Maryland Tax ID (EIN) Number & Business Registration
Maryland is an attractive state for small business owners and new entrepreneurs alike. Employment performance and wages in Maryland are high compared to the national average. Maryland is also home to more than 581,000 small businesses already—but don’t let the threat of competition scare you away. More than 1.1 million Maryland workers are employed in small businesses, representing more than half the total workforce. Last year, there were more than 21,000 net new jobs, thanks in large part to the strong small business activity in the state. In Maryland, the entrepreneurial scene is especially thriving—but before you get too far in your plans for building the next great business, you need to cover your legal bases, and establish your business’s foundation.
Steps to Obtain a Maryland Tax ID Number & Business Registration:
- Legal Formation of your Maryland Business
- Obtain your Federal Tax ID (EIN) Number
- Maryland State Tax ID Number
- Maryland Licenses & Permits
The first step you should take in plotting your business’s development is creating a formal business plan. You might have a magnificent idea in your head, but until you’ve fleshed out that idea with its strengths, weaknesses, threats, and opportunities (formalized in a SWOT analysis), you won’t be able to tell how feasible or profitable that idea truly is.
During your business plan work, you’ll need to make several important decisions for how to structure your business, including what type of business you want to form. There are several factors that should influence your decision here, including tax advantages, potential liabilities, and the amount of paperwork and maintenance required to maintain each business type.
These are your main options:
- Sole proprietorships and partnerships. Sole proprietorships and partnerships are practically identical, save for the number of people involved. They’re by far the easiest business to create, and the taxes are fairly straightforward; individuals report any income made in these businesses as individual income. The flip side of this simplicity is that owners of these businesses may be personally liable for any actions they take in the business.
- Limited liability companies (LLCs). LLCs are a step up from sole proprietorships and partnerships, both in terms of complexity and in terms of protection. LLCs are separate legal entities, which shield their owners from some types of liability. They also track their income and expenses as a separate entity, though owners will pay individual taxes on any profits or income they take from the company. In Maryland, you’ll need to file a personal property return (PPR), a type of annual report for your LLC every year. You’ll also need to pay a $300 filing fee, though there is no franchise or privilege tax in Maryland, as there is for LLCs in many other states.
- S-corporations and C-corporations. Corporations are much more complex, but can shield their owners and shareholders considerably from liability. They also enable companies to issue public shares, making them ideal for big businesses looking to raise funds from the public. The downside is that corporations pay taxes on any income they make, in addition to the individual taxes their shareholders will pay when drawing a salary or dividends from the company. In Maryland, the corporate income tax is a flat rate of 8.25 of net income. Of course, things get more complicated for nonresident members, so it’s a good idea to work with a tax professional before making the final call.
After you’ve finalized your choice of business structure and you have a business plan in place, your next step should be to get a federal tax ID number, otherwise known as an employer ID number (EIN). It’s best to think of this number as analogous to your social security number (SSN); it serves as a unique identifier, as a way to track your income, and as a way for you to apply for other accounts and opportunities.
In a business context, your EIN will be used to help you keep track of your employees and employment taxes, apply for business bank accounts, and even apply for some types of partnerships and business agreements. Our Tax ID Number Obtainment Service is designed to make this process simple; all we need is a few pieces of information, and we can get you an EIN in a matter of hours—take advantage of it when you’re ready for this step!
In addition to a federal tax ID number, your Maryland business will need a state tax ID number. These numbers can’t be used interchangeably, and you may find that you need them for different purposes. For example, you’ll need to use your Maryland state tax ID when hiring employees, but may not need it to open a business bank account. Fortunately, this process isn’t especially complicated for business owners. You may use a Maryland Tax ID obtainment service to get you registered with the state of Maryland completely online.
There’s a chance you may not need a license or permit to operate in Maryland, but many businesses will require some kind of licensure. Maryland offers a portal where you can view the hundreds of potential licenses and permits your business may need before starting a business. Most of these are linked to a specific industry; for example, most businesses in the healthcare or manufacturing realms will need to have permits to operate. And because license requirements often kick in at the local level, you’ll need to research licensing and permit needs for your specific city and county as well.
It may be several months before your business starts making a profit, but with all your legal requirements in place, you’ll have the freedom to set a course for your own destiny. If you’re ready to go and don’t want to get bogged down by paperwork, make sure to take advantage of the online Tax ID (EIN) Number and Maryland state Tax ID obtainment services.