These FAQs provide answers to some of the questions most frequently asked by entrepreneurs when starting a business. The information provided is of a general nature, and you may require professional advice for specific questions pertaining to your business situation.
- What kind of business entity should I establish?
When starting a business, you must decide what form of business entity to establish. Financial implications vary based on which form of business structure you use. The four most common forms of business structure are the sole proprietorship, partnership, corporation and limited liability company. Learn more about each here.
Sole proprietorships or general partnerships require no legal entry formalities except compliance with state and local licensing and taxation requirements. One of these requirements is registering your business so that your business personal property can be properly assessed, and the business can obtain a state or local license if required.
For legal entities such as corporations, limited liability companies, limited partnerships and limited liability partnerships, Maryland offers several flexible options for organizing business activity. For information about registration requirements for legal entities, contact the Maryland State Department of Assessments and Taxation (SDAT) at (410) 767-1340.
- What are the different types of businesses I can start?
Some possibilities include a home-based business, a franchise, buying an existing business, or if you're a foreign business — establishing a branch office.
More than half of all U.S. businesses are based out of an owner's home, according to the U.S. Small Business Administration. A home-based business is subject to many of the same laws and regulations affecting other businesses, such as zoning regulations and production restrictions. Be sure to consult with an attorney and your local, city and state departments of labor to find out which laws and regulations will affect your business.
A franchise is a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business. The franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods or services supplied by the franchiser or that meet the franchiser's quality standards.
Buying an Existing Business
Many find the idea of running a small business appealing, but lose their motivation after dealing with business plans, investors, and legal issues associated with new startups. If you are discouraged by risky undertakings, buying an existing business is often a simpler and safer alternative.
Establish a Branch Office (Foreign Businesses)
A foreign business planning to operate in Maryland may establish a branch office by registering or qualifying with the Maryland State Department of Assessments & Taxation. Learn more about all the great reasons to set up a branch office in Maryland.
- Where are the Maryland Department of Assessments & Taxation paper forms?
Please visit the Maryland Department of Assessments & Taxations Departmental Forms & Applications page.
- Can I register my business in Maryland online?
You may register the following business types online using Maryland Business Express.
- Sole Proprietorship
- General Partnership
- Maryland Limited Liability Company
- Foreign (Non-Maryland) Limited Liability Company
- Maryland Stock Corporation
- Maryland Tax-Exempt Nonstock Corporation
- Maryland Close Corporation
- Foreign (Non-Maryland) Corporation
Visit the Maryland Department of Assessments & Taxation website for assistance in filing for business types not currently accepted online.
- Where can I find good resources to develop a business plan?
Planning is critical to successfully starting a business. A business plan generally projects 3-5 years ahead and outlines how the company will grow revenues. Once your business is up and running, you'll need to regularly review and update your plan to manage growth. The U.S. Small Business Administration (SBA) provides detailed topics to create a business plan. The Maryland Small Business Development Center and SCORE also provide guidance on creating a business plan.
- What kind of tax information do I need and where can I find it?
New businesses should contact the Internal Revenue Service (IRS) to register for:
- A Federal Employer Identification Number (FEIN)
- Income tax – business and employee withholding
- Social Security
- Federal unemployment insurance
- Other federal taxes
The IRS provides business kits for three types of businesses: sole proprietorships, partnerships and corporations.
- Does Maryland have a personal property tax for businesses?
Yes, businesses must pay an annual tax based on the value of their personal property (furniture, fixtures, tools, machinery, equipment, etc.). The Maryland Department of Assessments & Taxation administers the valuation process while the counties and towns collect the tax based on the location of the property.
The Maryland Department of Assessments and Taxation automatically registers corporations, limited liability companies, limited partnerships, and limited liability partnerships for this tax when these legal entities form. All other businesses (sole proprietorships, general partnerships) that own or lease personal property or need a business license are required to:
- Obtain an identification number by registering with the Maryland Department of Assessments & Taxation.
- File an annual personal property return.
- For information regarding personal property assessments, visit the State Department of Assessments and Taxation Personal Property Unit. You may also file a current year return online through the Maryland Business Express portal.
- Where can I pay my business taxes?
A payment may be completed online using the Comptroller of Maryland's online tax payments portal.
- How do I choose a name for my business?
Picking a name for your business requires much more than just creativity and a working knowledge of your target market. Consider state and local requirements and making sure you don't infringe upon the rights of someone else's business name.
When registering your business through Maryland Business Express, you can search against existing Maryland business names and register a business trade name with the Maryland Department of Assessments and Taxation.
You may also register a trademark with the Secretary of State's office. A trademark is a unique graphic symbol or logo associated with a business, which distinguishes it from another business or person. Learn more about trademarks and do an online trademark search.
- What location options does Maryland offer my business?
Where you locate can be a critical factor to successfully operating your business. We offer a number of tools for you to find that perfect place, such as our Maryland Data Explorer, Counties and Regions map and Maryland Business Properties database. You may also want to consider the advantages of locating in a business incubator or research park. Visit our Site Selection page to learn more.
