Starting a Business in Maryland

A new business in Maryland is in reach. Have you been wondering: just how do I start a business in Maryland? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Maryland during a recession?

New Business in Maryland: Pros and Cons

Business Insider named Maryland the sixth worst state to start a new business in, per a 2016 article. And this is for the whole nation. The state has a small percentage of workers available for new businesses. However, a smart business owner can potentially get around that by recruiting employees from neighboring Delaware and Virginia.

There is also a high cost of living. Plus, this state has more business deaths than business births. It has the third worst business survival score.

Recent Changes

In 2018, Forbes names Maryland number 27. Also in 2018, Fit Small Business puts Maryland at number 42.

Forbes praises Maryland for its great labor supply. Quality of life and economic climate are around average. Growth prospects, business costs, and regulatory environment are all worse than average.

Fit Small Business says Maryland has a good labor market, a measure of the desirability of an area and the number of people with bachelor’s degrees. Quality of life and access to capital are both around average. Startup activity and costs of starting a business are worse than the average. And taxes and costs of living are in the worst ten states in the nation.

Only you can decide if it’s worth it to start a new business in Maryland.

New Business in Maryland: Programs

“Maryland Made Easy” is a program which focuses on how state agencies can streamline and simplify regulations to make doing business in the state easier. The “One Maryland Tax Credit” allows businesses which invest in an economic development project in a qualified county to qualify for tax credits worth up to $5 million.

Plus there the program offers startup business tax credits worth up to $500,000. The program covers qualifying costs incurred with the acquisition, construction, installation, rehabilitation, and equipping of eligible projects.

Invest Maryland

The “Invest Maryland” program is a tax credit program meant to fuel investment by offering insurance companies the chance to advance pay taxes at a discounted rate. This is in exchange for an investment in the program.

A minimum of 50% of these investments goes to the Maryland Venture Fund, for the purpose of supplying capital to businesses to create jobs and advance innovation.

Start-up Tax Credit Program

The state also offers a “Start-up Tax Credit” program.

This program is meant to help cover the expense of moving a business from outside Maryland. Eligible costs include office equipment, telecommunications, and furnishings. The credit goes up to $500,000 of eligible costs or $10,000 times the number of new positions created, whichever ends up being less.

Start a New Business in Maryland – Maryland Top Industries

Per the Maryland government website, the top industries in that state are IT and cybersecurity, and bio health and life sciences. More top Maryland industries are advanced manufacturing, aerospace and defense. Even more top industries in Maryland are military and federal, and energy and sustainability. Other Maryland top industries are financial services and agribusiness.

Smart business owners can take find new opportunities and advantage of the bigger industries in the area by offering goods or services such as data and other computer work. More options are trucking for any industry. Another choice is data security for computer systems.

Here is exactly how to start business in Maryland.

Start a New Business in Maryland – Maryland New Business Secretary of State Requirements

Register a Business Name

Register a business name online at the Maryland Business Express website.

A Maryland corporation must have a unique name. Before a business owner can file Articles of Incorporation, they should check to be sure that the name that they have chosen for the corporation is not already being used by another corporation.

Search online records and government databases to see if a name is available.

Also request information from the State Department of Assessments and Taxation, Trade Name Search and Registration, 301 West Preston Street, Baltimore MD 21201 or call the office at (410) 767-1340.

To reserve the corporate name until ready to file Articles of Incorporation, contact the State Department of Assessments and Taxation, Trade Name Search and Registration, 301 West Preston Street, Baltimore MD 21201 or call the office at (410) 767-1340.

Business Permits and Licenses

Go to the Maryland Department of Commerce for information about licenses. You can also go to the Maryland Department of Labor, Licensing and Regulation.

Local Permits and Licenses

The Department of Commerce has a list of the licenses and permits as required by different counties (but not cities) in Maryland.

Start a New Business in Maryland – Business Registration

Try the Maryland Business Express online system. Forms are also available through the Department of Assessments and Taxation.

Tax Registration

You can sign up with the Comptroller of Maryland.

Start a New Business in Maryland – Virtual Offices

Alliance offers Maryland virtual business addresses in the following cities:

Washington, DC area

Alliance has office space in Beltsville, Bethesda, Chevy Chase. Also they have space in slightly more remote Lanham and Riverdale.

Outside the Beltway

Alliance has space in Columbia, which is in the Baltimore area. It also has space in Annapolis, Frederick, and Laurel.

DaVinci adds Maryland virtual business space in Baltimore, Edgewater, and Gaithersburg. They also have space in Hagerstown, Rockville, Takoma Park, and Waldorf.

For other areas of the state, try Regus.

Or business owners might want to seek out local business owners. Or they can try computer user groups to find help in this area. Other options may include seeking virtual business office space in nearby states. These are Delaware, Pennsylvania, Virginia, and West Virginia.

Start a New Business in Maryland – Establish Business Credit

Company credit is credit in a business’s name. It doesn’t connect to an owner’s consumer credit, not even when the owner is a sole proprietor and the sole employee of the company.

Accordingly, a business owner’s business and personal credit scores can be very different.

