GUIDE TO LEGAL ASPECTS OF
DOING BUSINESS IN MARYLAND
A Joint Publication of the
Office of the Attorney General
and the
Department of Commerce
Acknowledgments
Laila K. Atallah, Principal Counsel, Office of the Attorney General, Department of
Commerce
John Tennis, Director of Antitrust Division, Office of the Attorney General
Jennifer Wazenski, Principal Counsel, Office of the Attorney General, Department
of Natural Resources
William Gruhn, Principal Counsel, Consumer Protection Division, Office of the
Attorney General
Andrea Baker, Principal Counsel, Office of the Attorney General, Department of
the Environment
Colleen A. Lamont, Assistant Attorney General, Department of Commerce
Melanie Senter Lubin, Commissioner, Securities Division, Office of the Attorney
General
Dale E. Cantone, Deputy Commissioner, Securities Division, Office of the Attorney
General
Jeffrey G. Comen, Principal Counsel, Office of the Attorney General, Department
of Assessments and Taxation
Craig A. Nielsen, Principal Counsel, Office of the Attorney General, Department
of Agriculture
Brian L. Oliner, Principal Counsel, Office of the Attorney General, Comptroller of
the Treasury
W. David Rawle, Assistant Attorney General, Department of Commerce
Ira Schwartz, Principal Counsel, Office of the Attorney General, Maryland
Technology Development Corporation
Karen Glenn Hood, Director of Communications, Department of Commerce
Milena Trust, Principal Counsel, Office of the Attorney General, Department of
Labor, Licensing and Regulation
Zenobia Carter, Paralegal, Office of the Attorney General, Department of
Commerce
DISCLAIMER
This booklet is for informational purposes only and does not
constitute legal services or representation. Further, this booklet is not an
exhaustive treatment of the legal obligations of Maryland businesses, but
rather focuses on only those matters regulated by State agencies. For
specific and complete legal advice, please consult with a practicing attorney
who is knowledgeable about Maryland law and is familiar with the relevant
details of your situation.
Despite every effort to ensure the accuracy of this booklet’s contents,
some errors may appear. Moreover, laws can change quite rapidly, and
court interpretations of laws often vary. Therefore, no guarantee can be
given as to the accuracy and completeness of any information provided in
this booklet. The Attorney General’s Office and the Department of
Commerce hereby specifically disclaim any liability for loss incurred as a
consequence of any material presented in this booklet.
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TABLE OF CONTENTS
I. BUSINESS ORGANIZATION
A. Introduction ......................................................................................................... 1
B. Corporation .......................................................................................................... 2
C. General Partnership ............................................................................................ 4
D. Limited Liability Partnership ............................................................................ 5
E. Limited Partnership ............................................................................................ 6
F. Limited Liability Limited Partnership ............................................................. 8
G. Limited Liability Company ............................................................................... 9
II. FOREIGN BUSINESS OPERATIONS IN MARYLAND
A. Introduction ....................................................................................................... 10
B. Independent Operations .................................................................................. 10
C. Joint Venture ...................................................................................................... 14
III. MERGERS AND CONVERSIONS UNDER MARYLAND LAW .......................... 15
IV. SECURITIES LAW
A. Introduction ....................................................................................................... 17
B. Registration of Securities ................................................................................. 17
C. Exemptions from Registration Requirement ................................................ 19
D. Preemptions from Registration Requirement ............................................... 19
V. MARYLAND TAXATION
A. Introduction ....................................................................................................... 20
B. Tax Registration ................................................................................................ 20
C. Maryland Sales and Use Tax ........................................................................... 21
D. Maryland Corporation Income Tax ................................................................ 22
E. Maryland and Local Personal Income Tax .................................................... 24
F. Maryland and Local Real Property Tax ......................................................... 24
G. Local Personal Property Tax............................................................................ 25
VI. LABOR AND EMPLOYMENT LAW
A. Introduction ....................................................................................................... 27
B. Employment Eligibility .................................................................................... 27
C. Equal Employment Opportunity .................................................................... 28
D. Safety and Health Standards ........................................................................... 29
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E. Workers’ Compensation Insurance ................................................................ 30
F. Wage Laws ......................................................................................................... 31
G. Employment-Related Tax Considerations .................................................... 33
H. Employee Concerted Activity ......................................................................... 35
I. Fringe Benefits ................................................................................................... 35
J. Workforce Services ........................................................................................... 36
VII. BUSINESS ASSISTANCE AND FINANCING PROGRAMS
A. Introduction ....................................................................................................... 37
B. Business License Information System ............................................................ 37
C. Domestic Business Assistance Programs ....................................................... 38
D. Domestic Business Financing Programs ........................................................ 39
E. International Business Assistance and Financing Programs ...................... 52
F. Employee Training Programs ......................................................................... 57
G. Tax Credit Incentive Programs ....................................................................... 57
VIII. ASSISTANCE TO AGRICULTURE BUSINESSES
A. Maryland Agriculture ...................................................................................... 59
B. Selling Maryland Agriculture ......................................................................... 60
C. Protecting Maryland Agriculture ................................................................... 61
IX. NATURAL RESOURCES LAW
A. Shoreline Development .................................................................................... 62
B. Forest Development .......................................................................................... 63
C. Licenses ............................................................................................................... 63
X. ENVIRONMENTAL LAW
A. Introduction ....................................................................................................... 66
B. Air and Radiation Administration ................................................................. 67
C. Land and Materials Administration ............................................................... 68
D. Water and Science Administration ................................................................. 70
XI. CONSUMER PROTECTION LAW
A. Consumer Protection Act ................................................................................. 73
B. Uniform Commercial Code ............................................................................. 73
C. Services of the Consumer Protection Division ............................................. 73
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XII. FRANCHISE LAW
A. Introduction ....................................................................................................... 75
B. Registration and Disclosure............................................................................. 76
XIII. “BUSINESS OPPORTUNITY” LAW
A. Introduction ....................................................................................................... 77
B. Registration and Disclosure............................................................................. 78
XIV. ANTITRUST LAW
A. Introduction ....................................................................................................... 78
B. Enforcement ....................................................................................................... 79
C. Concepts of Antitrust Law ............................................................................... 80
D. Prohibited Activities ......................................................................................... 81
E. Trade Associations ............................................................................................ 85
F. Conclusion ......................................................................................................... 85
G. Business Review Procedure ............................................................................. 85
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I. BUSINESS ORGANIZATION
A. INTRODUCTION
State law governs the formation of businesses in the United States;
there is no federal law regulating general business forms. Normally, a U.S.
business will organize under the law of the state in which its main office or
facility is located. This is not a requirement, however; a business may choose
to organize under any state law, and then comply with the laws for foreign
corporations or other foreign entities in those states in which its operations
are actually located (See Section II below, “Foreign Business Operations in
Maryland”).
Maryland’s business laws are flexible and serve well those
businesses that have chosen to establish operations in Maryland. To
encourage the creation and expansion of businesses, Maryland offers
several flexible options for organizing business activity. For all of the
business forms listed below, all papers are filed with the State
Department of Assessments and Taxation (“SDAT”) at the following
address:
State Department of Assessments and Taxation
301 West Preston Street -- 8
th
Floor
Baltimore, Maryland, 21201
Telephone: (410) 767-1340
Documents may now be filed with SDAT online through the
Maryland Business Express at egove.maryland.gov/businessexpress.
Currently, the documents which may be filed online are trade names
registrations, articles of incorporation for stock, close and tax exempt
non-stock corporations, articles of organization for limited liability
companies and foreign corporation and LLC registrations. All
documents may be filed with SDAT by mail at the address above or
in person by visiting the Department’s office during regular business
hours.
Maryland recognizes the following business forms:
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B. CORPORATION
1. Formation
A Maryland corporation may be formed by simply
having at least one adult (an “incorporator”) file articles
of incorporation with SDAT.
2. Features
a. Taxation
A corporation is taxed as a separate entity; it files its
own tax return and pays taxes without regard to the tax
status of the individual shareholders. However, if the
corporation distributes a portion of its after-tax income
to its shareholders in the form of dividends, each
shareholder will pay a separate tax on the dividend
received.
b. Liability
A shareholder of a corporation is not personally liable
for the acts or obligations of the corporation. However,
a small business that chooses the corporate form should
be aware that banks and other commercial lenders
understand the liability advantages of the corporate
structure and will often require the personal guarantees
of corporate shareholders as a condition of making a
loan to the corporation.
3. Articles of Incorporation
SDAT provides standardized fill-in-the-blank examples
for corporations on its website which can be used by
filers or serve as a template for those who wish to draft
their own documents. Articles of incorporation must
include the following information:
name and address of each
incorporator
name of corporation
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purpose for which corporation was
formed (can be as general as “to
engage in any lawful activity”)
address of corporation’s principal
office in Maryland
name and address of corporation’s
resident agent
authorized number, class, and par
value, if any, of shares
a description of each class of stock,
if applicable
number and names of
corporation’s initial directors
The articles of incorporation also include provisions
governing the basic rights of shareholders and defining
the authority of directors. Since shareholder
information is not filed with SDAT, the ownership of
the corporation does not become a matter of public
record with the State.
4. Corporate Name
A corporation’s name must include one of the following
words, or its abbreviation:
“company,” if not preceded by
“and” or “&”
“corporation”
“incorporated”
“limited”
5. Resident Agent
A resident agent is a person or entity that is designated
to accept service of process on behalf of the entity in the
event of a lawsuit. The address of a Maryland resident
agent must be an actual physical location and not a post
office box. A corporation’s resident agent must be one
of the following:
an adult resident of Maryland
a Maryland corporation
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a Maryland limited liability
company
6. Corporate Directors and Officers
Maryland requires that each corporation have at least
one director, except a statutory close corporation which
may elect to have no directors at its first organizational
meeting. The directors oversee the corporation and
elect the officers (the senior management), who manage
the day-to-day business activities. The qualifications
required of directors are set by the corporation, not by
the State.
In addition to its directors, a corporation must have at
least three officers: a president, a secretary, and a
treasurer. A corporation may have other officers,
including any number of vice presidents. If the
corporation’s bylaws permit, one person may hold
more than one office, except that one person may not be
both president and vice president. Moreover, a person
holding more than one office may not act in more than
one of those capacities when executing, acknowledging,
or verifying certain documents.
C. GENERAL PARTNERSHIP
1. Formation
There are required filings to form a general partnership.
Any unincorporated association of two or more
persons, acting as co-owners, which is set up to engage
in a business activity for profit is a general partnership.
2. Features
a. Taxation
Profits, losses, and control are proportionately divided
among the partners. Although the partnership must file
an informational tax return, it is not taxed as a separate
entity; rather, taxable income, losses, deductions, and
credits are passed through on a pro-rated basis to each
5
of the partners. Each partner is taxed directly on its
share of the partnership’s net income, whether that
income is distributed or not.
b. Liability
Each general partner is personally liable for all the acts
and obligations of the partnership. However, under
Maryland law, a corporation may be a partner, so for
the corporate partner, only its corporate assets would
be at risk.
D. LIMITED LIABILITY PARTNERSHIP
1. Formation
A limited liability partnership (“LLP”) is formed when
a general partnership registers as an LLP by filing a
certificate of limited liability partnership with SDAT.
(A limited partnership may also register as a limited
liability partnership. See Section F below, entitled
“Limited Liability Limited Partnership.”)
2. Features
A limited liability partnership functions in the same
way as a general partnership, with one exception: in a
limited liability partnership, the general partners are
not individually liable for the obligations incurred by
the partnership or by other partners unless a partner is
guilty of negligence or misconduct.
3. Certificate of Limited Liability Partnership
The certificate must contain the following information:
name of the LLP
purpose for which the LLP was
formed
address of the LLP’s principal
office in Maryland
name and address of the LLP’s
resident agent
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4. Limited Liability Partnership Name
The name of the limited liability partnership must
contain either the words “limited liability partnership”
or the abbreviation “L.L.P.” or “LLP.”
5. Resident Agent
A LLP’s resident agent must be one of the following:
an adult resident of Maryland
a Maryland corporation
a Maryland limited liability
company
E. LIMITED PARTNERSHIP
1. Formation
A limited partnership is a partnership of two or more
persons, with at least one general (“managing”) partner
and at least one limited (“investing”) partner. A limited
partnership is formed when all of the general partners
file a certificate of limited partnership with SDAT.
2. Features
a. Taxation
A limited partnership is taxed in the same way that a
general partnership is taxed.
b. Liability
Under usual partnership law, a general partner is
personally liable for the acts and obligations of the
limited partnership, while a limited partner is not.
However, Maryland offers three other features to
protect partners in limited partnerships from liability:
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A corporation may serve as the
general partner, thus exposing
only corporate assets to risk.
Limited partnership agreements
may be drafted to indemnify
partners, employees, and agents of
the limited partnership for all acts
except fraud and reckless conduct.
A limited partner may act as an
officer, director, or shareholder of
the corporate partner without
subjecting himself to liability as a
general partner, so long as a
creditor does not have a
“reasonable belief” that, based
upon his conduct, the limited
partner is instead a general
partner.
3. Certificate of Limited Partnership
The certificate must contain the following information:
name of limited partnership
address of limited partnership’s
principal office in Maryland
name and address of limited
partnership’s resident agent
name and address of each general
partner
latest date upon which the limited
partnership is to dissolve
4. Limited Partnership Name
The name of the limited partnership must contain either
the words “limited partnership”, or the abbreviation
“L.P.” or “LP”. In addition, the name of the limited
partnership may not contain the name of the limited
partner, unless that is also the name of a general
partner, or unless the business of the limited
partnership had been carried on under that name before
the admission of that limited partner.
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5. Resident Agent
A limited partnership’s resident agent must be one of
the following:
a citizen of Maryland who resides
in Maryland
a Maryland corporation
a Maryland limited liability
company
F. LIMITED LIABILITY LIMITED PARTNERSHIP
1. Formation
A limited partnership may register as a limited liability
limited partnership (“LLLP”). The limited partnership
registers by doing two things:
a. Including in its certificate of limited partnership
or an amendment to the certificate the following
information:
name of the LLLP
purpose for which the LLLP was
formed
address of the LLLP’s principal
office in Maryland
name and address of the LLLP’s
resident agent and
b. Using the words “limited liability limited
partnership” or the abbreviation “L.L.L.P.” or
“LLLP.”
2. Features
All of the legal provisions that govern a general
partnership that has registered as a limited liability
partnership also govern a limited partnership that has
registered as a limited liability limited partnership.
Thus, this form provides the same limited liability for
9
the limited partners, but will also provide limited
liability for the general partner in the same fashion that
a limited liability partnership does for the partners of a
general partnership.
