Maryland Economy Overview

Currency

US Dollar (USD)

Working hours

40 hours/week

Public/bank holidays

12 public holidays

Capital

Annapolis

Languages

English (some Spanish spoken)

Population

6,263,22 as of 2024 (estimate based on 2020 Census)

Minimum hourly salary

$15.00 (as of 2024, Maryland state minimum wage law)

Tax year

1st Jan – 31st Dec

Date format

MM/DD/YYYY

Misclassification penalties

Employers in Maryland who misclassify workers as independent contractors may face civil penalties, back wages, unpaid taxes, and interest. The state actively enforces compliance through audits, especially in construction and gig-based industries.

Fun fact

Maryland is home to the first-ever railroad station in the U.S. Built in Baltimore in 1829, it sparked the beginning of American railway expansion.

Expanding your business to Maryland offers the benefits of investing in a strong economy with access to an active job market of skilled and well-educated candidates. In addition to GDP growth, the state offers attractive tax credits for businesses in enterprise zones and for qualifying sectors.

Maryland is strategically located, providing easy access to many of the East Coast’s economic hubs. It is well-known for its investment potential in the financial, healthcare, construction, government, and real estate sectors.

To do business in Maryland, you must adhere to the local labor laws, from registering for tax to following fair hiring practices when recruiting a workforce. The simplest and most cost-effective way to achieve this is with the expertise of an Employer of Record, or EOR, in Maryland. To guarantee compliance and smooth expansion, this article details Maryland’s business regulations and why the services of recruitment agencies and EORs are valuable solutions.

Overview of Maryland's Economy

Maryland has diversified its economy since the 19th century, contributing to its resilience against external market conditions. The state’s key economic sectors include life sciences, IT, aerospace and aviation, and federal research. Maryland saw an increase of 1.6% in economic growth between 2022 and 2023, with its GDP reaching $512.3 billion in 2023. In fact, its 2023 GDP was at an all-time high despite shrinkage due to the COVID-19 pandemic.

Sector Contribution to Maryland’s Economy
GDP Growth Maryland’s GDP reached an all-time high of $512.3 billion in 2023, with a 1.6% annual growth rate driven by resilient, diversified sectors.
Life Sciences & Biotechnology One of the top biotech hubs in the U.S., Maryland is home to NIH, FDA, and hundreds of life science firms that drive medical research and innovation.
Information Technology & Cybersecurity With proximity to federal agencies and defense contractors, Maryland leads in cybersecurity and tech innovation, contributing over $37 billion to the state economy.
Aerospace & Aviation Maryland supports a robust aerospace sector with R&D facilities and key employers like Lockheed Martin, supporting both defense and commercial aviation.
Federal Research & Government Services The state’s location near Washington, D.C. gives it a competitive edge in federal employment and research grants, fueling stable public-sector growth.

Taxes

Employer Tax: 7.65% – 15%

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Federal Unemployment Tax (FUTA)

6.00% (first $7,000)

State Unemployment Insurance (SUI)

~0.3% – 13.5%

Employee Tax: 7.65%

Social Security (FICA)

6.2%

Medical Insurance (FICA)

1.45%

Income Tax

Progressive rates from 2% to 5.75%, depending on income bracket.

For Single Filers, Heads of Families, or Married Filing Separately

Up to $1,000

$1,001 – $2,000

$2,001 – $3,000

$3,001 – $100,000

$100,001 – $125,000

$125,001 – $150,000

$150,001 – $250,000

More than $250,000

Tax Rate

2%

$20 + 3% of excess

$50 + 4% of excess

$90 + 4.75% of excess

$4,697.50 + 5.00% of excess 

$5,947.50 + 5.25% of excess 

$7,260.00 + 5.50% of excess 

$12,760.00 + 5.75% of excess 

For Married Filing Jointly

Up to $1,000

$1,001 – $2,000

$2,001 – $3,000

$3,001 – $150,000

$150,001 – $175,000

$175,001 – $225,000

$225,001 – $300,000

More than $300,000

Tax Rate

2%

$20 + 3% of excess 

$50 + 4% of excess 

$90 + 4.75% of excess 

$7,072.50 + 5.00% of excess 

$8,322.50 + 5.25% of excess 

$10,947.50 + 5.50% of excess 

$15,072.50 + 5.75% of excess 

County Income Tax

Additional local tax ranging from 2.25% to 3.2%, based on employee residence.

