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Forming a general partnership in Maryland is the easiest way to start doing business with other people. Just start doing business with one or more people, and you have a partnership. There are no formal requirements, though there are things to consider and some additional tasks to complete to stay compliant. This article will go over how to form a general partnership in Maryland and the pros and cons of doing so.
There are pros and cons to forming a partnership in Maryland. The type of business you are running and your long-term goals may influence whether a Maryland general partnership is the right legal entity for you.
On the surface, starting a business sounds like it would be difficult. But forming a general partnership is easy, and that is a huge benefit. A general partnership in Maryland can be created with a handshake, although that is not recommended.
There are no formalities or ongoing maintenance fees like annual reports or document amendments. General partnerships are especially convenient for short-term business endeavors. Also, unlike corporations, partnerships are subject to pass-through taxation. This means they are taxed only at the personal tax return level.
Having few requirements simplifies the process, but there are some downsides. No personal liability protection is provided with a Maryland general partnership. You and your partners are personally liable for all financial concerns such as debts, or legal issues. Lack of formal structure can also make it difficult to raise capital if you are trying to expand the business.
If you opt to keep it simple and not make any changes, your business name will consist of your last name and the last names of your partners. This may work fine for short-term ventures or if you do are not doing any marketing for your company. If you want to use a different business name, you can acquire a DBA (doing business as) name. In Maryland, this is called a “trade name.”
Using a DBA often adds professionalism and clearer messaging to potential customers regarding what your business does. Choose a name that is not already in use. Then file a Trade Name Application through the mail using a PDF file or online with the state’s Business Express corporate filings platform.
A Maryland general partnership agreement is essentially a contract between partners outlining rights and responsibilities. Your business is not required to have a partnership agreement, but it is strongly advised and may help avoid potential conflicts. If no partnership agreement exists, disputes will be handled according to Maryland Revised Uniform Partnership Act Section 9-202. The state rules may or may not be favorable for your business.
There is no general state business license in Maryland. A Maryland business license is required for most businesses, including retailers and wholesalers. Buying and re-selling goods requires a trader’s license.
Whether you need a business license will depend on what type of industry you are operating in, as well as your location. Licenses, permits, and clearances may be issued at the local, state, and federal levels. It may take some deep diving to determine what you need for your Maryland general partnership. Use our Business License Report and make it much easier on yourself.
An EIN is necessary for your Maryland general partnership to pay taxes, hire employees, and open business accounts. You can apply for this number on the IRS website, or we can take care of that for you with our Employer ID Number Service.
Maryland general partnerships must comply with state and local taxation requirements. You will need an SDAT (State Department of Assessments and Taxation) Identification Number if you wish to open a business account, which you can obtain using Maryland Business Express.
Forming a general partnership in Maryland is not a difficult process. Once you have determined your business name, drafted a partnership agreement, and obtained licenses, permits, and tax numbers, you are ready to start business operations. Open bank accounts in your business name to keep business finances and personal assets separate. You may also need business insurance, depending on your industry.
Though a Maryland general partnership is one of the easiest businesses to start, it is important to stay on top of any state, local, and federal requirements to keep your business compliant. Our extensive suite of business development and maintenance services can help you easily fulfill many of your business obligations. We’re to help make sure that running a business is an awesome experience.
If you choose to go with another business structure, we can make it easy with our business formation services and get your Maryland limited liability company or Maryland corporation started quickly today!
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
You do not have to register as a general partnership in Maryland. Partners can just start doing business together. You will need to register for a DBA (if needed), obtain federal and state tax IDs, and meet other local requirements.
General partnerships don’t have to pay income taxes at the business entity level. Taxes pass-through to the personal tax returns of individual partners.
Generally, a partner has the ability to run the business and owns an interest in the business. They can transfer this interest, but that does not automatically entitle the new owner to the same operational rights.
Forming a Maryland general partnership is as simple as starting to do business with another person. If there is no partnership agreement, Maryland state rules will apply.
All partners are fully responsible for the debts and liabilities of the partnership.