A sole proprietorship is a common business entity because it is relatively simple to set up and has few filing requirements. In Maryland, new business registrations are handled by the Department of Assessment and Taxation. Although you are not required to register a sole proprietorship with the state, you may be required to obtain state and local occupational licenses and business permits, depending on the type of business. Many sole proprietors are also required to register with the state tax authority.
Maryland does not require sole proprietorships to register with the state. In a sole proprietorship, a single person owns the business and is personally liable for the debts of the business. In a sense, the sole proprietorship is merely an alter ego of the owner and is not a separate business entity. If the proprietorship owns property or owes money, the owner does as well. Because the entity provides no legal protection for the owner, registration with the state is not required. Instead, a sole proprietorship is automatically formed when an individual begins doing business.
Although you are not required to register the sole proprietorship, you may be required to obtain a number of state and local licenses. The sole proprietorship is formed as a business without registration, but the state provides an additional step for all companies engaged in certain types of business. Many businesses must acquire a state business license, including retailers, wholesalers, dry cleaners, plumbers, restaurants, and many other business types. Additionally, a number of professions require occupational licensing, such as cosmetologists, accountants and pilots. Contact your county clerk and the Maryland Department of Business and Economic Development to determine which permits and licenses your business may be responsible for.
If you plan to hire employees, or you are required to collect sales tax, you must register the business with the Maryland State Comptroller's Office. All businesses that make sales in Maryland must collect sales tax, while businesses with employees must withhold income and pay for unemployment insurance. You may complete a combined registration to apply for a sales and use tax license, an income withholding account, and an unemployment insurance account. Additionally, businesses that charge admission for events, sell tires, alcohol or tobacco, or have a transient business must also register with the comptroller's office. The combined registration application may be submitted online to set up a new business account.
If you would like to do business under a name other than your own, you must register a trade name with the state. To register a trade name, mail or hand-deliver an application to the Maryland Department of Assessments and Taxation with the appropriate fee. You may email or call the department to first determine if your preferred name is available.
Elizabeth Rayne earned her J.D. from Penn State University and has been practicing law since 2009, advising clients on issues ranging from employment law to nonprofit management. For two years, she served as a contributing editor for the "Vermont Environmental Monitor."