G. LIMITED LIABILITY COMPANY
1. Formation
A limited liability company (“LLC”) is formed by filing
articles of organization with SDAT.
2. Features
An LLC is an unincorporated business organization
with at least one “member.” Members may be
individuals, corporations, partnerships, or other LLCs.
a. Taxation
An LLC is normally taxed in the same way a
partnership is taxed; however, businesses considering
using the LLC form should consult tax counsel or an
accountant about the availability and method of
making an election of corporate or partnership tax
status; see Internal Revenue Service Form 8832.
b. Liability
An LLC is similar in function to a partnership, but offers
the same liability protection for its members as a
corporation does for its stockholders.
3. Articles of Organization
The articles of organization must contain the following
information:
name of the LLC
address of LLC’s principal office in
Maryland
name and address of LLC’s
resident agent
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4. Limited Liability Company Name
The name of the limited liability company must contain
either the words “limited liability company” or the
abbreviation “L.L.C.”, “LLC”, “L.C.”, or “LC.”
II. FOREIGN BUSINESS OPERATIONS IN MARYLAND
A. INTRODUCTION
The State of Maryland welcomes direct foreign investment in
terms of the ownership and active management of business
enterprises. (“Foreign” businesses are those that are organized under
the laws of another country, the United States, or another state in the
United States.) Foreign investors may organize their business
activities in Maryland in a variety of ways that are designed to
provide sufficient flexibility to fit the needs of any particular business
venture. However, the final determination will depend upon a
number of legal and tax considerations.
Initially, the foreign business must determine whether it plans
to operate independently, or in a joint venture with another U.S. firm.
If the foreign business is planning to operate independently, it may
simply establish a branch office in Maryland. Alternatively, it may
choose to operate through a wholly owned subsidiary corporation
organized under the laws of a state in the United States.
B. INDEPENDENT OPERATIONS
1. Branch Office
A foreign business entity may establish a branch office
in Maryland by registering or qualifying with the State
Department of Assessments and Taxation (“SDAT”).
a. Foreign Corporations
(i) Qualification (Intrastate Business)
If a foreign corporation wishes to engage
in intrastate business operations in
Maryland, it must qualify with SDAT. To
qualify, the foreign corporation must:
11
certify its address; and
certify the name and address of its
resident agent in Maryland; and
provide evidence of its existence in
its home state dated within 60 days
of the date of filing (usually a
certificate of good standing or
certificate of existence).
Note: if a foreign corporation is qualified to
do intrastate business in Maryland, it need not
also register to do interstate or foreign
business in Maryland.
(ii) Registration (Interstate and Foreign
Business)
If a foreign corporation wishes to engage
in interstate or foreign business
operations in Maryland, it must register
with SDAT. To register, the foreign
corporation must:
certify its address;
certify the name and address of its
resident agent in Maryland; and
provide evidence of its existence in its
home state dated within 60 days of the
date of filing (usually a certificate of
good standing or certificate of
existence).
b. Foreign Limited Liability Company (LLC),
Limited Liability Partnership (LLP), or Limited
Liability Limited Partnership (LLLP)
If a foreign LLC, LLP, or LLLP wishes to engage
in interstate, intrastate, or foreign business in
Maryland, it must register with SDAT. To
register, the foreign LLC, LLP, or LLLP must
submit an application to SDAT containing:
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The name of the foreign LLC, LLP,
or LLLP, and if different, the name
it proposes to use in Maryland to
do business
The name of the state under which
laws it was formed
A current certification from its
domicile state attesting to its
existence
The date of formation of the
foreign LLC, LLP, or LLLP
A general description of the
business to be transacted in
Maryland
The name and address of its
resident agent in Maryland, or a
statement that SDAT may act as
the resident agent for the foreign
LLC, LLP, or LLLP if it has no
resident agent
The address of the office that it is
required to have under the laws of
the state in which it was formed, or
if there is no such requirement, the
address of its principal office
c. Foreign Limited Partnership (LP)
If a foreign LP wishes to engage in interstate,
intrastate, or foreign business in Maryland, it
must register with SDAT. To register, the
foreign LP must submit an application to SDAT
containing:
The name of the foreign LP, and if
different, the name it proposes to
use in Maryland to do business
The name of the state or country
under which laws it was formed
A current certification from its
domicile state attesting to its
existence
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The date of formation of the
foreign LP
A general description of the
business to be transacted in
Maryland
The name and address of its
resident agent in Maryland, or a
statement that SDAT may act as
the resident agent for the foreign
LP if it has no resident agent
The address of the office that it is
required to have under the laws of
the state in which it was formed, or
if there is no such requirement, the
address of its principal office
The name and address of each of its
general partners
d. Maintaining Qualification / Registration
Once the foreign business is registered or
qualified, it must maintain a current resident
agent and file, effective January 1, 2018, an
annual report and a personal property tax return
to maintain its registration or qualification.
Additionally, a registered non-corporate entity
and a qualified corporate entity must pay a $300
fee when submitting the annual report.
Qualified non-stock corporations must also file
the annual report but are not required to pay the
filing fee.
e. Contacting Comptroller
Depending on the type of business and the
presence of employees in Maryland, the foreign
business may need to contact the Office of the
Comptroller for purposes of sales tax and
employment tax withholdings. (See other
sections of this Guide.)
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2. Subsidiary Corporation
Instead of using a branch office, many foreign
businesses choose to operate in Maryland through a
subsidiary corporation formed under the laws of
another state in the United States. One benefit of this
arrangement for foreign national businesses is that as a
general rule, only the assets of the U.S. subsidiary are
placed at risk in the U.S. operations. In addition, the use
of a separate U.S. subsidiary will help to clarify what
income will be subject to U.S. taxation.
The parent corporation, as the sole shareholder of the
subsidiary, will decide who the subsidiary’s director is,
and through the director, will oversee senior
management. Maryland permits a subsidiary
corporation to have only one director, who may be a
citizen or resident of another state or nation.
Please refer to Section I for information on setting up a
business in Maryland; a foreign business would follow
the same procedures in setting up its Maryland
subsidiary. In addition, the foreign business must also
comply with the laws for foreign corporations in
Maryland (and in any other state in which the foreign
corporation has located operations.)
C. JOINT VENTURE
A “joint venture” is an arrangement through which a foreign
business enters into an enduring relationship with a U.S. business for
the purpose of sharing resources in a common enterprise in order to
produce together goods or services. Joint ventures between foreign
businesses and U.S. businesses are common today and we believe
that the number of joint ventures will increase markedly in the future
as more businesses pool their resources to serve world markets.
In Maryland, joint ventures may be formally structured in
several ways:
The two businesses may each contribute capital
to a newly created corporation in exchange for
an equity interest. Each of the co-venturers
15
would then be a shareholder with voting rights
in deciding who serves on the board of directors.
Alternatively, the foreign business and the U.S.
business, either directly or through wholly
owned subsidiaries, may enter into a partnership
agreement and operate the joint venture as a
general or limited partnership.
Finally, the joint venture may be structured as a
limited liability company (“LLC”) with each of
the parties, either directly or through
subsidiaries, becoming members of the LLC and
managing the newly formed venture according
to an operating agreement.
There are various tax and legal issues relating to the preferred
form of organization in particular cases, but the business goals of the
venture may be accomplished in any of these formats.
III. MERGERS AND CONVERSIONS IN MARYLAND
Another example of the flexible options offered by Maryland law is
in the area of conversions and mergers. Under Maryland law, a Maryland
domestic business entity may convert into or merge with a foreign or
domestic business entity of similar or different organizational structure.
Likewise, Maryland law permits a foreign entity to convert into or merge
with a business entity organized under Maryland law in a similar or
different organizational structure.
A. MERGERS
To accomplish a merger that involves a Maryland business entity, the
parties to the merger must file Articles of Merger with SDAT. The articles
must be executed by all parties to the merger and set forth the following
information:
the name and place of incorporation or
organization of all parties;
for foreign entities, the date of
incorporation/organization, whether it was
created by special act or general law and, if
registered or qualified previously with SDAT,
the date of the registration or qualification;
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each country in Maryland where any party has
its principal office or owns an interest in land;
a recitation that the parties agree to merge, that
the terms and conditions of the transactions were
“advised, authorized and approved” by each
party in the manner and by the vote required by
its charter and the laws of its home state and the
manner or approval;
the number of shares or other type of ownership
interests in each entity, the number in each class
if any and the value of each share if applicable;
the manner and basis for exchanging the
ownership interests into that of the successor
entity; and
for foreign successor entities, the location of its
principal office where it is organized and the
name and address of its resident agent in the
place where it is organized.
B. CONVERSIONS
To accomplish a conversion of a non-Maryland entity into a
Maryland entity, a Maryland entity into a non-Maryland entity or to convert
a Maryland entity into a different Maryland business structure, the entity
must file Articles of Conversion with SDAT that set forth the following:
the name, date, and place of incorporation or
organization of the converting entity;
the name and place of domicile the resulting
(converted) entity;
the manner and basis of converting the
ownership interests of the converting entity into
that of the resulting entity; and
a statement that the conversion has been
approved in accordance with Maryland law.
Note: Foreign entities will likely have to file similar
documents in their home state or country as well.
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IV. SECURITIES LAW
A. INTRODUCTION
The Maryland Securities Act and related regulations allow
companies, large and small, to raise capital in Maryland in a manner
consistent with the protection of investors against investment fraud.
Like the federal securities laws, Maryland law requires a company
offering securities to provide potential investors with full and
complete disclosure about the company, so that investors are able to
make informed investment decisions. Unlike some states, Maryland
does not pass on the merits of an investment offering.
Securities come in all shapes and sizes. Corporate stock or
limited partnership interests are well-known types of securities;
however, limited liability company interests, notes issued in loan
transactions, viatical settlement agreements, and other investment-
type contracts may also be securities.
B. REGISTRATION OF SECURITIES
The Securities Division of the Attorney General's Office is the
agency that enforces the Maryland Securities Act. Any offer or sale
of a security in Maryland must be registered with the Securities
Division, unless the Maryland Securities Act exempts or federal law
preempts the specific type of security or transaction from the
registration requirement.
1. General
In most cases, an issuer has a number of choices in the
manner of registration or exemption of its securities
offering. There is also more than one way for the selling
agent to qualify to sell the offering.
Many of the registration and exemption provisions in
the Maryland statute relate directly to the federal
securities laws and the regulations of the U.S. Securities
and Exchange Commission (“SEC”), so that an issuer of
securities may readily coordinate compliance with both
Maryland and federal law. In many large national
offerings, Maryland regulation is minimized or
eliminated in favor of SEC oversight. In other local or
18
regional offerings, Maryland takes a primary role in
review of the offering.
2. Streamlined Procedure
In many cases, issuers who are registering their
securities offering may take advantage of a streamlined
procedure for coordinating state registration with SEC
registration. For example, offerings under Regulation
A of the SEC rules may be registered with several states
concurrently using this coordinated procedure.
3. Small Company Offering Registration (SCOR)
For small company offerings that meet certain
conditions, the Small Company Offering Registration
(“SCOR”) program is available. Under SCOR, certain
small business issuers may raise capital in the public
market without incurring the expense of a typical
securities registration. The SCOR program offers
several advantages to the small entrepreneur:
The disclosure
document is in a “plain English”
format
Requirements for
expensive audited financial
statements and exhibits are relaxed
With less
involvement of lawyers and
accountants, offering expenses are
reduced
An entrepreneur
may coordinate a SCOR
registration at the state level with a
Regulation D, Rule 504 limited
offering at the federal level
Under SCOR, shares received by investors are not
restricted, general solicitation may be used, and the
issuer may sell up to $1 million in securities in any 12
month period. Before offering securities under SCOR,
the issuer must file the completed Form U-7 and
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accompanying documents with the Securities Division,
and pay the filing fee. An attorney in the Division will
work with the company to help ensure that the SCOR
disclosure document meets the requirement of the state
securities law that the company disclose to potential
investors all information material to an investment
decision.
C. EXEMPTIONS FROM REGISTRATION REQUIREMENT
The following types of offerings are exempt from the
registration requirement:
Certain offers to existing security holders
A “limited offering” or “private placement”
usually requires only the filing of a short notice
form with the Division
Certain very small offerings do not require any
filing at all
Of course, the issuers of these securities are still subject to the
law’s requirement of full disclosure to potential investors.
D. PREEMPTIONS FROM REGISTRATION REQUIREMENT
The following types of offerings are pre-empted from the
registration requirement:
Offers of certain national exchange listed
securities sold by a Maryland registered broker-
dealer
Offerings of Investment Company securities
Offerings of securities made pursuant to federal
securities Regulation D, Rule 506
The first of these three pre-emptions is “self-executing” and
does not require any filing with the Securities Division. The second
two require the issuer to submit a notice filing to the Securities
Division and pay a filing fee. Of course, the issuers of exempt or
preempted securities are still subject to the law’s requirement of full
disclosure to potential investors.
20
For more information regarding the requirements of the
Maryland Securities Act, registration, exemption or preemption
provisions, please contact:
Maryland Securities Division
200 St. Paul Place
Baltimore, MARYLAND 21202-2020
Telephone: (410) 576-7050
or
www.marylandattorneygeneral.gov/Pages/Securities
/default.aspx – website
[email protected] – e-mail
V. MARYLAND TAXATION
A. INTRODUCTION
In Maryland, the principal State taxes are:
Sales and use tax
Corporation income tax
Personal income tax
Real property tax
The major local revenue sources for the counties and Baltimore
City include:
Real property tax
Personal property tax
Local income tax on individuals
Overall, the total tax burden imposed on businesses operating
in Maryland and on Maryland residents is lower than in most states
in the United States.
B. TAX REGISTRATION
1. State Tax Registration – Combined Registration
Application
a. Maryland provides one-stop business
registration online through the State
21
Comptroller’s web site at
www.marylandtaxes.com. General information
for businesses operating in Maryland, including
tax and reporting information, is available on-
line via the Comptroller’s website at
https://taxes.marylandtaxes.com/Business_Ta
xes/default.html
b. The Combined Registration Application meets
the requirements for most State taxes, including
sales and use tax, income tax withholding, and
the unemployment insurance tax. Combined
Registration Applications and instructions may
be obtained at any branch of the State
Comptroller’s Office, on-line at
https://interactive.marylandtaxes.com/webap
ps/comptrollercra/entrance.asp, or directly
from:
Comptroller of Maryland Central Registration
Revenue Administration Center
110 Carroll Street
Annapolis, Maryland 21411-0001
(410) 260-7980 and/or (800) 638-2937
The Combined Registration Application can be
completed and submitted on-line 24 hours a day.
