Starting a Business in Maryland
Even though it has a burdensome tax system as well as a high cost of living, many would do well to look at the advantages of operating a business in Maryland. It has strong communities who support their local businesses as well as a strong labor market. Another extremely important factor is its location in relation to Washington DC, which is just a stone throw away. Maryland tries to facilitate an environment where innovation and creativity are rewarded. This forward looking approach is especially applicable to minority groups (most notably women) who benefit from programs that are put in place to cultivate growth and expansion. The most common are incentives that are given through tax credits, grant programs, and benefits to companies who reside inside a Maryland Opportunity Zone.
STEPS TO STARTING A BUSINESS IN MARYLANDWhether you are researching the Business Licenses you will need, checking on approval or denial of form CRA, or trying to pay Maryland sales tax, avoiding costly mistakes is vital. Conducting a Maryland business name search can be done with the Maryland Secretary of State. Looking up a Tax ID Number is done at the federal level. Once you have organized a business with the Maryland Secretary of State, you can apply online for a Maryland Sales Tax Permit (Seller’s Permit). The Comptroller of Maryland governs business tax compliance and sales tax rates. After looking into your compliance needs, you can research the various benefit programs. Maryland businesses have a wide range of opportunities available to them. Some of the incentive programs offered are as follows:
- In order to spur growth in research and development, Maryland offers two separate tax credits to a business that has eligible R & D investments that it expends. The first is the basic R & D tax credit which is 3% of qualified R & D expenses not to exceed the Maryland base amount. The second is the Growth R & D tax credit which is 10% of qualified R & D expenses that exceed the Maryland base amount. The base amount is calculated as the average gross receipts for the previous four tax years. Credits are taken against corporate income tax obligations. Any unused credits that exceed total state income tax can be carried forward and applied to future income tax obligations with certain statutory limitations. These credits are applicable to C corporations against their corporate income as well as to pass through entities such as LLC’s.
- Maryland has a workforce development program geared toward helping expand jobs in the state called the Job Creation Tax Credit. A tax credit of 2.5% of combined annual wages with a $1000 limit per new job created can be taken. Any unused credits that exceed total state income tax can be carried forward and applied to future income tax obligations with certain statutory limitations. Funds can be used towards corporate income tax obligations, and pass through entities such as LLCs or S corporations can also take advantage of the credit.
- The Maryland Enterprise Zone Tax Credit was created to help promote economic growth within economically distressed areas. The objective is to expand human capital in these underdeveloped areas. Credits are split up into enterprise zones and focus areas. Credits can be taken up to $1000 per new employee in an enterprise zone and $1500 per new employee in a focus area. To qualify for the credit, the employee must hold the position for three years. Credits can be used toward corporate income tax obligations.
- A standout tax incentive offered in Maryland is the Cyber Security Incentive Tax Credit. It is offered to a qualified cyber security company in Maryland. The maximum credit is 33% of the total investment made with a cap of $250,000 per investor. To qualify the company must be located in Maryland, have fewer than 50 employees, and be a certified QMCC.
- One well known state allocation grant program is the Video Lottery Terminal Fund also known as the VLT Fund. This program benefits Minority and women owned businesses. It allocates funds (1.5%) of proceeds from slot machines located in five major casinos located throughout Maryland.