The Plan
When you have performed a self-assessment and gone through our Smart Start training, it will then be important to research and determine your business type and go through the registration process for the chosen business type. There are three general forms of business organizations of which the State of Maryland recognizes:

1. sole proprietorships
2. partnerships
3. corporations

Maryland Recognized Business Entities
Sole Proprietorship
General Partnership
Limited Partnership (LP)
Limited Liability Partnership (LLP)
Limited Liability Limited Partnership (LLLP)
Incorporation (C-corp., S-corp., Close Corporation)
Limited Liability Company

It is very important that you take the time to start your organization the way you want; therefore, weighing the advantages and disadvantages of each business type becomes crucial. You may want to think about starting as a corporation or a LLC if you plan to expand your business in the future. Check out www.bizfilings.com for a business entity comparison chart or www.incorporateinanystate.com to see the advantages and disadvantages of the different business entities. The Web site IANR.unl.edu will give you some publications on all small business entities and their variations (including s-corp. and limited partnership) under the small business section. These publications go over the advantages and disadvantages and the tax implications of each entity. Be reminded it is the best to consult a lawyer when setting up legal entities. The Website MDbusiness.state.md.us will link you to The Guide to Legal Aspects of Doing Business in Maryland written by the Maryland Attorney General Curran Jr. (to find it from the home page, link under the tab Business Assistance then link to Starting a Business). This document reviews each business entity recognized by Maryland, their formation, taxation and liability issues. The document will then go one to introduce other legal issues when doing business in Maryland. For further information regarding the laws relating to Maryland legal entity types, consult the Corporations and Associations Article of the Annotated Code of Maryland.

	Sole Proprietorship	Partnership	Corporation     (S or C)	Limited Liability Corporation
Best Suited For	Single owner business where taxes or product liability are not a concern.	Business with partners where taxes or product liability are not a concern	Single or multiple business owner(s) who need limited liability and want the company to fund fringe benefits.	Single or multiple business owner(s) who need limited liability but want to be taxed as a partnership
Type of Entity	Non-legal owned by one individual	Two or more person ownership	Separate legal entity	Separate legal entity
Length of Existence	Sole proprietorship either ceases or dies	Depends on partnership agreement  Typically death or withdrawal of a partner	Some states may allow perpetual existence  Depends on the state’s requirements	Perpetual
Liability	Unlimited liability can lose personal assets	Unlimited liability  Partners are equally liable or unless the partnership agreement states otherwise	Limited Liability    Shareholders are not typically liable for the debts of the corporation	Limited Liability    Shareholders are not typically liable for the debts of the corporation
Taxation	File Schedule C with Form 1040.  Owner is responsible    Income and expenses are included in owners personal income tax return  Avoids Corporate income taxes	File Form 1065  Partners are responsible  Income and expenses are included in owners personal income tax return  Avoids Corporate income taxes	S Corporations  Pays no income tax, its passed over to its stockholders  C Corporations  Subject to double taxation  Shareholders are personally liable and result in loss of corporate income tax deduction	Usually taxed as a partnership, but can be taxed as a corp. in some states. Usually Form 1065
Dissolution	Easiest	Easy	Complex   Requires filing dissolution document with state agency.   Some states require a tax clearance prior to dissolution	Most Complex  Requires filing dissolution document with state agency.   Some states require a tax clearance prior to dissolution
Advantages	Inexpensive to set up. Few administrative duties.  Few Government Regulations  Avoid corporate taxes	Inexpensive to set up. Few administrative duties.  Few Government Regulations  Avoid corporate taxes	Limited liability. Company paid fringe benefits. Tax savings through income splitting. Capital is easy to raise through sale of stock.  Unlimited Life  Easy transfer of ownership  Tax benefits	Limited liability. Pass-through entity. Unlimited number of owners. Capital is easy to raise through sale of interests.  Liability protection for the owners  Unlimited number of shareholders  Less formalities are required
Disadvantages	Unlimited liability. No tax benefits. Business dissolves upon death of owner.  Difficult obtaining large sums of capital for business loans  Owner is personally liable for all debt incurred	Unlimited liability, also liable for partner's acts. No tax benefits. Legally dissolves upon change or death of partner.	Can be costly to form. More administrative duties. S corp. limited to 35 shareholders.  S Corporation  Not allowed to own 80% or more of the corporations shares  C Corporation  Subject to double taxation  Increased complexity, more set up cost	Can be costly to form.  More administrative duties.  Needs permission to transfer membership interest  Limited lifespan
Examples	Mom and Pop Stores	Land Development, Club owners	S Corporation  Small Business (Pizza Parlor, Interior Design)  C Corporation  Software company, telecommunications	Real Estate Investment Property

Continue to Step 4:
DETERMINE STATE REQUIREMENTS AND REGISTRATION PROCESS