Maryland may be home to major corporations like Under Armour, Marriott International and GEICO, but it boasts an equally vibrant community of small businesses, too. According to the Small Business Administration, small businesses made up 99.5% of all businesses in Maryland in 2018, employing 50.2% of the state’s workforce. And research shows that Maryland is an especially friendly environment for marginalized entrepreneurs — in 2018, the state had the most female- and minority-owned businesses per capita of any state in the nation. So whether you’re a native Marylander or you’re considering a move to the Old Line State, entrepreneurs may be curious about what it takes to start a business in Maryland.
We’ve got you covered. In this guide, we’ll walk you through the nine steps it takes to start a business in Maryland so you can join this state’s robust and inclusive community of fellow entrepreneurs.
1. Write a business plan
Behind every successful business owner is a strong business plan.
Your business plan provides you with an actionable roadmap detailing how you’ll start, run and grow your business. Beyond that, the simple act of writing your business plan offers you the opportunity to think seriously about why you’re starting your business, and to parse what can seem to be the massive job of launching your business into smaller, digestible pieces. Luckily, there are lots of available resources that break down the seemingly overwhelming task into a manageable process.
For starters, take a look at our step-by-step guide on how to write a business plan, which provides guidance about all eight sections typically found in traditional business plans. A business plan template can also simplify the process of writing your business plan. You can also visit your local Small Business Development Center (SBDC) or SCORE chapter for personalized guidance about how to write a business plan to best suit your particular business. Finally, business plan software can also make quick work of this step.
2. Name your business
If you haven’t already, now is the time to come up with a business name. In addition to needing a business name for obvious reasons, you’ll need to commit to a name in order to officially register your business with the state of Maryland.
But coming up with a viable business name requires a few steps beyond brainstorming. Most importantly, you’ll need to make sure that that name is actually available for use. To do so, search for your name on Google, check for trademark filings through the U.S. Patent and Trademark Office and conduct a business entity search through the Maryland Secretary of State’s website to find out whether another Marylander is doing business under your potential name.
Once you have the all-clear, we’d highly recommend buying your domain name and creating social media accounts on your platforms of choice with your business name. That way, you can start your marketing efforts as soon as possible.
3. Choose a business structure
After choosing an available business name, in order to register your business with the state of Maryland you’ll need to determine your business’s legal structure. Beyond enabling you to register your business at all, the type of business entity you choose will determine how you’re taxed, your degree of personal liability, your ownership structure and whether you can hire employees.
The four most common business structures in Maryland are sole proprietorships, partnerships, corporations and LLCs. Among business owners generally, LLCs are the most popular option; they’re easy to register for, their ongoing requirements are minimal and they afford you both legal protection and the ability to choose how you would like to be taxed. In addition to reading up on our guide to business entity types, we’d highly recommend working with a business attorney, accountant, or other professional to ensure that the structure you choose makes the most sense for your unique business.
Whichever business entity you choose, you’ll need to make sure you comply with your structure’s particular ongoing requirements. If not, you run the risk of getting slapped with “Not in Good Standing” status, which can then lead to forfeiture (which, in plain English, means you won’t be allowed to conduct business in Maryland). Learn more about your ongoing requirements and maintaining Good Standing status through Maryland Business Express.
4. Register your business
Once you’ve chosen your business structure, you can go ahead and register your business with the Maryland Department of Assessments and Taxation. You can do so through the Maryland Business Express online filing portal. Keep in mind that sole proprietorships and general partnerships aren’t required to register with the state.
After your business has been approved for registration, you’ll be issued an SDAT identification number. This is the state’s own identifier for your business, and it’s different from your employer identification number (more on that next).
5. Register for taxes
An EIN acts a bit like a Social Security number for your business. It’s how the IRS identifies your business for tax and other purposes.
Sole proprietors with no employees and LLCs with no employees aren’t technically required to apply for an EIN. But as you’ll likely need an EIN to apply for a business loan, open a business bank account and hire employees, it’s still recommended that these entities do so. Plus, applying for an EIN is quick and easy. You can do it online through the IRS website in a matter of minutes.
Depending on your entity type, industry and business activities, you might need to apply for tax accounts at a state level, too. For example, businesses that make sales and collect sales taxes will need to register for a sales and use tax license; and if you pay employee wages, then you’ll need to register an employer’s withholding tax account. The Maryland Comptroller’s office has a full list of business tax types for your reference.
6. Obtain licenses and permits
Most Maryland businesses will need to obtain a business permit in order to operate legally. Depending on your industry, you and any employees you hire may need to be properly licensed to practice in your field, as well. Head to the Maryland Licensing OneStop Portal to search and register for licenses and permits issued by state agencies. You can also stop in at your local SCORE or SBDC chapter if you need help figuring out your particular business’s permitting and licensing requirements.