- What if I need help with site selection?
Maryland has a full network of experienced economic development professionals to help you navigate the site selection process. Services offered by economic developers include:
- Property selection and site tours to find the right location.
- Market research on factors such as demographics and workforce availability.
- Financing options including incentive programs, tax credits and training assistance.
- Ombudsman services with state and local agencies to ensure a smooth relocation process.
We have a team of business development specialists to work with your company. Many of these professionals have expertise in industries such as cybersecurity, technology, manufacturing, life sciences and renewable energy. Contact Jayson Knott at 410-767-6978 to be put in touch with one of these specialists
A statewide network of economic development professionals at the county level offers a variety of services from permit assistance to job training and placement. Visit our County and Regional Economic Development page for a list of county economic development offices.
- Why are zoning ordinances and regulations important?
Zoning laws come into play on every single real estate development, regardless of how big or small, so if you are thinking about buying property or making improvements to property you already own, be sure to understand the zoning restrictions before you commit to anything. One zoning use is typically not compatible with another. For example, a commercial building usually cannot be constructed on property that's zoned for residential uses.
- What are some financing basics?
There are two primary types of financing: equity financing and debt financing. Unfortunately, there is no such thing as "free" government or grant money to help you start your business. Family members, friends and former associates are all potential sources, especially when capital requirements are smaller.
There are many sources for debt financing: banks, savings and loans, and commercial finance companies. The U.S. Small Business Administration (SBA) can also provide assistance to small businesses by providing credit insurance to small business lenders. They do not lend directly to small businesses.
State and local governments have developed many programs in recent years to encourage the growth of small businesses in recognition of their positive effects on the economy. You should always check with your local economic development agency to see if they have local programs that you can use. Some the state's small business debt financing programs are listed below:
- Maryland Small Business Development Financing Authority (MSBDFA)
- Small, Minority, and Women-Owned Small Business Loan Fund (VLT)
- Military Personnel and Service-Disabled Veterans No-Interest Loan Program (MPSDVLP)
- Maryland Economic Adjustment Fund (MEAF)
- Maryland Industrial Development Financing Authority (MIDFA)
Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or industry colleagues. However, the most common source of professional equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions. Most specialize in one or a few closely related industries.
If you are a startup or early stage company looking to make your next move, TEDCO invests across the full range of industry sectors.
- What resources are available to help me do business with state government?
- What is Worker's Compensation Insurance and do I need it?
Maryland workers' comp law requires employers to purchase insurance to pay compensation to employees for work-related injuries, occupational diseases, or deaths, regardless of whether someone is at fault. This non-fault compensation is the employee's exclusive remedy against the employer for work-related injuries; the injured employee may not sue the employer to recover greater compensation. The compensation available includes medical and rehabilitation expenses, a percentage of lost wages, and an amount for impairment of earning capacity.
Employers may obtain coverage for their employees in one of three ways:
- State Accident Fund, a non-profit self-supporting agency of the State of Maryland.
- Any company authorized to write this coverage in the state. To obtain a directory of licensed insurance companies, visit the Insurance Commissioner's website.
- Self-insure with the prior permission of the Maryland Workers' Compensation Commission.
To learn more, visit the Workers' Compensation Commission website.
- What is a Certificate of Status? How can I obtain one?
When obtaining a license, a license renewal or a loan settlement, you are often required to obtain a "Certificate of Status" (generally called a "good standing" certificate) from the Maryland Department of Assessments and Taxation.
When the Maryland Department of Assessments and Taxation issues a certificate verifying that a business entity is in "good standing," it means that all documents and fees required by law have been received, and that no other government agency has notified the Maryland Department of Assessments and Taxation that the entity is delinquent in tax payments.
A Certificate of Status for a business entity registered with the Department can be ordered online at Maryland Business Express. For other ways of obtaining a Certificate of Status, visit the Maryland Department of Assessments & Taxation.
- How can I find out what licenses I may need?
Are you looking to start a construction, storage warehouse, or vending machine business? These are just a few of the businesses that require a special license. Visit Maryland's Business License Database to find out what licenses and permits you may need for your business. You can also check out the Comptroller of Maryland's web site for business license information.
- Where can I learn about importing and exporting?
Maryland’s Office of International Investment and Trade provides support to Maryland companies planning to enter new foreign markets or advance their export sales in their companies' existing foreign markets.
Visit our Expand to International Markets page for more information about our ExportMD program, or call (410) 767-0685 to learn how to grow your Maryland business overseas. The World Trade Center Institute is another great Maryland resource to learn the international ropes.
- Are there any additional regulations for an online business?
From a licensing standpoint, an online business is not all that different than a business that has a physical storefront location. Maryland State agencies regulate certain goods and services that could be offered to the public over the Internet.
- How do I start a non-profit organization in Maryland?
The Maryland Office of the Secretary of State provides detailed information on the steps needed to form a non-profit organization. Certain charitable, fraternal, educational and religious organizations in Maryland may be eligible for an exemption from state property tax if non-profit status is approved.