The Benefits

Considering that company credit is independent from personal, it helps to protect a small business owner’s personal assets, in the event of court action or business bankruptcy.

Also, with two distinct credit scores, an entrepreneur can get two different cards from the same merchant. This effectively doubles purchasing power.

Another advantage is that even new ventures can do this. Going to a bank for a business loan can be a recipe for frustration. But building small business credit, when done properly, is a plan for success.

Personal credit scores are dependent on payments but also other factors like credit usage percentages.

But for company credit, the scores actually only depend on if a small business pays its bills timely.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Establishing business credit is a process, and it does not happen without effort. A business needs to proactively work to establish company credit.

That being said, it can be done easily and quickly, and it is much swifter than establishing personal credit scores.

Merchants are a big part of this process.

Doing the steps out of sequence will lead to repetitive denials. Nobody can start at the top with small business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Start a New Business in Maryland – Company Fundability

A small business must be fundable to lending institutions and merchants.

Therefore, a small business will need a professional-looking website and email address. And it needs to have site hosting from a supplier like GoDaddy.

And, business phone and fax numbers should have a listing on ListYourself.net.

Additionally, the business phone number should be toll-free (800 exchange or similar).A business will also need a bank account dedicated solely to it, and it must have all of the licenses essential for operating.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Dealing with the IRS

Visit the Internal Revenue Service web site and acquire an EIN for the company. They’re free. Select a business entity such as corporation, LLC, etc.

A business can start off as a sole proprietor. But they will probably want to switch to a kind of corporation or an LLC.

This is in order to decrease risk. And it will make best use of tax benefits.

A business entity will matter when it concerns taxes and liability in the event of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and taxes. Nobody else is responsible.

Sole Proprietors Take Note

If you run a business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Because of this, you can find yourself being directly liable for all business financial obligations.

Plus, according to the Internal Revenue Service, with this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 probability for corporations! Avoid confusion and significantly reduce the odds of an IRS audit at the same time.

Beginning the Business Credit Reporting Process

Begin at the D&B web site and obtain a free D-U-N-S number. A D-U-N-S number is how D&B gets a business in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing this, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you ought to build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to get credit in the retail and cash credit tiers.

These varieties of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But to start with, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are commonly Net 30, instead of revolving.

Therefore, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts must be paid in full within 60 days. In contrast to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.

To kick off your business credit profile properly, you need to get approval for vendor accounts that report to the business credit reporting agencies. Once that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with negligible effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than one time to these vendors. So, this is to verify you are responsible and will pay punctually.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are service providers which include Office Depot and Staples.

Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or more.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are service providers like BP and Conoco. Use this credit to purchase fuel, and to fix, and take care of vehicles. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the small business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or better and a 411 business phone listing.

Shell might say they want a certain amount of time in business or profits. But if you already have enough vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly handling the credit you’ve gotten up to this point? Then progress to the cash credit tier. These are companies such as Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Also, they want you to have an established company.

These are companies like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are normally MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Start a New Business in Maryland – Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and fix any errors as soon as possible. Get in the habit of checking credit reports and digging into the particulars, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. See: fastcs.wpengine.com/monitoring.

Update Your Records

Update the information if there are mistakes or the info is incomplete.

Start a New Business in Maryland – Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any errors in your records. Mistakes in your credit report(s) can be fixed. But the CRAs often want you to dispute in a particular way.

Disputes

Disputing credit report mistakes normally means you send a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always mail copies and retain the original copies.

Fixing credit report errors also means you precisely itemize any charges you dispute. Make your dispute letter as understandable as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you mailed in your dispute.

A Word about Building Business Credit

Always use credit responsibly! Never borrow more than what you can pay off. Keep an eye on balances and deadlines for payments. Paying off on time and completely will do more to elevate business credit scores than virtually anything else.

Establishing business credit pays off. Good business credit scores help a business get loans. Your lender knows the company can pay its debts. They understand the small business is authentic.

The company’s EIN links to high scores and loan providers won’t feel the need to require a personal guarantee.

Business credit is an asset which can help your small business in years to come.

Learn more here and get started toward opening a new business in Maryland.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Maryland’s Response to COVID-19

This is what Maryland is doing about the novel coronavirus. On March 5, Governor Larry Hogan declared a state of emergency and a catastrophic health emergency. On March 17, the Governor announced significant reductions in local and commuter bus, and light rail services to slow the spread of the virus. 

See: governor.maryland.gov/wp-content/uploads/2020/03/Proclamation-COVID-19.pdf

If an employee receives unemployment benefits as a result of a coronavirus-related business shutdown, the employer’s unemployment taxes could increase. Unemployment benefits are proportionately charged to each employer based on weeks worked and wages earned in each individual’s base period. Contributory employers could see an increase in their tax rate, which would result in higher taxes. 

Reimbursing employers will not be charged dollar for dollar for benefits paid, so as to not have higher than expected unemployment costs. 

As of March 19, the Governor had applied for disaster relief for small businesses from the SBA. See: labor.maryland.gov/employment/uicovidfaqs.shtml

And see: businessexpress.maryland.gov/coronavirus