McNamee Hosea News & Press


Top Benefits of Incorporating a Business in Maryland

The lifeblood of Maryland's economy is small business. According to the most recent Small Business Administration (SBA) data, well over half a million small business (defined as fewer than 500 employees) existed in the state in 2008. The vast majority of those business did not have employees, but rather was an individual providing goods and services on his or her own. Fortunately small business has shown stability and growth throughout the past several years in the state. Still, small businesses face an uncertain economic outlook for 2012 and beyond.

But the opportunity to start and grow a business is present if done correctly. Preparation, including forming a professional business plan to attract investors and obtain a competitive strategy is paramount. Investing in marketing, avoiding the common mistake of overspending and setting goals may provide a startup with a competitive edge.

Also paramount is forming a proper business entity for your startup to best meet the needs of your business. Considerations include whether your business will need to raise capital (and if so, how much), whether any other individuals or entities will contribute to the running of the business, and tax considerations. Included in the business entity formation decision is in which state to file for incorporation.

Deciding where to incorporate a Maryland business can be daunting. You have to consider the structure of your business, individual state tax laws and any benefits of incorporating in a different state.

Entrepreneurs often assume they should incorporate in Delaware or Nevada, two states known for being business-friendly. Delaware's flexible, pro-business laws and Nevada's low taxes can be tempting for those looking to incorporate a business.

4 Benefits to Incorporating in Maryland

In comparison, Maryland may seem less appealing for business formation. But if your business has a physical presence in the state, incorporating here could save you not only money, but also time and energy that could be better spent actually running your business.

  1. Incorporating in another state complicates routine operations like managing bank accounts. You need special permission in Maryland to open an account for an "out of state" business, even if your business is physically located right next to the bank. Opening an account in the state of incorporation can also be difficult if your business has no physical address there.
  2. Incorporating out-of-state means paying twice as many filing fees. You will need to pay fees to operate in Maryland, as well as to incorporate in the other state.
  3. Incorporating out-of-state means extra paperwork. Both states will require that you appoint a Registered Agent in each state and file annual reports. Out-of-state businesses in Maryland also need to file a foreign qualification to conduct business.
  4. The tax benefits of incorporating out-of-state are overblown, especially for small businesses. Even if your out-of-state taxes are very low, you still need to pay taxes in the state where you do business. Your state taxes may even increase as a foreign entity doing business in Maryland.

Incorporating in Maryland allows you to minimize filing fees, paperwork and confusion. Wherever you choose to form your business, be sure to contact a business attorney who can help you determine the best course of action for you and your business.