The application can also be completed and
submitted in hard copy at any Comptroller office
or branch office, by mail or by fax (410-260-7908).
2. Local Tax Registration
Local taxes in Maryland require no additional
registration. Local taxes are usually collected as part of
the various State tax systems. Questions about local
property taxes should be directed to the finance office
of the county where the business is or will be located.
C. MARYLAND SALES AND USE TAX
Maryland has a 6% sales and use tax on the sale or use of
tangible personal property and taxable services unless a specific
22
exemption is provided. There are no sales and use taxes levied by
Maryland’s counties or municipalities, except for certain narrow
exceptions that generally permit a local tax on the sale or use of fuels,
utilities, space rentals, and, in a resort area, on the sale or use of food
and beverages. Major business-oriented exemptions from the sales
and use tax include:
Sales for resale and sales of property to be
incorporated in other property manufactured for
resale
Sales of manufacturing machinery and
equipment, including sales of equipment used in
research and development
Sales of property used in a production activity,
including fuels
Sales of transportation vehicles used principally
for interstate and foreign commerce
Certain capital transactions, including transfers
to newly-formed corporations
Sales of certain end-item testing equipment used
to perform a contract for the U.S. Department of
Defense and transferred to the federal
government
Maryland also imposes a 9% sales tax on the sale of alcoholic
beverages. This alcoholic beverage sales tax is separate and distinct
from the alcoholic beverages tax.
All retail vendors are required to register and collect the
Maryland sales and use tax and obtain a sales and use tax license. To
obtain the license, complete the Combined Registration Application
described in Part B.1.
D. MARYLAND CORPORATION INCOME TAX
1. General
Every corporation having income allocable to the State
of Maryland is required to file an annual income tax
return with the State. The tax rate is 8.25% of the net
income allocable to Maryland. In general, the Maryland
corporation income tax law conforms to the federal law,
with federal taxable income as the starting point in the
23
Maryland computation. Depreciation is deductible to
the same extent as permitted under the Internal
Revenue Code, except that the additional depreciation
deduction authorized for federal income tax purposes
by the Economic Growth Tax Relief Reconciliation Act
of 2001 is not deductible in Maryland. In computing its
Maryland taxable income, a corporation may deduct
from its federal net taxable any income dividends
received from foreign subsidiaries if the corporation
owns 50% or more of the foreign subsidiary.
2. Allocation of Business Income
Corporations whose trade or business is carried on
partly in Maryland generally allocate business income
to the State by means of a widely used three-factor
formula. This formula allocates income to Maryland
based on a ratio of the corporation's sales, property, and
payroll located in Maryland to its total sales, property
and payroll, with the sales factor being double-
weighted. A special rule applies to a corporation in the
business of manufacturing; its Maryland income is
determined by using a single sales factor formula that
provides for multiplying Maryland income by 100% of
the sales factor.
3. Estimated Tax Payments
All corporations that estimate current annual Maryland
income tax liability to exceed $1,000 must make a
declaration and payment of the estimated tax on the
15th day of the 4th, 6th, 9th and 12th months of its
taxable year, which, in the case of a calendar year,
corresponds to the months of April, June, September,
and December. Corporations that fail to comply with
the estimated tax requirements may be subject to
penalties.
24
E. MARYLAND AND LOCAL PERSONAL INCOME TAX
1. General
The Maryland personal income tax is based essentially
on the adjusted gross income reported on an
individual’s federal income tax return, with certain
additions and subtractions. The rates range from 2% on
the first $1,000 of taxable income to 5.75% on taxable
income in excess of $250,000.
In addition, Baltimore City and the Maryland counties
impose a local income tax on Maryland taxable income
at rates ranging from 1.25% to 3.2%; the local tax is
collected and administered by the State.
2. Business Withholding Requirements
Businesses are required to withhold the personal
income tax from employees’ wages and periodically
remit the tax to the State on behalf of the employees.
Officers and directors of a corporation who exercise
direct control over the corporation’s fiscal matters are
personally liable for unpaid employee withholding
taxes. Individuals whose tax is not withheld may be
required to make quarterly payments based upon their
estimated yearly tax.
3. Nonresident Officials
Partnerships, S Corporations and limited liability
companies that have a shareholder, partner, or member
who is not a resident of Maryland and that have income
from certain Maryland sources are subject to a tax of
7.0% of each nonresident’s taxable income. The tax is
treated as a tax imposed on the individual nonresident.
F. MARYLAND AND LOCAL REAL PROPERTY TAX
Maryland imposes a property tax on real property according
to its market value. Visit the website for the State Department of
Assessments and Taxation (www.dat.state.md.us) for current state
and local rates. The 2012 State tax rate was $0.112 per $100 of assessed
25
value of real property and $0.28 per $100 of assessed value of
operating real property of a public utility. The assessed value equals
100% of the market value which is reassessed every three years. Any
increase in value is phased in over the three-year period. For primary
residences, the phase-in of the increase is restricted to 10% of the
previous year’s assessment for State taxes if there has not been a
transfer of the property or a major improvement within the preceding
tax year.
The local counties and municipalities also impose real
property taxes. The tax rates vary between a low of $0.571 per $100
of assessed value in Talbot County to a high of $2.248- per $100 of
assessed value in Baltimore City (2012 rates). Municipal tax rates
vary considerably and should be reviewed individually.
Additionally, when the municipality provides services that the
county provides outside of that municipality, the county tax rate will
be lower for the property within the town limits. For primary
residences, the phase-in of the increased assessment is also restricted
for county and municipal property taxes, but the percentage of
increase is set by the taxing authority. The maximum is 10%.
Certain tax preferences for businesses are available where they
have been adopted by the local county officials, such as real property
tax credits for improvements within enterprise zones, for new
manufacturing industries, and for business expansion that creates a
specified number of new jobs. For property tax purposes, agricultural
land is only assessed at a maximum value of $500 per acre.
G. LOCAL PERSONAL PROPERTY TAX
The State of Maryland does not impose a state personal
property tax. However, eighteen counties plus Baltimore City do
impose a personal property tax at a rate which is set annually by each
county and which cannot exceed 2.5 times the counties’ real property
tax rate. Some municipalities also impose a personal property tax,
but those rates are not necessarily tied to the local real property rate.
Personal property assessments are based on the fair market value of
the property which is normally set at the cost of acquisition, less
depreciation. Depreciation rates vary depending on the type of
property, but there is a floor of 25% of original cost unless otherwise
established. Additionally, computer software and certain data
processing equipment may be depreciated to 10% of their original
cost unless otherwise established.
26
Certain personal property is exempt in whole or in part from
tax. Business inventory, manufacturing property, research and
development property, ready to use shrink-wrapped software,
vehicles, vessels, and aircraft all receive preferential tax treatment.
The responsibility for setting the value of both real property
and personal property and for determining the applicability of most
exemptions lies with the State Department of Assessments and
Taxation. Those values and any applicable exemptions are then
adopted by the counties and the municipalities.
For more information about Maryland sales and use or income
taxes, contact:
Comptroller of Maryland
Taxpayer Services Section
at either
301 W. Preston Street
Baltimore, Maryland 21201
Telephone: (410) 767-1300
or
Revenue Administration Center
Annapolis, Maryland 21401
Telephone: (410) 260-7980
Or through the Comptroller’s web site at:
www.marylandtaxes.com
For more information about Maryland property taxes, contact:
State Department of Assessments and Taxation
301 West Preston Street
Baltimore, Maryland 21201
Telephone: (410) 767-1184
E-mail: [email protected]
Or through SDAT’s web site at:
www.dat.state.md.us
27
VI. LABOR AND EMPLOYMENT LAW
A. INTRODUCTION
One of the principal business factors that must be weighed when
deciding where to locate your enterprise in Maryland is the quality of the
labor force —whether a location has available the kind of labor you need
(experienced, sophisticated, educated, skilled, semiskilled, unskilled) at
appropriate wage rates. For up-to-date economic information concerning
the labor force in Maryland, contact:
Department of Labor, Licensing and Regulation
Office of Workforce Information and Performance
1100 N. Eutaw Street
Baltimore, Maryland 21201
Telephone: (410) 767-2250
www.dllr.state.md.us
The workplace is regulated by both federal and state law, and
these employment laws are equally applicable to both U.S. and
foreign employers.
This section will identify major employer obligations under
both federal and state law, and the agencies responsible for
enforcement of those obligations. For more detailed information,
please contact these enforcement agencies.
B. EMPLOYMENT ELIGIBILITY
The Immigration Reform and Control Act (IRCA 1986)
requires all employers to verify the identity and employment
eligibility of all persons hired after November 6, 1986. Employers
comply by requiring and reviewing appropriate documentation and
by preparing and retaining the I-9 form for each person hired. The
United States Citizenship and Immigration Services within the
United States Department of Homeland Security issues and enforces
regulations under IRCA.
IRCA also prohibits discrimination in hiring against eligible
alien applicants on the basis of foreign nationality unless the
employer can establish that a U.S. citizen is better qualified or that the
law restricts employment to U.S. citizens.
28
For more information, please go to:
www.uscis.gov
C. EQUAL EMPLOYMENT OPPORTUNITY
Both federal law (Title VII of the Civil Rights Act Of 1964) and
Maryland law (Maryland Article 49B) prohibit employers with fifteen or
more employees from discriminating in any employment practice or with
regard to compensation, benefits, privileges, or conditions of employment
among job applicants or employees for any of the following reasons:
race
color
national origin
sex (including pregnancy-related conditions)
religion
age (forty or older, under the federal Age
Discrimination in Employment Act of 1967—
applies to employers with more than 20
employees)
disability
genetic information
Maryland law also prohibits employment discrimination on
the basis of marital status, physical or mental handicap, and sexual
orientation.
Equal opportunity laws impose three basic requirements upon an
employer:
to make employment decisions by evaluating
each person on the basis of individual, objective,
job-related abilities without regard to any
stereotypical assumptions
to pay compensation, provide benefits, and set
work conditions without regard to any of the
prohibited factors
to establish actual job-related requirements
Persons who think that they are being mistreated or denied an
employment opportunity (hiring, promotion, transfer, training, etc.)
for any of the prohibited reasons listed above must first file a
29
complaint with either the Equal Employment Opportunity
Commission (EEOC) or the equivalent State agency, the Maryland
Commission on Civil Rights. The agency will investigate, and if it
determines that there is some merit to the complaint, will first attempt
to reconcile the parties before allowing the complainant to sue. In
extreme cases, the agency itself may bring the suit.
For more information, please contact:
Maryland Commission on Civil Rights
William Donald Schaefer Tower
6 Saint Paul Street, 9
th
Floor
Baltimore, Maryland 21202
Telephone: (410) 767-8600
http://mccr.maryland.gov
D. SAFETY AND HEALTH STANDARDS
Federal law (the Occupational Safety and Health Act of 1970
or OSHA) requires employers to provide a work environment free of
all recognized hazards likely to cause death or serious bodily injury
and to comply with any specific safety and health standards
applicable to a particular industry. The federal government has
approved the Occupational Safety and Health Plan of the State of
Maryland and has authorized the State to be the enforcement agency.
The Maryland Occupational Safety and Health unit (MOSH)
in the Division of Labor and Industry, Department of Labor,
Licensing and Regulation, establishes safety and health standards
and enforces them by an inspection system. Specific standards
regulate such matters as machine guarding and employee exposure
to noise, asbestos, lead, silica, and other hazardous substances.
MOSH also enforces “right to know” regulations requiring employers
to warn their employees about exposure to hazardous materials and
substances. In addition to inspections, MOSH provides consultation
services through which MOSH will review an employer’s worksite,
identify hazards, and provide an employer with an opportunity to
abate the hazards without penalty.
There are two methods for assuring compliance with MOSH
standards: enforcement activities and voluntary compliance
activities. Enforcement activities include unannounced inspections
which may result in the issuance of citations.
30
Voluntary compliance consists of on-site consultative surveys
cooperative compliance programs and training. Employers may
request a free-of-charge, on-site consultation survey to determine
whether they are in compliance. There are no citations or penalties
associated with a consultation visit.
For more information, please contact:
MOSH
Division of Labor and Industry
10946 Golden West Drive Suite 160
Hunt Valley, Maryland 21031
Telephone: (410) 527-4447
https://www.dllr.state.md.us/labor/mosh/
E. WORKERS’ COMPENSATION INSURANCE
The Maryland workers’ compensation law requires employers
to purchase insurance to pay compensation to employees for work-
related injuries, occupational diseases, or deaths, regardless of
whether someone is at fault (the employer, the injured employee, a
co-worker, or a non-employee). This non-fault compensation is the
employee’s exclusive remedy against the employer for work-related
injuries; the injured employee may not sue the employer in an
attempt to recover greater compensation. The compensation
available includes medical and rehabilitation expenses, a percentage
of lost wages, and an amount for impairment of earning capacity. The
amount of the insurance premiums varies with the accident rate of
the industry and of the specific employer, so an employer has a
financial incentive to maintain a safe and healthy work environment,
to hire competent and careful employees, and to train and discipline
them in on the job safety and health practices.
Employers may obtain coverage for their employees in one of
three ways:
The employer may insure with the State
Accident Fund, which is a non-profit self-
supporting agency of the State of Maryland.
31
For more information, please contact:
State Accident Fund
Underwriting Fund
6900 Loch Raven Boulevard
Baltimore, Maryland 21204
Telephone: (410) 832-1998
The employer may insure with any company
authorized to write this coverage in the State. To
obtain a directory of licensed insurance
companies, please contact:
Insurance Commissioner
200 St. Paul Place Suite 2700
Baltimore, Maryland 21202
Telephone: (410) 468-2000
Toll Free: (800) 492-6116
www.mdinsurance.state.md.us
The employer may self-insure with the prior
permission of the Maryland Workers’
Compensation Commission. For more
information, please contact:
Director of Self Insurance
Maryland Workers’ Compensation Commission
6 North Liberty Street
Baltimore, Maryland 21201
Telephone: (410) 333-4700
F. WAGE LAWS
1. Wage Requirements -- General
Maryland’s Wage Payment and Collection Law
requires employers to pay employees all promised
wages, including benefits. Employers must establish a
regular payday, at least every other week for hourly
employees. In addition, employers are prohibited from
making deductions from employee paychecks unless
the deductions are specifically authorized in writing by
the employee, allowed by the Commissioner of Labor
and Industry, or approved by a court. The Wage
32
Payment and Collection Law is enforced by the
Department of Labor, Licensing and Regulation,
Division of Labor and Industry—Employment
Standards Service.
