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It’s important to correctly set up your business. Talk with an attorney or professional advisor for guidance.

Set Up Your Business the Right Way

A business structure is the legal way you set up your company. It affects:

  • How ownership and management are set up
  • What paperwork you must file
  • Which tax forms you need
  • How much personal risk you may have

Think about what structure works best for your business now and in the future.

Common Business Structures

The four most common business structures are:

  • Sole Proprietorship
    The simplest way to start a business as a solo owner. You keep all the profits but are also personally responsible for any debts or losses.
  • General Partnership
    Similar to a sole proprietorship, but it has two or more partners sharing in the profits and losses. Each partner has a stake in ownership and contributes to the business with money, property, work, or skills.
  • Limited Liability Company
    Combines the benefits of a corporation and a partnership. It protects owners, who are called members, from personal responsibility for business debts while offering tax benefits and flexible operations.
  • Corporation
    A legal business entity separate from its owners, who are called shareholders, which means the company itself can own property, make contracts, and be responsible for debts. Shareholders usually have limited personal liability and are generally not personally responsible for the company’s debts or legal issues.

Note: Sole proprietorships and general partnerships have fewer legal requirements because they aren’t formal legal entities. They must still follow state, federal, and local licensing and tax rules, and may need extra registrations for personal property or a business bank account.

Corporation Types

  • Stock Corporation
    The most common type of corporation that is set up so that multiple shareholders can own parts of the company. It must have at least three officers (President, Secretary, and Treasurer) and at least one Director.
  • Tax-Exempt Nonstock Corporation
    Used by most Maryland charities and nonprofit organizations that want tax-exempt status from the federal or state government. This type of corporation does not issue stock and does not have owners.
  • Close Corporation
    Allows one person to serve as all required officers and has the option to not have a board of directors. Close corporations have limits on how many shareholders they can have and who they can be.
  • Standard Nonstock Corporation
    Does not issue stock and is not seeking tax-exempt status from the IRS or the State of Maryland. Examples include: homeowners’ associations and social clubs.
  • Religious Corporation
    A special type of business structure that helps religious communities create a legal organization to run their place of worship. Religious corporations usually don't have to pay federal taxes.

Other Business Structures

  • Non-Maryland LLC
    An LLC started in another state, U.S. territory, or country, but wants to operate in Maryland.
  • Non-Maryland Corporation
    A corporation started in another state, U.S. territory, or country, but wants to operate in Maryland.
  • Limited Partnership
    Partners have limited liability and limited input in management decisions. These limits depend on the extent of each partner’s investment.

Note: To operate your out-of-state business in Maryland, you must complete the required out-of-state registration forms.

Starting a Charity or Non-Profit in Maryland

If you want to start a charity or non-profit in Maryland, you need to understand the state rules.

  • Maryland Secretary of State
    Signs up charity and non-profit groups, renews registrations each year, and checks that you follow the rules.
  • Department of Assessments and Taxation
    Handles the initial paperwork to create your group and helps you become a legal business entity.

The Maryland Secretary of State plays a significant role in registering, regulating, and renewing charitable organizations and non-profits that solicit charitable contributions in the State of Maryland. If you are considering starting a Charity or Non-Profit Organization, please visit the Maryland Secretary of State for more detailed information. For information specific to charitable solicitation registration, please visit the Maryland Secretary of State's Registering a Charity page.

Property Tax Exemption for Charities and Non-Profits
Charities or non-profits may qualify for a property tax exemption if the property is used for charitable or educational purposes. Apply through the Maryland Department of Assessments and Taxation.

Where You Can Get More Help

We’ve given you basic information about business structures, but there is much more to learn. You can consult an attorney or advisor for more guidance, as well as contact one of these organizations:

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