If you’re starting a small business in Maryland, get ready for a promising career. Maryland is nicknamed “The Old Line State,” and statistics show that Maryland is a great place to start a business: in 2019, 76% of new establishments were still active after a year of operation.
If you’re new to the area or new to owning a business there, you may need some help at the beginning. After all, small business laws vary from state to state, and it’s important to understand them and follow all possible advice to help your business thrive.
1. Know What Insurance You Need:
A new business comes with risks, some of them unpredictable. That’s why it’s important to be protected against accidents and potential lawsuits, and emergencies. The most common coverages to consider are:
Workers Compensation Insurance–
Most states require some form of workers’ comp to help with medical bills and lost wages in the event of work-related injuries. Maryland workers’ compensation is mandatory: an employer may have to pay a penalty of up to $10,000 for not having coverage. It’s an important policy for the security it provides to employees and protecting your company from lawsuits if the worst happens.
You can also apply to be a self-insured employer (paying for workers’ comp claims yourself) through the workers’ compensation commission.
Unemployment Insurance Tax–
Unemployment Insurance (UI) is provided by the state, which pays individuals when they lose their job, as long as they meet eligibility requirements. The benefit is funded by a specific tax charged on the payroll—that is, it’s the taxes you pay that support the program. In 2021, the rate for new employers in Maryland is 2.3%. A new small business should contact the Division of Unemployment Insurance to set up an account.
Commercial Auto Insurance–
If your company owns vehicles of any kind (construction trucks, delivery cars, and so on), they must be insured. This policy protects you and your employees in the event of traffic accidents with company-owned vehicles. In Maryland, it’s also necessary to have all commercial vehicles covered in the case of damage from an uninsured driver.
2. Know What Taxes You’ll Need to Pay:
The taxes your venture pays to the state of Maryland will depend on the business structure you establish. This decision is made when opening and registering your business and is one of the most important choices you need to make:
The easiest and fastest model. It’s a small company formed by an individual who chooses to start a business in an unincorporated way, paying personal income tax on the profits obtained. As sole proprietorships don’t have a separate commercial entity, your company’s assets and liabilities will be your personal ones, and you will be directly responsible for your company’s financial debts and obligations.
Partnerships are formed by more than one owner working together. There are two types: Limited Partnerships (LP), where only one of the owners has unlimited liability, and Limited Liability Partnerships (LLP), which protect each of the owners from debt against the partnership.
The most complex business structure. There are different types, but a small business is generally considered Corporation S, otherwise known as an S Corp. This structure allows the company’s profits (and some losses) to be passed on directly to the owner’s personal income. The shareholders of an S Corp also have their personal assets protected: they’re only liable for their investments.
Limited Liability Company–
Opening an LLC is usually the most practical option: you have the benefits of corporations, sole proprietorships, and partnerships in the same legal entity, in addition to protection from liability of the owners and even certain tax advantages.
When choosing your business structure, first try to understand the taxes you will pay at the state and local levels. Be sure to look into any regulations in the specific town, city, or county where your business is located.
3. Get Your Permits in Order:
To operate your new business legally, you must comply with federal, state, and local regulations, including obtaining one or more commercial permits and licenses.
There are licenses for each sector: a restaurant, for example, needs health licenses to operate. Depending on your area and type of business, you may need fishing/hunting permits, building permits, and so on. Any business that buys or sells gods needs a State Trader’s License.
4. Understand the Area:
Located on the east coast of the United States, Maryland is a diverse state with a privileged location among many economically strong regions, such as Pennsylvania, Virginia, and Washington, DC.
When hammering out the specifics of starting your business, you must decide whether to establish yourself in a rural or urban area, figure out what kind of facility you will need, and determine your target customer demographic. Talk to other entrepreneurs in the same sector for advice and feedback, and don’t forget that you join the community when you start a business.
There are several ways to get involved in the local society as your business involves you in the local economy. You can join the local Chamber of Commerce and invest in community life (for example, sponsoring local events and charities).
Prepare to Be Successful in Maryland:
Maryland is known as “America in Miniature” for its geographic diversity: it has mountains, several national and state parks, and even a coastline, all in a relatively small area. It’s also a wealthy state, with many job opportunities and excellent per capita income.
When deciding to open your small business there, you should already know that both federal and Maryland laws impose some requirements, fees, and permits. It can be challenging to remember everything, so count on the guidance and assistance of the Maryland Small Business Development Center.
Also, make sure you have all the necessary insurance coverage before you even start your business so that everyone—your employees, your potential customers, you—will feel safe to face the challenges and benefits to come.