2. Minimum Wage and Overtime Pay Requirements
The federal Fair Labor Standards Act (FLSA 1938) and
the Maryland Wage and Hour Law regulate the wages
and hours of employees. Employers are required to
keep accurate records of the hours worked and to pay
at least the statutorily required minimum wage of the
Maryland minimum wage or the Federal minimum
wage, whichever is higher. All hours worked by
covered employees over forty hours in a week are
considered “overtime” and must be compensated at
one-and-a half times the employee’s regular rate of pay.
These minimum and overtime pay requirements may
not be eliminated by agreement or by union contract.
There are a number of exceptions to the minimum wage
and overtime requirements, including but not limited to
commissioned salespersons, outside salespersons,
professional and administrative employees, and
supervisory and managerial employees at or above a
certain salary level. Both Maryland and federal law
regulate the use of “child labor” (i.e., the employment
of persons below the age of eighteen) and work permits
may be applied for on-line at
https://www.dllr.state.md.us/labor/wages/empm.s
html.
3. Equal Pay Requirements
The Equal Pay Act of 1963 requires employers to pay
male and female employees the same wage where the
work they perform requires “equal skill, effort, and
responsibility in substantially identical working
conditions.” In addition, Title VII of the Civil Rights
Act of 1964 prohibits employers from paying
employees differently because of their race, national
origin, color, sex, or religion. Both laws allow an
employer to pay employees differently on the basis of
33
longevity or seniority, a merit pay system, quantity or
quality of work performed, or some factor other than
one of those prohibited.
For more information concerning wage and hour
requirements, wage payment requirements, the
employment of minors, and equal pay requirements,
please contact:
Employment Standards Service
Division of Labor and Industry
1100 N. Eutaw Street, 6
th
Floor
Baltimore, Maryland 21201
Telephone: (410) 767-2357
https://www.dllr.state.md.us/labor/
4. Prevailing Wage Rate Requirements
The Maryland Prevailing Wage Law requires the
payment of specific wage rates to employees on “public
works” construction projects over $500,000. The
Prevailing Wage Unit of the Maryland Division of
Labor and Industry, Department of Labor, Licensing
and Regulation compiles wage data and sets the wage
and benefit rates for various construction crafts (cement
mason, carpenter, painter, etc.) in each county on a
yearly basis. That Unit also investigates complaints and
audits payrolls to ensure compliance with the law. If
you have any questions about the Prevailing Wage
Law, please contact:
Prevailing Wage Unit
Telephone: (410) 767-2365
https://www.dllr.state.md.us/labor/prev/
G. EMPLOYMENT-RELATED TAX CONSIDERATIONS
1. Withholding Employee Income Taxes
Federal and State tax laws require employers to
withhold and forward to the appropriate government
their employees’ income taxes.
34
2. Withholding and Paying FICA Taxes
The Social Security Act requires employers to withhold
and forward their employees’ required Federal
Insurance Contributions Act (FICA) tax. The employer
is also required to contribute a matching FICA
percentage along with the employee’s FICA tax.
3. Unemployment Insurance Tax
The Social Security Act also requires employers to pay
unemployment insurance tax on behalf of their
employees. These payments fund unemployment
insurance benefits to former employees who have lost
their jobs through no fault of their own.
New businesses in Maryland must apply for an
unemployment insurance account number. Employers
are assigned a new account tax rate until a rate can be
established based on their own experience rating
(which is based largely on the employer’s layoff rate).
The initial rate for new employers may not be less than
1% or more than 2.6% of the first $8,500 of wages paid
to each employee. An exception is that the rate for new
construction employers headquartered in another state
is 3.6%.
To be eligible for unemployment benefits, a claimant
must meet certain earnings requirements. In addition
to those earnings requirements, claimants must meet
non-monetary eligibility requirements. To be eligible
for benefits, a claimant must:
Be able to work;
Be actively seeking work;
Be available for full-time work;
Not place any undue restriction on
his/her availability for work or the work
he/she will accept; and
Not refuse suitable work.
35
For more information, please contact:
Division of Unemployment Insurance
Department of Labor, Licensing and Regulation
1100 North Eutaw Street
Baltimore, Maryland 21201
Toll Free: 1-800-492-5524
www.mdunemployment.com
H. EMPLOYEE CONCERTED ACTIVITY
The federal agency responsible for administration of employee
concerted activity is the National Labor Relations Board (NLRB),
which has two major functions. First, it supervises the secret ballot
election process to certify or decertify a union. Second, it investigates
and prosecutes unfair labor practice charges brought by employers or
by unions. For more information, please contact:
National Labor Relations Board
Regional Office
Bank of America Center, Tower II
100 S. Charles Street, 6
th
Floor
Baltimore, MD 21201
Telephone: (410) 962-2822
https://www.nlrb.gov/region/baltimore
I. FRINGE BENEFITS
Fringe benefits typically include a health care plan, a retirement plan,
paid vacation and paid holidays, a disability benefit plan, life insurance
plan, etc. Fringe benefits are considered to be partial and deferred
compensation for services already rendered. No federal law requires an
employer to provide any fringe benefits as part of its employment agreement
with its employees. If an employer does provide fringe benefits, however,
those benefits may be regulated. For instance, if an employer offers
disability fringe benefits, it must include pregnancy-related benefits. If it
offers retirement benefits, they must be based on unisex actuarial tables.
An employer that provides fringe benefits is subject to
regulation chiefly under two laws:
36
1. Consolidated Omnibus Budget Reform Act (COBRA)
COBRA requires employers who provide medical
benefits to allow terminated employees to retain their
benefits for up to eighteen months at the expense of the
former employee.
2. Employee Retirement Income Security Act of 1974
(ERISA)
U.S. tax laws do not include fringe benefits for income
tax purposes if they meet ERISA requirements, thus
providing a significant benefit to employees. ERISA is
jointly administered by the U.S. Department of Labor
and the U.S. Department of the Treasury. These
departments have issued comprehensive regulations
detailing the rights of employees and the procedures
that must be followed.
J. WORKFORCE SERVICES
1. The Maryland Workforce Exchange
Employers in Maryland may avail themselves, at no
charge, of the services of the Maryland Workforce
Exchange in placement of employees in job vacancies.
Employers inform this agency of their openings and
this agency attempts to match the employer’s needs
with persons seeking employment.
For more information, please contact:
Division of Workforce Development and Adult
Learning
Department of Labor, Licensing and Regulation
1100 N. Eutaw Street
Baltimore, Maryland 21201
Telephone: (410) 767-2173
2. Local Workforce Investment Areas
Maryland has 12 local Workforce Investment
Areas across the State. Each area develops workforce
development programs tailored to meet local
37
employment training needs, including business
services. Local workforce investment programs may be
contacted through: http://www.dllr.state.md.us.
VII. BUSINESS ASSISTANCE AND FINANCING PROGRAMS
A. INTRODUCTION
The State of Maryland, through the Department of Commerce
(“Commerce”) and various independent State-affiliated entities,
funds and administers a variety of assistance and financing programs
for Maryland businesses. The primary focus of these programs is the
creation and retention of jobs.
This section presents an overview of some of the State, federal
and local financing and assistance programs available to Maryland
businesses. For details on Maryland’s economic development
programs, please contact:
Department of Commerce
Division of Business Development
401 East Pratt Street
Baltimore, Maryland 21202
Telephone: (410) 767-6870
Toll Free: (800) 811-0051
TDD/TTY: (410) 333-6926
Fax: (410) 333-6792
Or visit Commerce’s Web site, located at:
www.commerce.maryland.gov
B. BUSINESS LICENSE INFORMATION SYSTEM
Maryland’s Business License Information System (“BLIS”), an
interactive Internet-based program, offers business owners a single
information source from which to determine many of the State permits and
licenses that may be necessary to operate their businesses. The user enters
in the type of business and BLIS will use the information supplied to
generate a list of possible required permits and licenses. Through BLIS, a
business owner may access the web sites of the various issuing agencies,
including any electronic application forms so that the owner may apply for
certain State licenses directly from the computer.
38
BLIS is administered by the Department of Commerce. It is
available 24 hours per day, 7 days per week. BLIS may be accessed
through the Internet at the following address:
http://commerce.maryland.gov/
C. DOMESTIC BUSINESS ASSISTANCE PROGRAMS
1. DIVISION OF BUSINESS DEVELOPMENT
Commerce’s Division of Business Development is the
direct arm of the State that is designed to attract, retain
and expand business investment in Maryland.
Businesses, associations, and their consultants should
contact the Division to obtain help in identifying and
securing a facility location that can best meet their
needs.
For more information, please contact the Division of
Business Development at the address, web site, and
phone numbers listed above in the “Introduction”
section.
2. DIVISION OF REGIONAL DEVELOPMENT
Commerce’s Division of Regional Development works
together with regional and local economic development
organizations to improve the competitiveness of
businesses in their areas. For more information on the
Division of Regional Development’s programs, please
contact:
Department of Commerce
Division of Regional Development
401 East Pratt Street, 15
th
Floor
Baltimore, Maryland 21202
Telephone: (410) 767-0095
or
www.commerce.maryland.gov
The Division’s regional offices provide a decentralized,
statewide service delivery system for the Division's
business and economic development activities. The
39
offices bring State resources into partnerships with local
and regional initiatives to provide information,
services, and financial investment. Regional offices are
located in the Greater Baltimore, Eastern Shore,
Southern, Suburban, and Western Maryland regions.
The Division of Regional Development also administers
the Maryland Industrial Training Program and the
Partnership for Workforce Quality. The Maryland
Industrial Training Program and the Partnership for
Workforce Quality are discussed below in the
Employee Training Programs section.
3. GOVERNOR’S OFFICE OF BUSINESS ADVOCACY
AND SMALL BUSINESS ASSISTANCE
The Governor's Office of Business Advocacy and Small
Business Assistance helps Maryland businesses
navigate through the processes and regulations of local,
State, and federal government and provides advice and
coordination for small and minority-owned businesses.
For more information on the Governor's Office of
Business Advocacy and Small Business Assistance,
please contact:
Department of Commerce
Division of Regional Development
401 East Pratt Street
Baltimore, Maryland 21202
Telephone: (410) 767-0545
or
www.commerce.maryland.gov
D. DOMESTIC BUSINESS FINANCING PROGRAMS
1. INTRODUCTION
Some Commerce programs provide direct financial
assistance to businesses in the form of loans, grants, or
equity investments. Other programs provide insurance
or guarantees for commercial loans. The amount and
availability of the insurance/guarantee financing is in
40
part affected by the lending policies of participating
private financial institutions.
2. MARYLAND SMALL BUSINESS DEVELOPMENT
FINANCING AUTHORITY (MSBDFA)
MSBDFA is a program of the Maryland Department of
Commerce. The Department has contracted the
administration and management of MSBDFA’s
financing programs to a private business, Meridian
Management Group, Inc. For more information on
MSBDFA’s programs, please contact:
Meridian Management Group, Inc.
826 East Baltimore Street
Baltimore, Maryland 21202
Telephone: (410) 333-4270
a. Contract Financing Program
MSBDFA provides loans, loan guaranties, and
equity investment guaranties for working capital
and equipment acquisition to eligible small
businesses performing government or public
utility contracts.
b. Long-Term Guaranty Program
MSBDFA provides loan guaranties and interest
rate subsidies to financial institutions that make
loans to eligible small businesses for working
capital, equipment acquisition, real property
acquisition or improvement, and the refinancing
of existing debt.
c. Surety Bond Program
MSBDFA provides direct bonding, bond
guaranties, and bonding lines of credit to eligible
small businesses that require bid, performance,
or payment bonds to perform government or
public utility contracts or contracts funded by
private entities.
41
d. Equity Participation Investment Program
(EPIP)
MSBDFA provides equity investment or debt
financing to eligible persons wishing to establish
and develop franchises or technology-based
businesses, to acquire existing successful
businesses, or to establish and develop other
businesses.
3. MARYLAND INDUSTRIAL DEVELOPMENT
FINANCING AUTHORITY (MIDFA)
a. Conventional Program
MIDFA insures loans made to eligible industrial
or commercial businesses to finance the
acquisition of land, buildings, equipment,
working capital, revolving credit lines, or
government contracts.
b. Bond Program
MIDFA issues both tax-exempt and taxable
revenue bonds for the benefit of eligible
borrowers to finance the acquisition of land, new
buildings (or substantial renovation of existing
buildings), new equipment, and working capital.
(Tax-exempt bonds are available only to
manufacturers and 501(c)(3) organizations.)
MIDFA also insures these bonds. The bonds are
sold in the public market or privately placed.
c. Linked Deposit Program
MIDFA invests funds with eligible lenders at
below-market rates; those lenders then make
low-cost loans for the purchase of fixed assets to
eligible businesses located in rural areas.
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4. DIVISION OF FINANCING PROGRAMS
a. Maryland Economic Development Assistance
Authority and Fund (MEDAAF)
Commerce makes loans, grants, and equity
investments to businesses and political
jurisdictions. Eligible projects must fall within
certain categories described below. In addition,
an applicant must operate a business in an
eligible industry sector and the project must be
located in a priority funding area. Assistance
under MEDAAF is usually limited to 70 percent
of the total project costs.
Significant Strategic Economic Development
Opportunities – The Department may provide
loans for a project that would have an economic
impact on a statewide, regional level or strategic
industry.
Assistance is in the form of a loan
An applicant may be a business or the
Maryland Economic Development
Corporation (MEDCO).
Maximum assistance may not exceed the
lesser of $10 million or 20 percent of the
current fund balance
Local Economic Development Opportunity –
The Department may provide financial
assistance for a project that would have an
economic impact on a more local level.
Assistance may be in the form of a loan,
equity investment, conditional loan or grant,
or grant
The project must be a priority of, and be
sponsored by, the local jurisdiction
The local jurisdiction must participate in the
financing, either by guaranteeing at least a
portion of the State’s financial assistance or
making a loan or grant for the project in an
43
amount equal to at least 10 percent of the
State's financial assistance
Loans may be up to $5 million, while
conditional loans and grants may be up to $2
million
Direct Assistance to local jurisdictions or
MEDCO - The Department may provide
financial assistance to a local jurisdiction for local
economic development needs.
Assistance may be in the form of a loan,
equity investment, conditional loan or grant,
or grant
The local jurisdiction or MEDCO may use the
assistance to aid one or more specific
businesses
The total amount of assistance may not
exceed $3 million
Smart Growth Economic Development-
Infrastructure Fund (“One Maryland”) – The
Department may provide financial assistance to
qualified distressed counties to fund the
development of industrial parks and the
development of shell buildings and other
infrastructure projects.
