Last Updated: 04.17.2022
I regularly meet with new clients seeking my “lawyerly” advice on how to start a business in Maryland. Often they immediately want to file for an LLC, open a bank account, and open a shop to start selling XYZ. They want to start businesses as varied as:
- gas stations to record labels
- retail stores to microchip manufacturing
- from woodworking to pottery
No matter the business, I always start the very first business client consultation with the same opening line –
“Do you have a business plan?”
Non-lawyerly Advice to Successfully Starting a Business in Maryland
Most of the time, I advise my clients to cover their non-legal bases before worrying about shelling out any money for a lawyer, LLC filings, or opening a bank account.
Why?
It is not because I don’t want to earn the legal fee for the legal work. But as a Small Business lawyer, I would not be doing my clients a service if I failed to help them succeed in the long term.
So, here are my simple steps to starting a business in Maryland:
1. Have an idea
This is where your business starts.
2. Write the idea down
This is called a business plan. Think about the idea. Your business plan will include:
- The marketing plan
- Is your idea going to have any customers?
- Who will be buying it?
- How do you get people to buy it?
- The financial plan
- Figure out what it is going to cost to start and run your business. Then double your estimates.
- Regulations and Licenses
- Figure out what the regulatory environment is for your business.
- A retail store needs a trader’s license from the county in which you are selling.
- A restaurant needs a liquor license, a food vendor license, certain training requirements, and possibly a trader’s license.
- A consultant just needs his brains.
- The competitive analysis
- Who are you competing against?
Put all this information together in a coherent plan. Then add a short executive summary. You will need this to borrow money from any bank or any venture capital investor for starting a business in Maryland.
3. Meet with Professionals
Meet with a Baltimore Small Business Lawyer (preferably me), an accountant, and any other trusted friends and advisers. Ideally, you make sure they are all smarter than you are.
Have them tell you what you should be doing to be successful.
- File the necessary documents with the state, local, and federal government for licensing and LLC
- Determine if you need a trade name and any trademark protections for your business. File for them if you do.
- A hundred small items in between the idea and the implementation, but eventually start your business.
This process should take anywhere from 6 months to a year for just business formation. It can take less, but to be done correctly requires a tremendous amount of time commitment. Of course, it can be skipped too, but our experience is that success often comes faster and easier with the heavy lifting done upfront.
The Legal Steps of How to Start a Business in Maryland
Depending on where you are in the process of starting a business in Maryland, you may have researched the feasibility of your venture, chosen and registered a business name, determined the location of your operations, written a comprehensive business plan, and even purchased a website domain. These are all valuable steps that help you get your business off the ground.
However, it is important to also consider the legal steps required for a new business to achieve long-term success.
Registering Your Business in Maryland
One of the first steps will be registering your business entity as a:
- Sole proprietorship
- Partnership
- Limited Liability Company [LLC]
- Corporation
You will also need to register your business name with the Maryland State Department of Assessments and Taxation (SDAT). This can be done online through the SDAT website, or through the Maryland Business Express, found on commerce.maryland.gov.
If you are going to be using a “trade name,” or a name that is different than the legal name registered with the state of Maryland, you should also register this trade name. Although registration of trade names is not mandatory.
Obtaining Identification Numbers
All business entities need a Federal Business Identification Number in order to file federal taxes. This is done through the IRS, via IRS Form SS-4, “Application for Employer Identification Number” (EIN).
In most cases, this can application can be completed online. Once you have received your EIN, you must then apply for a State Identification Number as well, unless you have registered as a sole proprietorship or are only applying for a sales and use tax license and therefore do not have an EIN.
All businesses are automatically filed for property taxes when the business is registered with the SDAT. If a sole proprietorship or partnership intends to own or lease property, they too must file an annual personal property tax return and obtain a State Identification Number.
Licensing Your Business in Maryland
Many Maryland businesses require a business license to legally run. There are both state and county business licenses, all dependent on the type of business you have.
To determine whether your business will require a state or county license, click here, or speak with an experienced business advisor.
The Importance of Your Business Plan
Why am I so insistent that clients who are learning how to start a business in Maryland write a business plan, and spend so much time researching the industry?
A couple of reasons:
- It makes you think about unanticipated problems, such as unforeseen regulatory issues or costs of starting your business.
- The financial analysis, in particular, will highlight your ability to earn a profit in your business
For example, by understanding your market and your costs you may learn:
- That the potential client base for your product is only 10,000 people
- They will only buy your product once or twice a year and your product costs .$50 to make and sells for $1.50
- So you will only ever possibly earn $20,000 per year in profit
By thinking and not spending, you can invest your money in another idea later on by avoiding bad business plans.
The Bottom Line on How to Start a Business in Maryland
Learning how to start a business in Maryland can seem daunting.
Frankly, whether or not you write a business plan is totally up to you. There are plenty of samples available online for free and people at SCORE and the SBA will help you write them for free. Plus there are literally hundreds of books and classes on business plan writing.
There is no magic format. It is a difficult process if you do it correctly. But the rewards for your business will pay handsomely long term.
Have businesses succeeded without them? Yes!
But the bottom line is that we want your business to succeed as much as you do, and it starts with a plan.
The information provided above is just some of the primary legal steps that businesses need to take before commencing operations in Maryland.
Some of the other factors to consider when starting a business in Maryland include:
- ensuring that your business is compliant with employment law and legal hiring practices
- opening a business bank account
- obtaining intellectual property protection for your intellectual assets
To ensure your business has a solid legal foundation for success, consider scheduling a consultation with an experienced small business advisor and legal professional. Contact EN Lawyers to learn more.