Organizations soliciting charitable contributions in Maryland are generally required to register with the Office of the Secretary of State as a charitable organization. Registration is required before soliciting in Maryland begins and continues on an annual basis.
- Where can I learn more about occupational safety and health regulations?
Maryland Occupational Safety and Health (MOSH), part of the Maryland Department of Labor, Licensing and Regulation, works to improve the safety and health of Maryland's working men and women in both the public and private sector by providing consultation services, outreach and educational programs, establishing partnerships, setting and enforcing standards, and encouraging continual process improvement in workplace safety and health.
MOSH offers a free consultative service designed to help employers recognize and control potential safety and health hazards at their worksites, improve their safety and health program, assist in training employees, and possibly qualify for a one-year exemption from routine OSHA inspections. This confidential service is primarily targeted for smaller businesses (less than 250 employees per establishment or 500 employees nationwide) in high hazard industries; such as manufacturing, healthcare, and construction.
- What are the fees for registering a business or other document filings?
- Why is my business not in Good Standing or Forfeited?
- How can I get a Federal Employer Identification Number or FEIN?
Numerous callers each year contact the Department of Assessments and Taxation inquiring about a "Tax ID Number" and what agency specifically issues it. The Tax ID number is actually called a "Federal EIN" (Federal Employer Identification Number). Often the reason why people need the identification number is because they have been advised by a bank that no account will be opened without it, even if it is requested by a non-profit organization.
The Maryland Department of Assessments and Taxation is the initial step but only one-third of the process for obtaining the FEIN number and making the other necessary filings. The business or the non-profit organization should first file the formation documents (an incorporation, LLC, etc.) with the Maryland Department of Assessments and Taxation . Individuals or businesses without any employees who want to operate as a "sole proprietorship" still must register with the Maryland Department of Assessments and Taxation if they wish to open a bank account. The Maryland Department of Assessments and Taxation will issue its own identification number (usually beginning with a "D", "F", "W", "L", or "Z") but this is not the FEIN number required for bank accounts.
The second step where one actually obtains the FEIN number is to contact the Internal Revenue Service. The IRS expects the entity to be formed with the Maryland Department of Assessments and Taxation before applying for the FEIN number. The IRS has enhanced the speed of this process so that one can obtain a FEIN in a matter of minutes via the telephone at 1-800-829-4933 (from 7:00 a.m. until 10:00 p.m.) or the IRS website at www.irs.gov/businesses/. The necessary IRS Form to be completed is Form SS-4. This form and its instructions can be viewed and printed via the IRS website. Also try Employer ID Numbers (FEIN) page.
The third step in the necessary filings process is to file a "Combined Central Registration" with the Maryland Comptroller's Office. This form from the Comptroller's Office will ask the filer to list both the FEIN number and the Maryland Department of Assessments and Taxation internal entity filing number. This Central Registration Form of the Comptroller's Office deals with Maryland taxes owed, including employee withholding taxes.
- What is a forfeiture?
Forfeiture is the process that allows the Maryland Department of Assessments and Taxation to remove inactive entities that have not legally terminated their authority to do business in Maryland or to notify active entities of an existing oversight in meeting legal filing requirements. The Maryland Department of Assessments and Taxation sends forfeiture notices to these entities identifying the delinquency.
The main causes of forfeiture are failure to:
- file a previous year Form 1 (annual report/personal property return) by a domestic entity
- file a current year Form 1 by a foreign entity
- pay an outstanding late filing penalty resulting from the late filing of a Form 1
- reimburse the Maryland Department of Assessments and Taxation for a dishonored filing fee check.
A business can avoid forfeiture by filing the delinquent Form 1, paying the late filing penalty or making good the dishonored filing fee check before the deadline date cited in the Final Forfeiture Notice.
- The entity has not done any business in Maryland or did not have any personal property in Maryland last year. Why does it need to file a Form 1?
All entities are required to file a Form 1 by April 15th if they existed as of January 1st. The Form 1 is due whether or not it owns property.
- The entity does not want to remain active. What needs to be done if the entity owned personal property in Maryland in the previous year?
If the entity owned business personal property and had an assessment in the previous year, it MUST notify the Personal Property Division of the disposition of the personal property previously reported. Failure to do so will result in estimated assessments and tax bills, regardless of the forfeiture taking effect.
If the entity did not own any personal property in Maryland, the forfeiture process is automatic.
- How do I change my principal residence address?
If the wrong mailing address appears on your real property assessment notice or real estate tax bill, or you would like to change the address to which your tax bills, assessment notices, and other correspondences are sent, please mail a letter to the assessment office for the jurisdiction in which the property is located.
- How do I correct my business name if it is misspelled?
Contact the Maryland Department of Assessments and Taxation's Charter Department at firstname.lastname@example.org.
- Where can I find my Department ID number?
A Maryland Business Express entity search by name will provide you with the company information and Department ID number.