Sole Proprietorship in Maryland: How to Start One

A sole proprietorship is the default business structure in Maryland: if you start doing business under your own legal name and haven't filed anything with the state to become an LLC or corporation, you're already a sole proprietor. That's the appeal. There's no formation document, no filing fee to become one, and no annual report requirement. But "no paperwork to start" doesn't mean "no paperwork at all." Depending on what you sell and how you operate, you may still need to register a trade name, get a sales tax license, and pull a local trader's license. This guide walks through exactly what a Maryland sole proprietor actually needs to do, in order.

What You'll Need

Your full legal name, or a trade name ("doing business as" name) if you want to operate under something other than your own name
A Maryland business address (home address is fine for most sole proprietors)
Access to Maryland Business Express for name searches and tax registration
An EIN from the IRS if you'll hire employees or want to avoid using your Social Security number on business forms (optional otherwise)
A Combined Registration Application with the Comptroller of Maryland if you'll collect sales tax or have employees
Roughly $25 to $75 in state fees if you register a trade name, plus any local trader's license fee your county or Baltimore City charges
Basic bookkeeping setup: a separate bank account, and a way to track income and expenses for tax time

Step-by-Step: How to Start a Sole Proprietorship in Maryland

1. Decide on your business name

If you're going to operate under your own legal name, for example "Jane Alvarez Photography" where Jane Alvarez is your actual name, you can skip trade name registration entirely. Most people don't do this, though: they want something that sounds like a business, like "Chesapeake Photography Studio." If your business name is anything other than your exact legal name, Maryland requires you to register it as a trade name.

Before you settle on a name, search the Maryland business entity search to make sure it isn't already in use by another registered business, LLC, or corporation. This step gets skipped constantly, and it's the reason people end up rebranding six months into a Maryland sole proprietorship because someone else already had the name locked up.

2. Register your trade name with SDAT

Trade name registration in Maryland is filed with the State Department of Assessments and Taxation (SDAT), not with your county clerk, which surprises a lot of new business owners. The form is the Trade Name Application, available at dat.maryland.gov. The standard fee is $25. If you need it processed faster, expedited service adds $50, for $75 total. Registration doesn't expire on a fixed annual cycle, but you'll want to keep a copy of your confirmation for banks, licensing offices, and anyone who asks you to prove the name is legitimately yours.

This step is optional only in the narrow case where you're using your exact legal name with no additions. Add "Consulting," "Studio," "Co," or basically any modifier, and you need to register it.

3. Get an EIN from the IRS (if you need one)

A sole proprietor with no employees can legally operate using their Social Security number for tax purposes. Most people get an EIN (Employer Identification Number) anyway, because banks generally want one to open a business checking account, and it keeps your SSN off invoices and vendor forms. The IRS issues EINs for free through its online application. If you plan to hire anyone, an EIN is not optional.

4. Register with the Comptroller of Maryland for taxes

If you'll sell taxable goods or services, collect Maryland's 6% sales and use tax, or have employees, you need to register through the Combined Registration Application with the Comptroller of Maryland. The Sales and Use Tax License itself is free. This registration also sets you up for withholding tax if you hire staff, and it's a prerequisite for the next step if your business sells goods.

5. Get a trader's license if you sell goods

Maryland doesn't have one general state business license that covers everyone. What it does have, for most businesses that sell goods (not services), is a trader's license issued by the Clerk of the Circuit Court in the county where you operate. The license year runs May 1 through April 30, so budget for a renewal every spring. Growers and manufacturers are exempt from this requirement.

Here's the part that trips people up: the Clerk generally cannot issue a trader's license until you already have your free Sales and Use Tax License from the Comptroller, and the Clerk also checks that you don't owe personal property tax or have missing SDAT filings. If any of that is outstanding, your trader's license application will stall. Handle your Comptroller registration first, in other words, not as an afterthought.

6. Check for local and professional licensing on top of the trader's license

Depending on your industry, you may need additional permits: a home occupation permit if you're running the business from your house, a health permit for food-related work, or a professional license if you're in a regulated field like cosmetology, contracting, or accounting. These are handled by your county or the relevant state licensing board, not SDAT, so check with your specific city or county government early rather than assuming the trade name registration covers it.

7. Open a separate business bank account

Nothing in Maryland law requires a sole proprietor to keep business and personal money in separate accounts, since legally they're the same pot anyway. Do it regardless. Mixing funds makes bookkeeping a mess, makes it harder to prove business expenses if you're ever audited, and makes it nearly impossible to get a clean read on whether the business is actually profitable.

8. Look into insurance

A sole proprietorship offers no liability separation between you and your business. If a client sues over a bad outcome, your personal assets, house, car, savings, are exposed, not just business assets. General liability insurance, and professional liability insurance if you're in a service field, is worth pricing out even for a one-person operation.

9. Plan for how you'll pay taxes

As a sole proprietor, your business income passes straight through to your personal Maryland income tax return. Maryland's state income tax is graduated from 2% to 6.5%, and on top of that, every county (and Baltimore City) adds a local income tax between 2.25% and 3.30% for 2026. You'll also owe federal self-employment tax on top of ordinary income tax, since there's no employer paying half of your Social Security and Medicare for you. Most sole proprietors need to make quarterly estimated tax payments to both the IRS and the Comptroller to avoid a penalty at filing time.

Tips and Common Mistakes to Avoid

Don't confuse trade name registration with business formation. Registering a trade name in Maryland does not create an LLC or corporation, and it does not protect your personal assets from business debts or lawsuits. It just lets you legally use that name.
Don't skip the Comptroller registration before applying for a trader's license. The Clerk of the Circuit Court will not issue a trader's license without it, and this is the single most common holdup people run into.
Don't assume your trade name is exclusively yours statewide. Trade name registration in Maryland doesn't grant the kind of exclusive naming rights that a trademark does; if brand protection matters to you, that's a separate, and more involved, process.
Don't forget the trader's license renewal date. The May 1 to April 30 license year is easy to miss if you're used to calendar-year deadlines.
Don't operate without at least researching liability insurance. A sole proprietorship is the structure with the least legal separation between you and the business, and that's exactly why insurance matters more here, not less.

What You Can Reasonably Expect

Most people who start a sole proprietorship in Maryland this way can generally expect to be legally operating within a matter of days to a few weeks, depending mainly on how quickly the trade name registration and trader's license are processed and whether any additional local permits apply to your specific business. Because there's no SDAT formation filing for a sole proprietorship itself, the timeline is usually driven by the trade name application and any licensing steps, not by a charter review process.

Sole Proprietorship vs. LLC: A Quick Note

If liability protection matters to you, it's worth comparing a sole proprietorship against forming a Maryland LLC, which costs $100 to file Articles of Organization with SDAT and carries a $300 annual report fee going forward, but separates your personal assets from business liabilities in most circumstances. A sole proprietorship costs less to run day to day but offers no such separation. Which one makes sense depends on your risk exposure, revenue, and plans for growth, and that's a conversation worth having with a professional rather than deciding on cost alone.

This article is for general informational purposes only and does not constitute legal or tax advice. Maryland's requirements can vary by county, industry, and individual circumstances, and fees and deadlines are subject to change. Consult a licensed attorney or CPA, or contact SDAT, the Comptroller of Maryland, or your county Clerk of the Circuit Court directly, before making formation or tax decisions for your specific situation. The Maryland Small Business Development Center and the SBA's Baltimore district office also offer free, one-on-one guidance for people starting a business in the state.