Starting a business in Maryland comes with several benefits, including incentive programs to reduce the amount of tax your corporation is liable for. Additionally, you minimize filing fees and paperwork by incorporating your business in Maryland.
The following step-by-step guide will show you how to start a corporation in Maryland.
1. Select a name for your corporation
Irrespective of the type of business you’re planning on running, or the business structure you’d like to register, you’ll still need to decide on a business name for your corporation.
General corporate name guidelines
Ensure that you adhere to the following Maryland state naming requirements when deciding on your business name:
- Your Maryland corporation name should not include words that may mislead the public into believing that your corporation is affiliated with any government agency, such as Treasury, State Department or FBI, etc.
- Your Maryland corporation name must be distinguishable and significantly different from other business entities in the state, including reserved names in the state of Maryland
- Your Maryland corporation name should not imply that your business is organized for any other purpose other than what is outlined in its Articles of Incorporation
- Your Maryland corporation name must contain one of the following words: company, corporation, limited, Inc., or an abbreviation of any of these terms
Refer to the Maryland state statute for additional guidance and direction on deciding on a Maryland corporation name.
Once you’ve confirmed the availability of your business name and you’ve reserved or secured it, then you have the option of applying for a trademark as well. Applying for a trademark ensures that no other business in the state of Maryland can register a similar or the same business name.
Ultimately the trademark offers legal precedent on your side. It’s a good option if you’re thinking of going national. To trademark your Maryland corporation name, make an application to the office of the Secretary of State or state’s office.
Your Maryland corporation’s entity name is basically your business’s legal name. The entity name is what the state uses to identify your business and is also the name that you should use when completing all formation documents.
DBA (Doing-business-as) name
Any corporation in Maryland that plans on conducting business under a different name from the entity name will need to register a DBA. A DBA is also known as a doing business as name and is one of the easiest methods for corporations to follow to use a trade name or conduct business under an alternative name.
To file for the DBA, complete the online application on the Maryland Business Express website; alternatively, complete the Trade Name Application Form.
2. Nominate a registered agent
Every business entity in the state of Maryland must appoint a registered agent. Some of the names that registered agents are also known are statutory or resident agents. You must nominate a statutory agent for your corporation with the Department of Assessments and Taxation.
The role of the registered agent is to accept government correspondence, compliance documents, and service of process on your business’s behalf. You may nominate any individual to be your corporation’s registered agent.
However, the individual must meet the following criteria:
- The Maryland statutory agents must maintain availability during normal business hours
- The Maryland statutory agent should have a physical street address in the state where business is conducted
- The Maryland statutory agent must be at least 18 years old
- The Maryland statutory agent must consent to the appointment
3. Appoint initial directors at the organizational meeting
One of the essential steps in forming your Maryland corporation is holding an organizational meeting where you will select your initial or corporate director. Additionally, during this first meeting, you’ll need to create and approve bylaws, execute an incorporator’s statement, and determine your company’s share structure.
You will need to appoint at least one corporate director to oversee the operations of your corporation. The director will serve until the first shareholder meeting. Additionally, the director is in charge of the adoption, repeal, and amendment of operational bylaws. They will also need to be involved in the election, supervision, and removal of corporate officers.
4. File Articles of Incorporation
In order to legally form your new business or Maryland corporation, you’ll need to submit Articles of Incorporation, also referred to as a Certificate of Incorporation for the stock corporation, with the Maryland Department of Assessments and Taxation.
Your Articles of Incorporation must include the following information:
- The number of directors you’ve nominated
- The names of the initial directors
- The consent of the resident agent
- The number of shares your Maryland corporation is authorized to issue
- The street address and the name of the registered agent
- The company’s entity name
- The company’s purpose
- The principal place of business as well as the street address of your Maryland corporation
- The address and the name of the incorporator
Once you’ve compiled the relevant information, go ahead and file the articles with the Maryland Business Express website. Alternatively, feel free to download the Articles of Incorporation Form and mail it to the following filing address:
Department of Assessments & Taxation
301 W. Preston Street; 8th Floor
Baltimore, MD 21201-2395
5. Create and approve bylaws
While corporate bylaws are not a state requirement, neither do they need to be filed with the state of Maryland, they are essential governing documents for your organization.
Essentially the bylaws determine how your company will be governed and operated. It’s essentially a Constitution for your corporation and clarifies the rules and goals for everyone involved.
Therefore your bylaws must include the following information:
- How your corporation will be operated
- The roles of officers and directors
- The process of holding meetings and voting procedures
- The process of electing corporate officers or corporate directors
- The process of storing and managing corporate records
- The process of handling company disputes
- The process of adding or amending bylaws in future
- The date of the annual shareholders’ meeting
- The process of negotiating contracts
6. Select a share structure
The next step is deciding on a share structure for your corporation. Essentially, a share of stock is the unit of ownership of a company. Therefore, each share of stock represents the percentage of ownership of the corporation.