Assistance may be in the form of a loan,
equity investment, conditional grant, or
grant.
The qualified distressed counties may use the
assistance to aid one or more specific
businesses.
Specialized Financing Areas – The Department
may also make financial assistance available for
projects in the following specialized areas:
Brownfield Revitalization Incentive—
provides loans and grants to assess and
revitalize qualified brownfields sites
44
Aquaculture—provides loans, grants, and
equity investments to businesses involved in
seafood processing and aquaculture
Animal Waste—provides loans, grants, and
equity investments to fund research,
development, implementation, or marketing
of technology related to the use, reduction, or
management of animal waste.
Child Care Centers—provides loans, grants,
and equity investments to fund the
construction or expansion of child care
facilities
Arts and Entertainment—provides loans,
grants, and equity investments to entities
involved in the visual or performing arts and
located in an arts and entertainment district
and financing for projects that promote or
enhance the development of arts and
entertainment districts
Regional or Local Revolving Loan Fund – The
Department also assists local governments in
capitalizing local or regional economic
development loan funds.
b. Community Development Block Grant
Program (CDBG)
Commerce makes conditional grants to eligible
local governments, which either use the funds
directly or to make loans to assist businesses.
The funds may be used for the acquisition of
land and equipment, the acquisition or
construction of buildings, the rehabilitation of
real property, or infrastructure and downtown
revitalization. This program focuses upon the
creation and retention of employment
opportunities primarily for low- and moderate-
income persons, and the elimination of slum and
blight conditions in communities.
45
c. Economic Development Opportunities
Program Fund (“Sunny Day” Fund)
The Sunny Day Fund provides financing for
extraordinary economic development
opportunities where assistance from other
sources is limited. Through this fund, the State
may offer tailored, high-level incentives to
companies in order to encourage the attraction
and retention of private business in Maryland.
d. Smart Growth Economic Development
Infrastructure Fund (“One Maryland”)
The One Maryland Program provides financing
to qualified distressed counties to fund the
development of industrial parks and the
development of shell buildings and other
infrastructure projects.
5. MARYLAND ECONOMIC ADJUSTMENT FUND
(MEAF)
Commerce lends money to companies with 50 or fewer
employees for working capital, equipment, furnishings,
or the construction, rehabilitation, or purchase of real
property. Commerce may also provide grants to local
revolving loan funds.
6. MARYLAND TECHNOLOGY DEVELOPMENT
CORPORATION (TEDCO)
a. The Corporation:
The Maryland Technology Development
Corporation (TEDCO), an independent entity,
was established by the Maryland General
Assembly in 1998. TEDCO facilities the creation
of businesses by connecting emerging
technology companies with federal laboratories,
research universities, business incubators and
specialized technical assistance, and assists in
transferring technologies originating in
46
university or federal labs to the private sector. It
also assists in commercializing research and
development generally, via a variety of
assistance and financing programs. Governed
by a 15-member Board, appointed by the
Governor with advice and consent of the Senate,
the Board is comprised of leaders in the State’s
technology community and contains
representatives from these sectors: private,
university, nonprofit and public.
b. TEDCO Funding Programs:
Maryland Innovation Initiative (MII): A
collaboration between the State and five
Maryland academic research institutions
(Johns Hopkins University, Morgan State
University, University of Maryland College
Park, University of Maryland Baltimore and
University of Maryland Baltimore County).
Provides up to $265,000 ($315,000 for joint
projects) to promote commercialization of
research conducted in these universities and
leverage each institution’s strengths.
Technology Validation Program: The
Technical Validation Phase awards of up to
$40,000 for proof-of-principle studies at a
Maryland university for projects that can be
completed in 6–9 months. The Market
Assessment Phase awards of up to $10,000 for
a market analysis for a technology and for the
development of a commercialization plan for
projects that can be completed in 2–3 months.
Incubator Business Assistance Fund:
Provides funding to qualified business
technology incubators to help them
implement best practices for their
tenant/affiliate companies. These funds can
be used when business services are needed
that cannot be provided by the incubator
staff.
47
Seed Investment Funds: Provide up to
$200,000 to support certain types of
Maryland companies in their effort to
develop and commercialize new technology-
based products. TEDCO makes investments
in these companies so they can reach a critical
milestone in their product development
efforts and advance their technologies
further along the commercialization
pathway, which will increase the company’s
valuation and lead to follow-on investment,
sustainability, and job creation.
Gap Investment Fund: Provides
investments of $250,000-500,000 to help for-
profit, technology-based companies solidify
strategic partnerships or gain customer
traction. Companies seeking a Gap
Investment will be required to provide a
dollar-for-dollar, cash matching investment
from other accredited or institutional
investors. It is TEDCO’s preference to follow
the lead of the matching investors. Funds
may only be used for new hires.
Maryland Venture Fund (MVF): MVF is a
regionally-recognized leader in seed and
early-stage investing, and a national model
for State-supported investment programs.
With nearly two decades of experience and
numerous successful transactions, MVF
invests in highly innovative Maryland
technology companies across a full range of
industry sectors including software,
communications, cybersecurity, and life
sciences companies in the areas of healthcare
IT, medical devices and diagnostics. MVF
has $100 million under its management and
has invested in over 150 technology
companies in Maryland.
c. TEDCO Entrepreneurial Innovation Programs:
TEDCO provides a variety of assistance
programs for entrepreneurial development,
48
including: (i) the Maryland Rural Business
Innovation Initiative Program (RBI2), which
assists start-up and small technology-based
businesses in the rural areas of Maryland ; (ii) the
Maryland Entrepreneurs Resource List
(MERL), which provides a list of entrepreneurs
who are available to mentor or provide
leadership to early-stage companies; (iii) the
mdPACE Program, which helps medical device
companies navigate the complex FDA approval
process, (iv) the Executive Exchange Program,
which offers supplemental stage-appropriate
assistance to portfolio company entrepreneurs;
(v) the NIST – Science and Technology
Entrepreneurship Program (N-STEP) which
provides opportunities for NIST researchers to
build upon the experience gained while working
at NIST as they explore entrepreneurial careers;
and (vi) the Incubator Assistance Fund, which
assists Maryland’s technology business
incubators to provide added value to their client
companies.
d. Maryland Stem Cell Research Fund (MSCRF):
In 2006, the MSCRF was established for the
purpose of promoting state-funded stem cell
research and cures through grants and loans to
public and private entities in the State. TEDCO
administers the Fund under the guidance of the
Maryland Stem Cell Commission, an
independent commission that functions within
TEDCO. The Commission has established five
(5) research funding mechanisms: Discovery
Grants, Validation Grants, Commercialization
Grants, Clinical Grants, and Post-Doctoral
Fellowship Grants. Discovery Grants are
designed for research on new, innovative ideas
in the stem cell field without preliminary data.
Validation Grants are designed for research
fostering the transition of promising stem cell
technologies having significant commercial
potential from universities and research labs to
49
the commercial sector, where they can be
developed into products and services that meet
identified market needs. Commercialization
Grants are designed to foster the creation of
start-up companies or new technologies
developed in MD-based companies. Clinical
Grants are designed for for-profit Companies
that wish to conduct clinical trials in Maryland
using human stem cells to advance medical
therapies. Post-Doctoral Fellowship Grants are
designed for post-doctoral fellows who wish to
conduct basic and/or translational research in
academia or industry using human stem cells.
For more information on TEDCO and its
programs and resources, visit www.tedco.md
7. MARYLAND AGRICULTURAL AND RESOURCE-
BASED INDUSTRY DEVELOPMENT
CORPORATION (MARBIDCO)
The Maryland Agricultural and Resource-Based
Industry Development Corporation, ( MARBIDCO) is a
State-sponsored independent economic development
entity that brings together public and private partners
to focus on delivering enhanced financing and business
development services to the State’s agriculture, forestry
and seafood industries. MARBIDCO has also been
charged by the Maryland General Assembly, as a
financial intermediary, with assisting State and local
rural land conservation agencies with their farmland
and forestland preservation efforts.
MARBIDCO currently offers several financing
programs most of which require some level of
participation by commercial lenders or public sector
funders:
The Maryland Resource-Based Industry
Financing Fund offers low-interest loans to
purchase land and capital equipment for food
and fiber production and processing activities.
50
The Rural Business and Equipment Working
Capital Loan Fund offers loans for working
capital and equipment purchases at 1% above
the prevailing prime rate; while the Forestry
Equipment and Working Capital Loan Fund
offers flexibly-priced loans to Maryland’s forest
products businesses for working capital and
equipment purchases.
The Agricultural Cooperatives Near-Equity
Investment Program provides capital
investment needed by agricultural cooperatives
when business operations are beginning or
significantly expanding.
The Rural Business Energy Efficiency Loan
Program helps established firms and producers
purchase equipment or technology that lowers
energy consumption. Small loans are available
at a low interest rate contingent on a third-party
energy audit report.
The Next Generation Farmland Acquisition
Program provides young and beginning farmers
with equity to acquire their first farm by
effectively acquiring an agricultural
preservation easement on the farm to be
acquired.
In addition, MARBIDCO offers four grant programs:
The Maryland Value Added Producer Matching
Grant program provides a portion of the
federally-required matching funds for Maryland
applicants to USDA’s highly competitive Value
Added Producer Grant Program.
The Maryland Value Added Producer Capital
Equipment Grant program provides small
matching grants to food and fiber processors for
value added processing projects.
The Local Government Agricultural/Resource-
Based Industry Project Cost Share Program
supports local and regional rural business
development efforts by offering matching cost
share assistance for agribusiness development
projects with units of local government.
51
The Maryland Urban Agriculture Commercial
Lending Incentive Grant program provides
small grants to urban farmers to help leverage
loans that are made by commercial lenders.
For further information on MARBIDCO, please contact:
Stephen McHenry, Executive Director
1410 Forest Drive, Suite 21
Annapolis, Maryland 21403
Telephone: 410-267-6807
8. MILITARY PERSONNEL AND VETERAN-OWNED
SMALL BUSINESS NO INTEREST LOAN
PROGRAM
Commerce, in consultation with the Maryland
Department of Veteran’s Affairs (“MDVA”) provides
no-interest loans from $1,000 to $50,000 to assist: (i)
businesses owned by military reservists and National
Guard members called to active duty, and small
businesses (fewer than 50 employees) that employ
them; and (ii) veteran-owned small; and (iii) businesses
employ a service-disabled veteran.
Funds for reservists or National Guard members must
be used for payment of identifiable costs of the business
that result from the call to active duty. The loan may be
made at any time from the date of the call to active duty
through the period ending six months after the end of
the individual’s active duty.
Funds for veteran-owned small business or businesses
employing a service-disabled veterans must be either
for the acquisition of equipment that has an anticipated
useful life in excess of one year and helps make the
home, motor vehicle, or place of employment or
business of a veteran accessible to individuals with
disabilities or for other necessary expenses, as
determined by MDVA.
Commerce requires written documentation of disability
for a service-disabled veteran. The term of the Loan will
be from one year to eight years. The term of a loan used
52
to purchase equipment usually will not exceed the
useful life expectancy of the equipment to be
purchased. Guarantees and collateral may be required.
9. NONPROFIT, INTEREST-FREE, MICRO BRIDGE
LOAN ACCOUNT (NIMBL)
Commerce provides no-interest bridge loans for
operating expenses of up to $25,000 to a nonprofit entity
that has received written confirmation of funding from
a government grant or contract but has not yet received
the funding.
E. INTERNATIONAL BUSINESS ASSISTANCE AND
FINANCING PROGRAMS
1. EXPORT DEVELOPMENT ASSISTANCE
PROGRAMS
Commerce’s Office of International Investment and
Trade (“OIIT”) offers export assistance through all
stages of the export process to small and medium-sized
companies with internationally competitive products
and services. Some of OIIT’s assistance programs
include:
a. Trade Development Program
OIIT trade specialists assist Maryland exporters
in developing new foreign markets and
expanding sales in existing markets. OIIT also
coordinates the participation of Maryland firms
in selected foreign trade and catalog shows.
Some companies may qualify for Export MD
grants to assist with these endeavors.
b. Pathfinder Program
Through the Pathfinder Program, Maryland
companies are represented at foreign trade
shows through an OIIT specialist, for a nominal
fee. For a fraction of the cost of physically
attending a show, Maryland companies can:
identify potential partners, suppliers,
53
distributors, and customers; promote new
products; gather important materials; and
generate publicity. Companies interested in a
particular overseas trade show should contact
the OIIT representative covering the appropriate
export region.
c. Foreign Offices and Representatives
Maryland’s foreign offices and representatives
provide exporters with in-country assistance
around the globe, including:
agent/distributor searches and business
appointments;
credit reports, competitor analysis, and
regulatory information;
marketing and logistical support at trade
shows; and
market research and analysis.
Maryland contracts with foreign offices in
Shanghai, China; Paris, France; Taipei, Taiwan
and Singapore. There is also a Maryland
representative in Tel Aviv, Israel. A Maryland
company is entitled to 20 free hours of assistance
per office, per year.
For further information on assistance offered by the
Office of International Investment and Trade, please contact the following:
FOREIGN OFFICES
Contact in Maryland
AFRICA, CANADA, MIDDLE
EAST
The World Trade Center
—Baltimore
401 E. Pratt St., 15
th
Fl
Baltimore, Maryland 21202
Brian Castleberry,
Office of International
Investment and Trade
Phone: 410-767-6362
Fax: 410-333-4302
E-mail: brian.castleberry@maryland.gov
ASIA
The World Trade Center
—Baltimore
401 E. Pratt St., 7
th
Fl
Baltimore, Maryland 21202
Felicia Pullam,
Office of International
Investment and Trade
Phone: 410-767-0688
Fax: 410-333-4302
E-mail: felicia.pull[email protected]
54
EUROPE
The World Trade Center
—Baltimore
401 E. Pratt St., 7
th
Fl
Baltimore, Maryland 21202
Jessica Reynolds,
Office of International
Investment and Trade
Phone: 410-767-6435
Fax: 410-333-4302
E-mail: jessica.rey[email protected]
SOUTHEAST ASIA, INDIA
The World Trade Center
—Baltimore
401 E. Pratt St., 7
th
Fl
Baltimore, Maryland 21202
Andrew Kreinik,
Office of International
Investment and Trade
Phone: 410-767-8824
Fax: 410-333-4302
E-mail: andrew.kr[email protected]
LATIN AMERICA
The World Trade Center
—Baltimore
401 E. Pratt St., 7
th
Fl
Baltimore, Maryland 21202
MARYLAND EXPORT
ASSISTANCE NETWORK
World Trade Center
Institute
Deborah M. Kielty, President
& Executive Director
The World Trade Center
—Baltimore
401 E. Pratt Street, Suite 232
Baltimore, MD 21202
Phone: 410-576-0022
Fax: 410-576-0751
E-mail: kielty@wtci.org
Website: www.wtci.org
d. Representative Program
Maryland’s Representative Program provides
exporters with a proactive bilingual sales and
marketing presence in targeted overseas
markets. Foreign office representatives can
answer phone inquiries in the native language,
host meetings, participate in trade shows,
facilitate travel arrangements, evaluate the
effectiveness of international marketing efforts,
and provide sales leads.
e. Foreign Trade Zones
A foreign trade zone (“FTZ”) is an area that, for
customs law purposes, is legally treated as if it
were outside the United States. Inside an FTZ,
foreign and domestic merchandise may be
bought duty-free for purposes such as storage,
repacking, display, assembly, or manufacturing.
