How to Start a Business in Maryland: Accounting and Tax Checklist

Handbook of Entity, Bookkeeping and Taxes.

Forming a business in Maryland is an exciting endeavor, but accountability for upkeep of accounting and tax obligations can prove to be perplexing for first-time business owners. This business accounting checklist is meant to guide you through all of the critical steps required to put in place consistent financial practices, register for taxes correctly and remain compliant as your company scales. It’s something to build upon whether you are starting a sole proprietorship, a partnership, an LLC or corporation.

Select a legal entity and know the impact on taxes

Choose the business structure that suits your objectives. How you report income, pay taxes, and handle liabilities is influenced by each type of entity. As you launch business Maryland accounting, plot out how your chosen structure impacts federal and state tax treatment, owner payroll, and self-employment taxes. Include the decision and effective date in your articles of incorporation or formation.

Submit your business name and formation documents

File articles of organization or incorporation with the state and secure any assumed name or trade name registrations necessary in localities. On the accounting side, for audit preparation and support keep certified copies of formation documents and filing dates.

Get a Federal and State Tax ID Number

Get an EIN for banking, hiring employees and filing with the feds. Maryland also requires that you register for State taxes (State sales tax and/or employer withholding). When you open Children Maryland business accounting be certain to add your EIN and any state tax IDs that apply in your business so transactions are properly documented.

Register for Maryland state taxes

Find out if your business is required to collect and remit the Maryland sales tax, and obtain such permit, you may have to register with the state comptroller for withholding tax if you have employees. And be sure to verify any county-level or local business licenses that have reporting or remittance requirements. Save registration confirmations and account numbers in a compliance folder.

Establish business bank account and payment procedures

Open a business bank account to keep your personal and business funds separate. Put systems in place to get paid by customers and pay vendors. Ensure name consistency to link bank transactions with chart of accounts categories in your bookkeeping solution.

Develop An Account’s Chart and bookskeeping Schedule You have to create an account's chart and pbooks keeping schedule.

Create a chart of accounts that includes your revenue streams, cost of goods sold, operating expenses, payroll categories and tax liabilities. Develop a bookkeeping schedule — daily, weekly, monthly — and stick to it in which bank and credit card accounts are reconciled and receipts get recorded and expenses categorized. Regular bookkeeping can help prevent errors and create time savings at tax filing.

Keep track of sales tax and taxable sales

If you make taxable sales, determine which items are subject to Maryland sales tax and any applicable local additions. Maintain detailed sales records for each jurisdiction in which you sell if you have sales in several counties. Establish how often you must file your sales tax returns and specific calendar due dates, and create reminders for you to comply.

Know the rules — and costs — for payroll and employer taxes

If you hire workers, sign up for employer withholding tax and unemployment insurance accounts. Choose between pay periods, calculate payroll withholdings for federal and state income taxes, Social Security, Medicare and any necessary local taxes. Keep records of all payrolls, including but not limited to time sheets, check stubs and summary payroll data.

Income tax and estimated payments: Strategize for them

The vast majority of small business owners have to pay estimated federal and state taxes throughout the year. Project taxable income, figure out required quarterly payments and set up reminders so you don’t get socked with underpayment penalties. Base initial estimates on prior-year returns and update projections for quarterly information.

Maintain robust recordkeeping and retention

Maintain organized electronic or hard copy records of invoices, receipts, contracts, bank statements and tax filings. Get into the habit of doing your file naming and filing properly. Maryland and federal tax agencies may need to keep supporting documentation for as many as several years, so you should retain copies and safeguard personal financial information.

Set up accounts and performance control

Develops monthly profit and loss, balance sheet, and cash flow statements in order to track profitability and liquidity. Keep a close eye on important metrics, such as gross margin, operating margin, accounts receivable aging and cash runway. Leverage these reports to run your business and get ready for taxes.

Startup and recurrent costs to consider

Produce a startup budget by accounting for formation costs, equipment, marketing and initial operating costs through break-even. Keep a continuous working budget and revise it monthly by way of comparison against actual with projected results. By forecasting, you can plan for tax liabilities and identify funding needs.

Think through sales tax breaks and credits

Look into any state exemptions, credits or benefits that apply to your industry or usage. Record which documents are eligible and must be certified to correctly adjust the sales tax collected and reported.

Get ready for audits and checks of compliance

Keep ONE easy “Auditor File” of formation docs, tax registrations, payroll summaries and financials. Frequent reconciliations and clear records lessen stress if challenged by the tax man plus decreases resolution time.

Make Your Own Tax Calendar And Reminders

If you're looking for a no-frills way of tracking those tax deadlines, here's how to get organized in the best sense of the word.

Create a critical deadline calendar: for quarterly estimated tax payments, filing deadlines for sales tax returns, due dates to provide payroll tax deposits and annual filing deadlines. Set up reminders ahead to gather necessary paperwork and balance accounts prior to filing returns.

Final checklist summary

Choose the type of legal organization and document details of establishment

Get EIN and state tax IDs

• Open a bank account for the business and establish payment procedures
• Set up your chart of accounts and bookkeeping schedule
• Collect and remit sales tax as needed
• Register for payroll taxes and establish a payroll process
• Determine and make estimated quarterly tax payments
• Keep and maintain orderly books and accounts
• Track and report financial results and budget adjustements
• Maintain an audit-ready compliance folder and tax calendar

In Maryland, launching a business takes more than a great idea – it also calls for effective accounting setup and consistent tax compliance. The following business accounting checklist aims to provide a good financial footing and reduce your risk exposure, so that you can be safe in the knowledge that you can grow your business with confidence.