So if your corporation is issuing stock or one share of stock, the shareholder then owns hundred percent of the company. Additionally, shares may be structured into classes, phrased as a share class, and each of the share classes may hold a different set of rights and privileges. Maryland corporations are allowed to have multiple classes, and each class may hold any number of shares.
When completing the Articles of Incorporation, you should know that the form or template is used to start a corporation with one share class. However, if your corporation will be issuing multiple share classes or structures, then you should compose your own Articles of Incorporation.
7. Obtain an EIN
Irrespective of whether you’re forming a C corporation, an S corporation, or a limited liability company, you’ll still need to register for an EIN. An EIN stands for Employer Identification Number and is issued by the Internal Revenue Service as a way of identifying business entities in each state. Essentially, it is a Social Security number for your company.
Once you obtain an EIN, you’ll use it to open a corporate bank account for your company, hire employees, and submit it for tax purposes.
There are two ways to obtain an EIN. In both instances, you’ll need to submit an application to the IRS. The application comes with no cost, and obtaining an EIN is also free of charge. You may use the online EIN assistant to complete the application for your Employer Identification Number. Alternatively, you may download IRS Form SS-4 and then submit it by mail to the following address:
Internal Revenue Service
Cincinnati, OH 45999
8. File Maryland state taxes
Unless you are forming a nonprofit corporation, large and small businesses in the state of Maryland are liable for corporate taxes:
- Corporate income tax: Marylands corporate income tax is assessed at a flat rate of 8.25% of net income.
- Maryland sales tax: Business owners who are selling physical products will need to register for a seller’s permit with the Maryland Comptroller’s website. This application will give you a certificate allowing you to collect sales tax on taxable goods.
- Maryland employer taxes: If you plan to hire employees for your corporation in Maryland, you must register for Maryland employer taxes through the Maryland Comptrollers website.
9. Maryland business licenses and permits
Business owners in the state of Maryland cannot apply for a general state of Maryland business license. However, depending on the type of business you’re running, you may need to acquire one or more licenses and permits to legally operate in the state:
- Trader’s License: All businesses selling products in Maryland need to obtain a trader’s license. This must be obtained from the Clerk of the Circuit Court in the county where business activities are conducted.
- Sales and use tax license: If you’re selling products and offering certain services in Maryland, you’ll also need to register for a sales and use tax license from the Comptroller of Maryland website.
- Resale certificate: Businesses that purchase products to resell will need to obtain a Maryland resale certificate to ensure that they do not pay sales tax for goods that are being resold to customers.
- Occupational license: An occupational license is also referred to as a professional license. So if you are running a professional corporation, then you definitely need to register with the Maryland Department of Commerce prior to offering your services in the state. Some of the professions that require occupational licensing include contractors, laundry services, landscapers, and many more.
10. Annual report requirements in Maryland
All Maryland corporations must file an annual report each year by the 1st of April. You may choose to complete the filing online on the Maryland Business Express website or file a hard copy by mail with the Maryland State Department of Assessments and Taxation.
11. Costs of starting a corporation in Maryland
The filing fees below apply to all Maryland corporations:
- Name reservation: $25
- DBA name: $25
- Articles of Incorporation: $120
- Annual report: $300
- Maryland Certificate of Good Standing: $20
Next steps after forming a corporation
After filing the relevant paperwork and applying for the necessary licenses to operate your business, you should keep the following steps in mind:
Open a bank account for your business
Opening up a business bank account is one of the best steps you can take after forming your Maryland corporation. Essentially, a business bank account will separate your personal assets from your businesses and also legitimizes your corporation.
Additionally, it will simplify the accounting processes and the business tax filings. When opening up a bank account for your Maryland corporation, you’ll need your Employer Identification Number as well as your formation documents.
Obtain business insurance
Every business must have business insurance as it helps absorb the costly fees that liability claims and damage to property bring with it. Additionally, by having business insurance, you’ll protect your personal assets if a lawsuit is made against your business. Business owners will have to pay out-of-pocket for costly damages and legal claims if the business is not covered by business insurance.
There are three types of business insurance: general liability insurance, professional liability insurance, and Workmen’s Compensation insurance. Speak to a business insurance consultant to find out which option is the best for you.
The board of directors has an obligation to protect shareholders’ interests, oversee the corporation’s operations, and establish policies for management.
The type of business structure you choose depends on various factors. C corporations or a C corp have a Board of Directors, are owned by stockholders, and hold annual meetings. S corporations can pass-through income to the shareholders for tax purposes, while nonprofit corporations use profits to advance the corporation’s mission.
Yes, business insurance does offer personal liability protection, and any type of business needs it. Liability protection covers your business regarding accidents, lawsuits made against the company, and various other claims against your business.
A sole proprietorship is a business owned and also operated by an individual or natural person. It is not a legal entity and does not exist separately from its owner.
A shareholder agreement is a contract concluded between the company and its shareholders. Essentially, it formalizes the relationship between shareholders and the company and safeguards both parties’ rights.