Imports may be landed and stored quickly
55
without full customs formalities. Maryland has
four FTZs:
Baltimore Foreign Trade Zone #74
Consists of a total of 1,727 acres divided
among fourteen sites throughout the
greater Baltimore region.
BWI Foreign Trade Zone #73
Consists of five sites and two sub-zones,
totaling over 37 acres, on or near the
Baltimore/Washington International
Airport.
Prince George’s County Foreign Trade
Zone #63
Consists of 77 acres on two sites:
Steeplechase and Collington Business
Center.
Washington County Foreign Trade
Zone #225
Consists of 1,866 acres on seven sites
throughout Washington County.
2. INTERNATIONAL BUSINESS FINANCING
PROGRAMS
a. Trade Finance Program
The Maryland Industrial Development
Financing Authority (MIDFA) provides
insurance of commercial loans to service
providers to the overseas market and to
businesses that are engaged in the export and
import of goods through Maryland seaports and
airports.
b. ExportMD Program
Eligible Maryland companies can apply for
grants of up to $5,000 to reimburse one-half of
the costs necessary to enter a new foreign market
56
via participation in export-related foreign
activities such as a trade show or mission.
Grantees also receive 80 free hours of assistance
from any foreign office or combination of foreign
offices of their choice.
3. ASSISTANCE FOR FOREIGN DIRECT
INVESTORS
Due to Maryland’s outstanding location and
transportation infrastructure, exceptional workforce,
and business-friendly environment, the State is truly
the premier global gateway for any company entering
the U.S. market. Understanding Maryland’s strategic
advantages, OIIT Investment and Trade Executives
work side-by-side with international business as they
evaluate the many variables that go into making a
successful site location decision. Services provided
include:
a. Market Research on labor availability, wage
rates, taxes, and duty costs;
b. Building and Site Selection Assistance to meet
each company’s expansion requirements;
c. Incentives that are coordinated and packaged
to provide the highest possible level of financial
support;
d. Liaison Service between each company and
government / regulatory agencies to ensure a
smooth and timely relocation process;
e. Cultural Assimilation to provide information
on international schools, and community /
cultural organizations that can help relocated
employees feel more at home;
f. Referrals to local attorneys, accountants, and
banks with expertise in areas such as
immigration, incorporation or financial services;
and
57
g. Supplier Contacts to connect foreign business
with potential vendors and service providers in
Maryland.
F. EMPLOYEE TRAINING PROGRAMS
1. Partnership for Workforce Quality (PWQ)
Commerce provides matching grants to reimburse
eligible Maryland businesses for up to 50% of the direct
costs related to training needed to upgrade the job-
specific skills of current employees.
The PWQ program is administered by Commerce’s
Division of Regional Development.
2. Maryland Industrial Training Program (MITP)
Commerce provides grant assistance to reimburse
grantees for the costs associated with new workforce
development and training activities in start-up and
expanding operations.
MITP is administered by Commerce’s Division of
Regional Development.
G. TAX CREDIT INCENTIVE PROGRAMS
1. Enterprise Zones
Eligible businesses that locate their operations in
designated Enterprise Zones receive various State tax
credits and special consideration for financial assistance
under Commerce’s programs, discussed above in the
Domestic Business Financing Programs section. For
more information please visit Commerce’s website at
commerce.maryland.gov or contact Commerce’s Tax
Incentive Group 410-767-6438.
58
2. Empowerment Zones (federal)
A federal Empowerment Zone, one of only six in the
nation, encompasses 6.8 square miles in three separate
areas of Baltimore City, two of which are zoned for
heavy industrial use. Eligible businesses that locate
their operations in the Empowerment Zone receive
various federal and State tax credits and other financial
incentives.
3. One Maryland Economic Development Tax Credit
Businesses that establish or expand a business facility
located in a Tier 1 county and is eligible under the
State’s priority funding area statute, may be entitled to
a tax credit for costs related to the new or expanded
facility. The credit may be taken against corporate
income tax, personal income tax, or insurance
premiums tax, but may not be applied to more than one
tax type. For more information please visit Commerce’s
website at commerce.maryland.gov or contact
Commerce’s Tax Incentive Group 410-767-6438.-
4. Job Creation Tax Credit
Businesses that expand or establish a facility in
Maryland resulting in the creation of new positions in
the State may be entitled to a tax credit. The amount of
the tax credit is based upon the number of positions
created or on the wages paid to the new employees. The
credit may be taken against corporate income tax,
personal income tax, or insurance premiums tax, but
may not be applied to more than one tax type. For more
information, please visit Commerce’s website at
commerce.maryland.gov or contact Commerce’s Tax
Incentive Group 410-767-6438.
5. Research and Development Tax Credit
Businesses that incur qualified research and
development expenses in Maryland are entitled to a tax
credit. The total credits for all businesses may not
exceed $6,000,000 per year. The credit may be taken
59
against corporate income tax, personal income tax, or
insurance premiums tax, but may not be applied to
more than one tax type. For more information please
visit Commerce’s website at commerce.maryland.gov
or contact Commerce’s Tax Incentive Group 410-767-
6438.
6. More Jobs for Marylanders Program
Manufacturing businesses that locate or expand in
Maryland are eligible to receive certain tax credits for a
10-year benefit period. The availability and type of tax
credit depends upon whether the business is new or
existing and if the facility is located in a Tier 1 or Tier 2
county. For more information please visit Commerce’s
website at commerce.maryland.gov or contact
Commerce’s Tax Incentive Group 410-767-6438.
7. Additional Tax Credit Information
Businesses in Maryland may be able to take advantage
of several other tax credits, including tax credits related
to biotechnology and cybersecurity companies, the
development of brownfields, winery and vineyard
related costs, and hiring veterans. More information on
Maryland’s tax credits can be found on the
Comptroller’s website at www.marylandtaxes.com and
Commerce’s website at commerce.maryland.gov.
Some of these tax credits may have additional
requirements, carryover provisions or recapture
provisions. You should contact the appropriate agency
to make sure that you meet all requirements.
VIII. ASSISTANCE TO AGRICULTURE BUSINESSES
A. MARYLAND AGRICULTURE
Agriculture, along with agriculture-dependent businesses, is
Maryland’s number one industry, with more than $11 billion in
revenue and employing 350,000 people -- 14% of the Maryland work
force. The agriculture of the state is extremely diverse, and its
poultry, nursery products, dairy, grains, soybeans, cattle, hogs,
seafood aquaculture, fruits, and vegetables are in demand
throughout the nation and around the globe.
60
B. SELLING MARYLAND AGRICULTURE
1. Introduction
The Maryland Department of Agriculture’s Office of
Agricultural and Seafood Marketing uses an aggressive
and dynamic marketing strategy to expand economic
opportunities for Maryland farmers, watermen and
food businesses. Following are some of the activities
and programs of Marketing:
2. Domestic Marketing
Promote farmers’ markets for both retail and
wholesale customers.
Establish customer identification with Maryland
agriculture and seafood products through the
Maryland’s Best Program and logo. The Web
site is http://www.marylandsbest.net.
Promote organic farming through an Organic
Certification Program to expand sales and reach
new customers.
Organize Maryland food companies to
participate at trade shows and exhibit food and
agricultural products.
Organize retail promotions and special events
to showcase Maryland agriculture and food
businesses.
Survey consumer buying habits to help
agricultural producers meet market demand and
plan for alternative crop production.
Promote individual agricultural and food
commodities through the production of flyers,
brochures, guides, recipe books, and
directories.
3. International Marketing
Assist Maryland farmers, seafood companies
and agribusinesses to enter the global
marketplace.
61
Assess the export readiness of businesses and
assess the export potential of products.
Organize the participation of Maryland
companies at international trade shows and
exhibitions.
Organize trade missions in foreign markets for
Maryland businesses.
Provide businesses with information on
phytosanitary requirements for product export
and assist in obtaining any needed inspection
documentation or certificates.
Identify foreign buyers, agents and
distributors.
Develop, prepare and implement proposals for
grant activities funded by the United States
Department of Agriculture Foreign Agriculture
Service and other trade development
organizations.
Work closely with U.S. Embassies and
Agricultural Trade Offices in over 70 countries
and regions to promote the export of Maryland
products and coordinate trade development
activities.
Present information and analysis of trade
research data and studies to international
business groups, companies, associations and
organizations.
Develop and disseminate trade leads.
Assist exporters to obtain the services of freight
forwarders, marketing intermediaries, banks
and other financial institutions.
Conduct export training seminars.
C. PROTECTING MARYLAND AGRICULTURE
The Department of Agriculture also operates many programs
that protect the quality of Maryland’s agriculture and foods,
including:
Plant Protection and Weed Management
Apiary Inspections
Nursery Inspections and Plant Quarantine
Turf and Seed Oversight
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The State Chemist
Agricultural Products Grading Services
Egg Inspections
Grain Dealers Licensing
Weights and Measures Inspection
Board of Veterinary Medicine Examiners
The Horse Industry Board
For more information on these and the many other programs
available to assist Maryland agriculture, please contact:
Maryland Department of Agriculture
Agriculture and Seafood Marketing
Telephone: (410) 841-5770
Or through the Department’s web site at:
www.mda.state.md.us
Expanding Economic Opportunities for Maryland Agriculture is
Our Business!
IX. NATURAL RESOURCES LAW
From the Atlantic seaboard to the Appalachian Mountains, Maryland
is blessed with a wealth of natural resources. The state has over 2,300 miles
of inland waterways, including the Chesapeake Bay -- the world’s most
productive estuary. Forests cover 2.7 million acres, or 42% of the state’s total
land area and provide habitat to a myriad of species, including white-tailed
deer, bobwhite quail, and, during winter, Canadian geese. This diversity
has helped earn Maryland the title of “America in Miniature.”
The Department of Natural Resources protects, preserves, enhances
and restores the State’s natural resources for the wise use and enjoyment of
all citizens. The Department regulates business use of these resources in
three areas: (1) shoreline development, (2) forest development, and (3)
commercial use of natural resources – boating, fishing, and wildlife.
A. SHORELINE DEVELOPMENT
In 1984, Maryland enacted the Chesapeake Bay Critical Area
Protection Program, which limits development in areas 1,000 feet
landward of the Bay and its tributaries (the “Critical Area”). In 2002,
the General Assembly extended the program to protect the Atlantic
Coastal Bays. In 2008, the Critical Area law was amended to expand
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enforcement authority against licensed home improvement
contractors, marine contractors, builders, tree experts, landscaping
firms and others for violating the law. The Critical Area program is
locally administered and subject to oversight by a state Commission.
An application for a building permit in a Critical Area must meet the
requirements of the local jurisdiction’s Critical Area program. For
more information, go to www.dnr.state.md.us/criticalarea.
B. FOREST DEVELOPMENT
In 1991, Maryland enacted the Forest Conservation Act, which sets
forth planting and reforestation requirements for project site
development. The law applies to parcels of land one acre or larger
and generally requires replacement of trees where trees are removed,
or planting of trees where there are none. This law is also locally
administered. An application for a grading or sediment control
permit or subdivision plan triggers the requirements of the local
jurisdiction’s forest conservation program. For detailed information
about the Act and its requirements, go to
www.dnr.state.md.us/forests/pages/programapps/newFCA.aspx.
C. LICENSES
The Department of Natural Resources issues a variety of
business licenses to commercial users of state natural resources. The
licenses and license requirements are described in the table below.
Four units in the Department issue the licenses. The issuers and their
contact numbers are as follows:
Licensing and Registration Service (LRS) (410) 260-3220
1
Fishing and Boating Service
(410) 260-8300
Forest Service (410) 260-8531
Wildlife and Heritage Service (WHS) (410) 260-8540
In addition to the summary below, information about business
licenses issued by the Department may be found at
www.dnr.state.md.us. Under the Online Services section, click on the
“buy a license” link to be taken to the COMPASS page.
1
The Department, which is located in Annapolis, also has service centers in Belair (410/836-4550),
Centreville (410/819-4100), Frederick (240/236-9950), Essex (667/401-0760), Prince Frederick
(410/535-3382), and Salisbury (410/713-3840).