7. Purchase business insurance
Purchasing some form of business insurance is recommended for the vast majority of business types; but the exact type of coverage you choose depends on your industry, whether you have employees, your business activities, whether you have a brick-and-mortar location and other risk factors particular to your business. Also note that business owners with employees are required by the state to purchase certain types of insurance, including health insurance, unemployment insurance and workers' compensation insurance.
For most business owners, we recommend purchasing (or looking into) general liability insurance at a minimum. This type of insurance can provide protection against a host of legal claims taken against your business by a client, vendor, or another company. You can consult our guide to small business insurance to learn more about the nine most common types of coverage for small business owners. The Maryland Insurance Administration can also provide information and assistance for Maryland business owners seeking coverage.
8. Organize your finances
A crucial step for anyone starting a business in Maryland, or any state for that matter, is to set up a barrier between their personal and business finances. Beyond simply looking more professional, creating a separation between your finances will ensure that your personal assets are protected in case your business runs into legal trouble. It’ll also make filing both your personal and business taxes about a million times easier.
Start by opening a dedicated business bank account. If you’re happy with the bank you’re using for your personal finances, it makes logistical sense to open a business bank account with the same institution. Since banks value loyalty, they often offer their consumer clients discounts and other perks when they’re opening a business bank account, as well. Regardless, we always recommend exploring all your options, so take a look at our guide to the best business bank accounts. It’s also a good idea to consult our guide to the best banks for small businesses to learn about the banks that can offer your business additional products and services as you grow.
Next, apply for a business credit card. Business credit cards are surprisingly easy even for brand-new businesses to be approved for — if you can’t provide your business’s financial information on the application (which is often the case for barely-launched businesses), then you can usually provide your personal financial information instead.
Once you have your credit card, be mindful of only using it for your business-related expenses to maintain that barrier between your finances. Use it for your business’s smaller, daily expenses — and, just as you would with your personal card, be careful not to spend over your credit limit. Doing so can ding your credit score pretty substantially, which may hurt your chances of securing a business loan down the line.
To keep track of your finances, we recommend purchasing accounting software. With the right accounting software, you can streamline, automate and essentially entirely outsource this otherwise difficult and time-consuming task.
9. Explore your funding options
As you well know, it takes money to make money (there’s a reason why that cliché persists!). Typically, however, entrepreneurs don’t receive startup funding from brick-and-mortar banks. Banks are notoriously risk-averse, so businesses without a proven track record of financial solvency will have a very hard time being approved for a traditional business loan.
There are lots of other funding avenues for startups to explore, however. Along with bootstrapping, most entrepreneurs use a portion of their own savings to open their doors. If tapping into your own funds isn’t an option, or if you still need a boost, you can consider applying for a personal loan from your bank. Provided you have a strong credit score, personal loans are more accessible for brand-new entrepreneurs, as you won’t need to provide financial information about your business (just yourself). You can use your personal loan for virtually any purpose — including, of course, launching your business.
You might also seek loans from family and friends who are supportive of your venture. But if you choose this route, we recommend drafting a contract with the help of a lawyer. This will avoid any potential snafus with your family and friends — because even opening your dream business is just not worth sacrificing your most important relationships for.
Beyond that, you can look into crowdfunding, Kiva loans, angel investors and other forms of equity financing, small-business grants and business incubators. If you’re intent on a debt-based business loan, you might have the best luck applying for invoice financing, equipment financing, or a business line of credit from an online lender, as these loans tend to be more accessible to new business owners — provided these forms of funding will actually be of use for your particular business, of course. Consult our guide to startup funding for more information about some of the best financing options for brand-new business owners.
We’d also recommend consulting Maryland’s Funding Programs page to learn about state-specific financing incentives, assistance and benefits for Maryland small business owners.
As you’re completing steps one through nine, you should also begin to implement at least a few elements of your small business marketing plan.
Assuming you bought your domain name back in Step 2, you can start by building your business website — which is a lot easier than you may fear, even if you’re typically technophobic. We recommend using a website builder like Squarespace or Wix, which offer plenty of professionally designed templates, built-in SEO tools and even e-commerce functionality if you want to sell your goods or services online. As we also mentioned, you should create social media accounts on your preferred platforms (Facebook and Instagram are pretty non-negotiable) and start posting high-quality content regularly. Be sure to respond to comments and messages promptly and kindly, too.
This should be just the start of launching a long-running marketing scheme. Because, as you know, the work doesn’t end as soon as Step 9 does: Starting a business in Maryland is a continual labor of love. But by following the nine steps we’ve covered here, you’re setting up your new business with the strongest possible foundation.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.