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How to Choose the Appropriate Business Structure in Maryland


Many people dream of starting and owning a business; but oftentimes, they do not know what type of business entity to choose. There are several types of business entities for hopeful business owners to choose from - the key is to select the one that is most appropriate for all involved.

Weighing the pros and cons of each type of entity is a good idea for business owners because certain entities come with advantages that owners might seek, while others come with disadvantages that might not have been contemplated originally.

4 types of business entities

There are four general categories of business structures in Maryland and elsewhere throughout the U.S., and choosing the right entity can be difficult for most new owners. According the Maryland Department of Assessments and Taxation, those general structures are: 

  1. Sole proprietorships
  2. Partnerships
  3. Corporations
  4. Limited liability companies

While those are the general categories, it should be noted that partnerships can be either general, limited or limited liability partnerships; corporations can be regular, S corporations, professional corporations or nonprofit corporations; and limited liability companies can be a regular LLC or a professional limited liability company.

Starting a Maryland business

Once a person has selected the appropriate business structure for the business, certain requirements will have to be met and various documents will have to be filed, depending on the structure selected. In Maryland, general partnerships and sole proprietorships do not have any legal formalities to follow, except for those that deal with local and state taxation and licensing requirements. LLCs and Corporations do have certain registration requirements, so owners should keep that in mind.

After the formalities have been completed, the owner should choose a name for the business, and owners should be careful to choose a name that is not currently being used by another business. Additionally, owners may elect to operate the business under a trade name, and with that election comes additional requirements, such as registering the trademark with the Office of the Secretary of State.

Ensuring that the business is setup and registered properly is key to starting a business off right. It is a good idea for those who are wondering about how to structure their new business to contact a legal professional who can assist and advise owners on choosing the appropriate entity to meet their needs.