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License or Permit
General Requirements
Issuer
Boating
Boat manufacturers and
dealers
Surety bond or other security,
$25 annual fee
LRS
Fisheries
Tidal fish (commercial)
license
Limited by law to a specific
number of participants;
$37.50 to $300 fee, depending
upon landing authorization
(finfish, crabs, clams, oysters);
$215 harvester registration fee
plus seafood marketing
surcharge
LRS
Tidal fishing guide
A federal license to operate a
vessel carrying passengers for
hire; $100 fee for residents,
$200 fee for nonresidents
LRS
Freshwater fishing guide
Possession of any necessary
fishing licenses and stamps;
$20 to $100 fee
Fishing and
Boating
Services
Aquaculture
Jt. Federal/State Application
for Commercial Aquaculture
Lease and Federal Permit;
$300 fee for submerged land
or water column lease, $150
fee for lease in Aquaculture
Enterprise Zone; and site
inspection of proposed
facility
Fishing and
Boating
Services
Shellfish Nursery Permit
Application and $100 fee
Fishing and
Boating
Services
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Forestry
Forest product operator
(for the harvest,
manufacture, or sale of
forest products)
Application and $20 fee
Forest
Service
Tree expert (pruning and
treatment of trees)
Two years approved college
education in forestry or
forestry-related fields and one
year experience with a
licensed tree expert; or five
years’ experience with a
licensed tree expert;
examination; $30 initial fee
and $20 biannual renewal fee;
insurance, and continuing
education requirement of 8
credit hours
Forest
Service
Qualified conservation
professional (to prepare
plans under the Forest
Conservation Act)
Licensed forester or
landscape architect, or four-
year degree in natural
resource sciences or
equivalent and completion of
training program
Forest
Service
Wildlife
Waterfowl outfitter
Application; previously
licensed as a master hunting
guide or licensed as a
waterfowl hunting guide for
2 seasons working for
licensed waterfowl outfitter;
$300 annual fee
WHS
Waterfowl hunting guide
Application; valid Maryland
hunting license; $50 annual
fee
WHS
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Commercial regulated
shooting area (to raise,
release, and shoot pen-
reared birds)
Application; copy of tax map
showing land tract of at least
50 to 100 acres; $150 annual
fee
WHS
Commercial wildlife
damage control
cooperator (control of
wildlife injurious to
agricultural or other
interests or care and
treatment of sick or
injured wildlife)
Examination; adequate
training as an apprentice in
the capture and handling of
wildlife; continuing
education; facilities sufficient
to maintain permitted
wildlife in captivity; $50
application fee (renewed
annually)
WHS
Game husbandry
(raising, breeding,
protecting or selling
game birds or mammals)
Fencing or other
requirements necessary to
keep apart captive and native
animals; inspection; $5 annual
fee
WHS
Captive reptile and
amphibian permit
(possession, breeding,
and sale)
Adequate animal housing
and shelter; inspection; $10
annual fee
WHS
Fur dealer
Application; $50 annual fee
($100 annual fee for
nonresidents)
WHS
Taxidermist and fur
tanner
Application; examination;
submission of work samples
meeting minimum professional
standards; $50 application fee
WHS
X. ENVIRONMENTAL LAW
A. INTRODUCTION
The principal environmental laws in Maryland focus upon a facility's
operations as they affect the quality of the air, water and land. Both the
United States Environmental Protection Agency (EPA) and the Maryland
Department of Environment (MDE) regulate business activities that
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contribute to air pollution, water pollution, and solid and hazardous waste
pollution. Most Maryland environmental laws enforce standards that are
equivalent to those provided under federal law. Although state and federal
jurisdiction sometimes overlap, MDE is generally the regulator of first resort
for the implementation and enforcement of environmental laws in
Maryland.
As the lead state agency involved in environmental protection,
MDE is organized to deal with various types of pollution using a
media-based approach. The three primary administrations that
implement MDE’s environmental programs are the Air and
Radiation Administration (ARA), the Land and Materials
Administration and the Water and Science Administration (WSA).
B. AIR AND RADIATION ADMINISTRATION
The mission of the Air and Radiation Administration (ARA) is
to improve and maintain air quality and control sources of radiation
in order to protect the health and welfare of the people and the
environment of Maryland, while providing for enhanced community
service and economic development.
ARA administers six programs:
Air Quality Planning
Air Monitoring
Air Quality Permits
Air Quality Compliance Program
Mobile Sources Control
Radiological Health
ARA has several functions:
Operate a statewide network of air quality monitors
that continuously measure air quality
Provide information to the public about the quality of
the air and the nature and extent of both regional and
local air pollution problems
Assist businesses in understanding and meeting
requirements of state and federal air quality and
radiological health laws and regulations
Investigate and resolve complaints about air pollution
and radiation, inspect equipment and activities that
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emit air pollution or have the potential to expose the
public to radiation, and pursue enforcement actions
when necessary
Issue permits and licenses for medical, industrial,
commercial, and institutional radiation uses or air
pollution sources, ensuring that these activities do not
create air pollution or unauthorized exposure to
radiation; provide opportunities for the public to
understand and comment on permit activities
Reduce air pollution from motor vehicles in the State by
implementing mobile source requirements of the Clean
Air Act and other mobile source programs
Approve training courses for asbestos workers and
supervisors, and provide technical support on asbestos
management to state agencies, school systems, and
county health departments
Develop coordinated plans, programs, and standards to
prevent and reduce air pollution and control sources of
radiation to protect public health
C. LAND AND MATERIALS ADMINISTRATION
MDE’s Land and Materials Administration (LMA) protects human
health and preserves and restores our land and water resources by reducing
the quantity and toxicity of generated wastes through recycling and source
reduction, ensuring the control and proper disposal of waste, regulating the
operations of animal feeding operations, managing lead paint compliance,
assuring that oil is handled in an environmentally safe manner, and
overseeing the remediation of contaminated sites for viable economic
development.
The mission of LMA is achieved by maintaining a highly
visible presence in the regulated community, providing assistance to
stakeholders and developing long-term strategies for waste
management needs.
LMA is organized into seven substantive programs:
Solid Waste Program
Technical Services Operations Program
Oil Control Program
Land Restoration Program
Lead Poisoning Prevention Program
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Resource Management Program
Mining Program
LMA has the following functions:
Permitting facilities and conducting compliance
inspections to assure the proper management of solid
waste, hazardous waste, sewage sludge, petroleum
products, medical waste, scrap tires, and natural wood
waste
Administering the remediation of leaking underground
storage tank (UST) sites and the laws relating to the
proper installation and operation of tanks at over 10,000
sites statewide
Permitting animal feeding operations and conducting
inspections to assure the proper management of
animals and animal waste to prevent water pollution
Administering a “Superfund” program that assesses
suspected hazardous waste sites, including federal
facilities, to control and remove environmental and
public health threats through site cleanups and
remedial actions
Implementing a voluntary cleanup program for sites
with environmental contamination to encourage
cleanups and the reuse or redevelopment of abandoned
industrial and commercial properties
Registering and inspecting vehicles that transport
hazardous materials to ensure that wastes are properly
and safely handled during transportation
Facilitating local and regional planning for solid waste
and low level radioactive waste management
Accrediting and overseeing lead abatement contractors
and inspectors
Registering rental properties and maintaining a data
base of risk reduction and lead-free certificates
Maintaining the childhood lead poisoning registry and
tracking the incidence of lead poisoning in the State
Regulating active mines and gas drilling and mitigating
environmental problems associated with abandoned
mines; regulating oil and gas exploration, production,
and storage
70
Administering the proper management of scrap tires,
including the cleanup of scrap tire stockpiles and the
permitting of scrap tire haulers and collection and
processing facilities
Ensuring that Maryland counties follow waste
diversion requirements
Reviewing and approving county 10-year Solid Waste
Management Plans
Permitting composting operations and conducting
inspections to assure the proper management
As part of the Land and Materials Administration’s
commitment to improved customer service while protecting the
environment, the Administration has developed general permits for
oil operations, for oil facilities with wastewater discharges, for
natural wood waste recycling facilities, for composting operations
(individual composting permits, also), and for animal feeding
operations. These permits improve efficiency and service to
stakeholders by reducing the time necessary to obtain required
permits and approvals.
D. WATER AND SCIENCE ADMINISTRATION
The mission of the Department’s Water and Science
Administration (WSA) is to restore and maintain the quality of the
State’s ground and surface waters, and to plan for and supervise the
development and conservation of the State’s waters. WSA manages
a broad range of activities, including regulating and financing
municipal wastewater treatment systems; regulating the use and
development of the State’s water resources, public water supplies and
on-site residential sanitation systems; regulating well-drilling and
industrial pretreatment; providing technical assistance for water and
wastewater utilities; approving erosion/sediment control and storm
water management plans for State and federal agencies; storm water
permitting; dam permitting and inspection; protection and
management of tidal and nontidal wetlands and waterways and the
100-year floodplain; monitoring the quality of shellfish harvesting
waters and testing edible fish tissue to certify that fish are safe for
human consumption and working with local health departments to
enhance beach water quality monitoring and maintain the public
notification process regarding beach water quality in Maryland.
These protections, financing, and regulatory activities help WMA
ensure that state waters are safe for drinking, recreation, and wildlife.
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WSA has eight programs:
Sediment, Stormwater & Dam Safety Program
Wastewater Permits Program
Wetlands & Waterways Program
Compliance Program
Water Supply Program
Integrated Water Planning Program
Environmental Assessment and Standards Program
Field Services Program
These programs have the following functions:
Provide outreach and assistance to regulated
communities
Review and approve erosion/sediment control and
storm water management plans for state and federal
construction projects
Inspect dams for safety, issue new dam permits, and
approve downstream warning plans for high hazard
dams
Issue water appropriation and use permits for
withdrawals of surface and ground waters
Issue permits for discharges to surface and ground
water from both industrial and municipal facilities as
required by the Federal Clean Water Act
Oversee programs delegated by MDE to local health
departments. MDE provides technical assistance to
local health authorities for on-site water and
wastewater systems, and review and approval of new
innovative or alternative septic system designs, and
installation and maintenance of Best Available
Technology on on-site disposal systems for nitrogen
reduction
Regulate activities conducted in nontidal wetlands and
their buffers, and nontidal waterways, including the
100-year floodplain; regulate activities conducted in
tidal wetlands
Create, restore, and enhance nontidal wetlands and
streams; provide training and technical assistance and
72
assist in the development of watershed management
plans
Inspect industrial and municipal wastewater
discharges, coal and surface mining operations,
agriculture sites, and construction activities involving
sediment control, stormwater management, wetlands,
and waterways
Ensure safe drinking water in Maryland by
administering the federal Safe Drinking Water Act,
developing source water protection plans, responding
to local water supply emergencies; conducting
performance evaluations of surface water filtration
plants to assist systems in optimizing treatment and
reducing the risk of passing contaminants into the
finished water
Offer training to public water and wastewater
treatment operators and provide on-site technical
assistance to support the State's operator certification
program and achieve compliance and pollution
prevention goals
Implement the federally mandated Municipal Separate
Storm Sewer System (“MS4”) stormwater permitting
program
Develop and implement strategies to protect the
Chesapeake Bay by regulating and monitoring
nutrients and other pollutants that wash into the Bay,
contaminating the water and causing ecological harm.
In addition to the eight programs administered by WSA, there are
two State licensing boards, established by the General Assembly, which are
also located within the Water and Science Administration. The Boards were
created to license and certify individuals as:
Superintendents and operators of waterworks,
wastewater works, industrial wastewater works,
wastewater collection systems, and waste water
distribution systems
Well drillers, and water conditioner and water pump
installers
The Marine Contractors Licensing Board (MCLB) was also
established by Chapter 286 of the 2010 Laws of Maryland but is not included
in the Water and Science Administration. Seven individuals are appointed
73
by the Governor to serve on the Board for a three-year term. The members
include three licensed marine contractors, two at-large representatives, a
representative from the Maryland Department of the Environment and a
representative from the Maryland Department of Natural Resources.
These Boards screen applicants who are seeking licenses, administer
competency examinations, evaluate continuing education as a prerequisite
for license renewal, and take disciplinary action against those licensees who
are in violation of the law or regulations.
XI. CONSUMER PROTECTION LAW
A. CONSUMER PROTECTION ACT
Businesses and consumers alike benefit when information about
available goods and services is both complete and accurate. Like its sister
states, Maryland has a Consumer Protection Act that is designed to promote
honesty and fair dealing. The Act generally prohibits businesses from
engaging in unfair or deceptive practices in connection with the offer or sale
of consumer goods, consumer realty, consumer services, or consumer credit.
It also prohibits the making of false or misleading statements, including
misrepresentations made in advertising or at the point of sale.
B. UNIFORM COMMERCIAL CODE
To ensure the high quality of products sold in the state,
Maryland’s Uniform Commercial Code imposes upon sellers an
implied warranty of merchantability and a warranty that the goods
are fit for the ordinary purpose for which they are intended. In
general, any language used by a seller which attempts to exclude or
modify the implied warranties, or to exclude or modify remedies for
breach of those warranties, is unenforceable in transactions involving
consumer goods.
C. SERVICES OF THE CONSUMER PROTECTION
DIVISION
1. Mediation
The Consumer Protection Division of the Attorney
General’s Office works closely with the business
community to establish a positive dialogue that will
help consumers and businesses throughout the State.
74
For the convenience of consumers and businesses, the
Division has established a Mediation Unit to assist in
the informal resolution of consumer complaints.
2. Health Education and Advocacy Unit
The Division’s Health Education and Advocacy Unit
(HEAU) assists health care consumers who have a
dispute with their health care provider or have received
an adverse coverage decision by their HMO or health
insurance carrier. HEAU guides the consumer through
the carrier’s internal appeals and grievances process.
3. Arbitration
Over 1,000 businesses have committed to arbitrate
disputes through the Division’s Arbitration Program if
mediation fails to resolve a consumer complaint. The
Arbitration Program is an effective alternative to
litigation and has proven over the years to be a speedy,
fair, simple, and conclusive means of resolving
customer complaints. Businesses interested in
participating in the Arbitration Program are
encouraged to contact the Consumer Protection
Division. Businesses interested in learning more about
the Arbitration Program may call 410-576-6593.
4. Registration of Businesses
The Consumer Protection Division has several
registration programs. Each builder of new homes,
custom homes or condominiums in Maryland must
register with the Home Builder Registration Unit. If
you need information about the home builder program,
please call 410-576-6573 or, toll-free in Maryland, 877-
259-4525. Sales representatives for home builders must
also be registered with the Home Builder Registration
Unit. New Home Warranty Security Plans offered in
connection with the sale of a new home must be
registered with the Home Builder Registration Unit.
Additionally, the Division’s Health Club Registration
Unit registers all businesses selling health club services,
including health spas, figure salons, weight reduction
75
centers, and self-defense schools. For more information
about the health club program, please call 410-576-6350.
Vehicle Protection Product Warranty Programs must
also be registered with the Consumer Protection
Division. For more information about the vehicle
protection product warranty registration program,
please call 410-576-6350. Legal Assistance
Organizations that recommend, furnish, arrange or pay
for legal services for members or beneficiaries must
annually file a report of activities and financial
conditions with the Consumer Protection Division.
Information about these programs is available at
www.oag.state.md.us/consumer/index.
5. Identity Theft Unit
Businesses that collect personal information from
consumers are required to protect that information. If a
breach occurs that results in personal information being
released or lost, the business is required to notify
affected consumers and send notice of the breach to the
Consumer Protection Division’s Identity Theft Unit.
For more information, please contact the Identity Theft
Unit at (410) 576-6491, or visit
www.oag.state.md.us/idtheft/index.
For general information about any of the Consumer
Protection Division’s programs, please contact:
Consumer Protection Division
200 Saint Paul Place, 16th Floor
Baltimore, Maryland 21202
Telephone: (410) 576-6557
or
www.oag.state.md.us/consumer
XII. FRANCHISE LAW
A. INTRODUCTION
The basic purpose of the Maryland Franchise Law is to ensure that a
prospective franchisee has all material information about the franchise
before signing the franchise agreement. The law recognizes that full
76
disclosure is helpful to both franchise buyers (“franchisees”) and franchise
sellers (“franchisors”), and it encourages a better franchise relationship
because the parties are informed about their respective rights and
obligations.
