• Spencer & Stahl

Owning a Business in Maryland

Updated: Jul 26


Many of us dream of owning a business. Many people, when they start a business, just get right to work, without “organizing” with the State. The simplest business form which is not registered with the State is called a sole proprietorship. While there are many different forms of business, a sole proprietorship is the least formal, and least beneficial to the business owner. In looking at what type of business model you want to form such as a corporation or a limited liability corporation, you should consider things like:

  1. how many people will own the business;

  2. are some owners investing, while others are doing the work;

  3. what type of business is it;

  4. what are some of your goals as relates to taxes;

  5. what are your goals in growth;

  6. is the business a franchise;

  7. is the business, or any of its activities, one that is specially regulated by the government;

  8. is the business one that has financing issues; and

  9. many other considerations.


Based upon the type of business that you form, any business that is registered with the State of Maryland has a level of protection called limited liability. If done correctly, this liability limiting will protect personal assets of the business owners in the event the business has debts that exceed its assets. The registration of the business with the State is an ongoing issue, which must be completed each and every calendar year, or else the business will not only lose its liability protections, but could also lose many other protections, and potentially be unable to conduct business at all.


Another benefit of organizing a business is the ability to utilize means of reducing your tax liability, including the use of many retirement plan options. Even more importantly, the business can, if organized correctly, make it so the owners have a lower tax bill, as opposed to using alternate business forms. Organizing incorrectly, however, can mean increased taxes, decreased benefits, and inefficiencies underlying the entire concern.

After registering with the State, the business owners also must ensure that the business has an Employer Identification Number (called an “EIN”; think of this like a Social Security Number for a business), and bank accounts. The basics of organizing the business are then completed. However, that is only the first step to business ownership. It is likely necessary to then create documents for the business to use. The most important of these documents is what controls the operation of the business, called either an Operating Agreement or Bylaws, depending on what type of structure the business has. Next, you will need contracts for customers, suppliers, employees and a host of other entities you will do business with. You may also need to consider, at the time of business formation, your plans for either sale or winding down of the business. Taking a misstep at any of these points could spell an early doom for your business.


If you are considering starting a business in Maryland, call the attorneys at Spencer & Stahl to learn what you need to know to start your business, make it as productive and efficient as possible, and to pre-plan to maximize your sale of the business in the future.

Post written by Chad Spencer

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