The Maryland Franchise Law applies to the offer and sale of
franchises in the State. This law has two principal requirements:
Any franchise offered in Maryland or to a
Maryland resident must be registered with the
Maryland Securities Division, unless the offering
or the franchisor is exempt under the law.
The franchisor must provide a disclosure
document to a prospective franchisee at least
fourteen days before the franchisee pays any
money for the franchise or signs a franchise
agreement. Federal law also requires this pre-
sale disclosure about the franchise.
In contrast to the laws of some states, the Maryland Franchise
Law generally does not govern the ongoing contractual relationship
between a franchisor and its franchisees and does not require that a
franchisor include any specific provisions in its franchise agreement.
(Note, however, that other Maryland laws may govern certain aspects
of the contractual relationship in specific industries, such as gasoline
distributors, alcoholic beverage distributors, motor vehicle dealers
and dealers in farm, industrial or construction equipment.)
The Maryland Franchise Law makes it unlawful for any person
to commit fraud in the offer and sale of a franchise, or to fail to
disclose to a prospective franchisee all material information about the
franchise offering. The law contains a private right of action, so that
individual franchisees may sue a franchisor for violations of the law.
B. REGISTRATION AND DISCLOSURE
To register a franchise offering in Maryland, the franchisor
files with a Division an application that includes a copy of its
“Franchise Disclosure Document”. Maryland allows the franchisor
to submit this document in a format that all other franchise
registration states and the federal government have adopted. The
Franchise Disclosure Document requires information about the
franchisor, its experience, the initial and ongoing fees it charges, the
77
initial investment a franchisee is expected to make, the names of
existing franchisees and a recent audited financial statement. The
Securities Division reviews the document and advises the franchisor
whether it contains all necessary information. If the document
contains all of the required disclosures, the Securities Division
registers the franchisor to offer and sell franchises for one year. A
franchisor may renew its registration annually by filing an updated
disclosure document and paying the required registration fee.
The Securities Division staff is available to answer questions
about the Maryland Franchise Law and the Franchise Disclosure
Document guidelines. The Division also has published information
about the requirements of the law and what a prospective franchisee
should consider before investing in a franchise. To obtain this
information, please contact:
Maryland Securities Division
200 St. Paul Place
Baltimore, Maryland 21202-2020
Telephone: (410) 576-7786
http://www.marylandattorneygeneral.gov/Pages/Se
curities/default.aspx - website
[email protected] - email
XIII. “BUSINESS OPPORTUNITY” LAW
A. INTRODUCTION
Maryland is one of about 25 states with a specific law dealing with
“business opportunities.” That law is the Maryland Business Opportunity
Sales Act. “Business opportunities” are prepackaged small business deals
offered mainly to novice entrepreneurs through telemarketing, classified
ads, home seminars and business opportunity expos. Typical business
opportunity transactions involve the sale of vending machines, pay
telephones, amusement devices, greeting card display racks and 900
telephone lines.
Both federal and Maryland authorities have noted the growing
problem of business opportunities fraud. The Federal Trade Commission
reports that business opportunity consistently rank among the top ten
categories of consumer fraud complaints reported to the Federal Trade
Commission. The Maryland Business Opportunity Sales Act provides for
78
penalties against sellers that commit fraud or deceptive practices in the sale
of business opportunities in this State. Under the law, the Maryland
Securities Division can take enforcement action against those fraudulent
business opportunity sellers, allowing legitimate sellers a better
environment in which to transact their business.
B. REGISTRATION AND DISCLOSURE
A seller of business opportunities must register with the
Securities Division before advertising or soliciting in Maryland. The
seller also must provide a copy of an approved disclosure statement
to the buyer at least ten business days before the buyer signs an
agreement or pays any money to the seller.
The seller must file a copy of its disclosure statement with the
Securities Division. That document must contain information about
the seller, its business, its financial condition, any previous
bankruptcies, and the names of any previous buyers who have
demanded a refund. The Securities Division reviews the seller’s
proposed disclosure statement and advises the seller whether the
document complies with the law. A seller may renew its registration
annually by filing with the Division an updated disclosure statement
and paying the required filing fee.
The Division has published a pamphlet for persons who may
be considering the purchase of a business opportunity. To obtain a
copy of this pamphlet, or for more information about the new
Business Opportunity Act, please contact:
Maryland Securities Division
200 St. Paul Place
Baltimore, Maryland 21202-2020
Telephone: (410) 576-7786
www.marylandattorneygeneral.gov/Pages/Securities
/default.aspx - website
[email protected] - email
XIV. ANTITRUST LAW
A. INTRODUCTION
Federal and state antitrust laws exist to assure that consumers
enjoy the economic benefits of competitive markets and, therefore, to
79
identify and correct business activities that diminish or eliminate
those benefits. The goal is to protect and encourage open and
vigorously competitive markets, with all firms competing on a level
playing field and enjoying equal business opportunities. Businesses
with superior products or more efficient methods will benefit from
these competitive markets. Thus, the antitrust laws are both pro-
consumer and pro-business.
B. ENFORCEMENT
1. Federal Law
The Sherman Act (1890), the Clayton Act (1914), and the
Federal Trade Commission Act (1914) are the primary
federal antitrust laws. The Sherman Act, which is the
only antitrust law that carries both criminal and civil
penalties, is enforced by the Antitrust Division of the
U.S. Department of Justice. The Clayton Act (civil
penalties only) is enforced by both the Antitrust
Division and the Federal Trade Commission. The
Federal Trade Commission Act is enforced by the
Federal Trade Commission.
In addition, the attorney general of each state is
authorized by federal law under certain circumstances
to bring antitrust cases on behalf of the citizens of the
state.
However, most antitrust lawsuits are not brought by a
government; they are civil cases brought by private
parties who claim that the defendant’s misconduct has
injured their business. In such a private civil case, a
successful plaintiff is automatically entitled to treble
compensatory damages, plus attorneys’ fees, court
costs, and litigation expenses.
2. State Law
Maryland, like every state except Pennsylvania and
Vermont, has a state antitrust act that is similar to
federal antitrust laws. The Maryland Antitrust Act
permits the state Attorney General to bring
enforcement actions seeking civil penalties, restitution,
80
and treble damages on behalf of the state, state citizens
and political subdivisions. Willful violations of the
Maryland Antitrust Act are misdemeanors.
C. CONCEPTS OF ANTITRUST LAW
The core principle of antitrust law is simply stated: competitors
should compete. Competitors should not agree, formally or informally, that
they will not compete with one another, either directly or indirectly. To
apply this principle to business operations, it is helpful to understand
several concepts of antitrust law:
1. Horizontal Agreement
An agreement among competitors at the same level of
the distribution or manufacturing process (e.g. Ford
and Chrysler).
2. Vertical Agreement
An agreement among parties in a buyer-seller
relationship at different levels of the distribution or
manufacturing process (e.g. Ford and a Ford dealer).
3. Per Se Violation
An activity that has been recognized as nearly always
harmful to competition. A plaintiff who claims that the
defendant committed a per se violation need not prove
that the defendant’s activity has adversely affected
competition; the adverse effect is conclusively
presumed. The only defense to a charge of a per se
violation is that the challenged activity did not occur.
4. Rule of Reason Violation
If a challenged activity is not a per se violation of the
antitrust laws, then the plaintiff must prove that the
activity had an adverse effect on competition. This
proof requires a detailed economic scrutiny of the
anticompetitive and procompetitive effects of the
challenged activity.
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Antitrust counsel should be consulted whenever there
is a question about the legitimacy of particular
activities.
D. PROHIBITED ACTIVITIES
1. Horizontal Price Fixing (per se violation)
Competitors may not agree on any element of price:
they may not agree to set price floors or ceilings, to raise
or lower or stabilize prices, or to refrain from bidding
against one another or to submit bids at specific prices.
2. Horizontal Market Allocation (per se violation)
Competitors may not agree to divide territories or
customers among themselves.
3. Horizontal Joint Boycotts (per se violation)
Competitors may not agree to “gang up” on or boycott
either a common supplier or a common distributor. It
is perfectly legitimate for a business firm to make an
independent, unilateral decision not to purchase from a
certain supplier or not to sell to a certain distributor, but
it is a per se antitrust violation for two or more
competitors to agree among themselves not to do so.
4. Horizontal Mergers and Acquisitions (rule of reason)
Some foreign firms begin to do business in Maryland by
acquiring or merging with an existing U.S. firm. Others
enter the market in a joint venture with a U.S. firm,
either through an equity share in a new U.S. corporation
or through a partnership structure. If the merging
entities or co-venturers are actual or potential
horizontal competitors, the antitrust concerns include
whether the merger might eliminate a healthy
competitor from the market or reduce the number of
competitors so as to facilitate collusion among the
remaining firms, raise barriers to entry by potential
competitors, or give the surviving firm monopoly
power to control prices in the market.
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However, a horizontal merger or a horizontal joint
venture is not illegal unless it constitutes an
unreasonable restraint of trade or is likely to reduce
competition by a significant amount. Both the Justice
Department and the National Association of Attorneys
General publish guidelines for determining the legality
of acquisitions, mergers, and joint ventures. These
guidelines primarily rely on the market shares of the
participants. Generally, the higher the combined
market shares of the acquiring and acquired firm, the
more likely the merger will be found to be illegal.
5. Horizontal Joint Venture (rule of reason)
While a merger eliminates one firm from the market,
the horizontal joint venture adds a new market entrant.
There is an antitrust concern that a joint venture may
create a potential for price-fixing or production
reduction between the co-venturers who compete
against each other in other markets. For example, U.S.
and foreign automobile manufacturers have been
allowed to enter into joint ventures for the purpose of
producing a specific automotive product although both
firms compete in the U.S. and foreign automobile
markets with regard to other automotive products.
The criteria for determining whether a specific
horizontal joint venture is legal are basically the same
as those for a merger. A proposed joint venture will
probably be lawful if neither venturer would have
independently entered the market. In those
circumstances, the new entry would increase
competition.
6. Vertical Mergers and Acquisitions (rule of reason)
A business firm vertically integrates “upstream” to
assure its source of vital supplies and “downstream” to
control its retail outlets. Instead of developing its own
sources of supply or its own company controlled
outlets, under certain circumstances a firm may find it
advantageous to acquire already existing ones. An
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antitrust concern arises here if a firm’s competitors are
foreclosed from competing with it either for the supply
or at the outlet. Vertical mergers are normally lawful
unless a merger results in a substantial foreclosure of
the relevant market.
(Note that antitrust enforcement agencies rarely
challenge vertical joint ventures between firms at
different levels in the distribution chain because these
ventures normally enhance competition.)
7. Vertical Non-Price Agreements (rule of reason)
Because manufacturers have a legitimate interest in
maximizing distribution efficiencies and in
determining the manner in which dealers sell their
products to consumers, they are permitted to enter into
agreements to control various aspects of distribution.
Manufacturers and dealers may have agreements
specifying, for example, territories, classes of
customers, minimum levels of promotional activity, or
service requirements. These vertical non-price
agreements are judged by a rule of reason, involving a
detailed look at the impact of the agreement upon the
market in which the restraint occurs, and are not per se
illegal.
8. Vertical Resale Price Maintenance Agreements
A product manufacturer may announce unilaterally to
its distributors the minimum or maximum resale price
that the distributors may charge, and may enforce this
mandate by terminating the distribution arrangement.
Price agreements between manufacturers and
distributors are more problematic, however. Federal
law permits a manufacturer and its distributors, in
some circumstances, to agree to maintain a resale price
for the manufacturer’s products under the following
rationale. Although resale price maintenance
undermines competition between retail sellers of the
same brand product and harms consumers by not
allowing sale of the product at a discount price, such
agreements may enhance interbrand competition. For
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this reason, federal law requires a rule of reason
analysis of agreements directly or indirectly mandating
resale price maintenance. Under Maryland law,
however, resale price maintenance is per se illegal.
9. Price Discrimination (rule of reason)
The Robinson-Patman Act (Section 2 of the Clayton Act)
was enacted in 1936 primarily to stabilize prices. The
Act makes it a civil violation for a manufacturer to
charge competing distributors different prices for
goods of similar grade or quality where the effect of that
sale would be to adversely affect competition. It is also
a violation of the Act for a seller to charge a sustained,
below-cost price for its products in one region of the
country while supported by profits from other sales
regions, if the seller does this with the aim of causing
local competitors in the first region to lose significant
market share or go out of business. A disfavored
distributor must establish not only injury to its own
business but also a substantial lessening of competition
in the market as a whole.
10. Monopolization
A business may unlawfully injure competition by so
dominating a relevant product and geographic market
that the business has the power to control prices or
exclude competition without fear of competitive
response. This is known as possession of monopoly
power. Factors considered to determine whether a firm
possesses monopoly power include: the firm’s market
share; the number, size, and vigor of competitors; the
history and ease of entry and exit in the industry; and
the level of profits or rates of return over a period of
time.
Possession of monopoly power alone, however, is not a
violation of antitrust laws. The plaintiff must establish
also that the firm wrongfully or willfully acquired or
maintained its monopoly power, that the firm’s
possession or exercise of its monopoly power injured
the plaintiff in its business, and the amount of damages
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attributable to the firm’s possession or exercise of its
monopoly power.
E. TRADE ASSOCIATIONS
Competitors may jointly undertake most industry trade
association activities without violating the antitrust laws.
F. CONCLUSION
If a firm focuses on the basic antitrust principles expressed
here and seeks, when necessary, the advice of counsel, it can be
confident that the Maryland market will reward its vigorous
competitive efforts. The basic principles apply throughout the United
States and include the following: (1) competitors are to compete and
are not to agree to refrain from competing; (2) restrictive vertical non-
price arrangements are generally lawful when their effect is to
strengthen interbrand competition and they do not foreclose a
substantial share of the market; (3) competing customers should not
be charged different prices without justification; (4) horizontal
mergers and joint ventures are likely to be lawful unless they tend to
substantially lessen competition; and (5) monopolization is illegal.
G. BUSINESS REVIEW PROCEDURE
As a service to the Maryland business community, the
Antitrust Division of the Attorney General’s Office has a business
review procedure whereby a firm may request that the Antitrust
Division review a proposed business arrangement under state and
federal antitrust laws. The Division will express its enforcement
intentions based upon the information given, market conditions and
the current state of the law.
For more information, please contact:
Antitrust Division
Attorney General’s Office
200 St. Paul Place
Baltimore, Maryland 21202
Telephone: (410) 576-6470