County

Baltimore City

Baltimore County

Montgomery County

Anne Arundel County

Frederick County

Howard County

Worcester County

Hartford County

Prince George’s County

Washington County

Local Tax Rate

3.20%

3.20%

3.20%

2.70% – 3.20%

2.70% – 3.20%

3.20%

2.25%

3.06%

3.20%

2.95%

Type

Flat

Flat

Flat

Progressive

Progressive

Flat

Flat

Flat

Flat

Flat

Overview of Maryland's Business Regulation

In Maryland, state and federal law govern the local business regulations, and the Maryland Department of Labor oversees employment issues while enforcing the law. It is important to note that Maryland is an “at-will” employment state, allowing employers and employees to terminate the employment relationship at any stage without a contract.

A closer look at Maryland’s regulations concerning company registration and taxation can help you establish your business quickly and compliantly.

Company Registration

Businesses must first register with the Maryland Department of Assessments and Taxation. Once approved, you will receive an SDAT number to identify your business.

  • Companies that operate as corporations or partnerships and file employment tax must register with the IRS for a Federal Employer Identification Number (FEIN), also known as a Federal Tax Identification Number.
  • Despite sole proprietorships and certain types of partnerships not being recognized as legal entities, they still require an SDAT identification number.
  • The next step is to issue a report to FinCEN concerning business ownership. All businesses in the state must apply for tax and insurance accounts and complete registrations for business licenses and permits.
  • Lastly, employers must purchase business and health insurance.

Investment Laws

The State of Maryland permits foreign investment, including property ownership.

  • International businesses can take advantage of the state’s resources, such as the Global Gateway Program. This program offers mentorship and support to foreign entrepreneurs for successful expansion into the United States. 
  • The Maryland Securities Act, otherwise known as the “Blue Sky Law,” requires that businesses selling securities in the state be registered with the Maryland Securities Division. The law aims to protect international investors against fraud and misrepresentation.

Tax Policies

Maryland offers numerous tax incentives for businesses depending on the sector and whether they fall within specific enterprise zones. 

  • Foreign businesses that expand to Maryland and create full-time employment of 60 jobs or more are eligible for the Job Creation Tax Credit (JCTC). Small businesses can benefit from tax credits of $500 for each employee if they provide paid sick and safe leave to their employees.
  • The Enterprise Zone Program offers property and state income tax credits for expansion in specific locations.
  • Other tax incentives in Maryland include credits for companies in research and development, film productivity, and biotechnology.
  • Investors will further qualify for tax credits if expanding within a Regional Institution Strategic Enterprise (RISE) zone.

Social Security Regulations

Employers and employees contribute toward Social Security and Medicare tax. The Social Security Act covers most state and government employees. 

Both employers and employees pay 6.2% of earnings toward social security. An extra 1.45% is paid toward Medicare. 

What Are the Benefits of Doing Business in Maryland?

  • Untapped market potential: Maryland’s untapped market lies in the IT and cybersecurity sectors. The technology industry alone has contributed $37.8 billion to the state’s GDP. According to a 2024 survey conducted by WalletHub on the Most and Least Innovative States, Maryland ranked sixth for innovation. 

    Other sectors that offer investment potential include research and development, in which businesses are offered tax credits.
  • Strategic location: Maryland is located in the Mid-Atlantic, providing rapid transportation. As a neighbor to Washington D.C., Maryland has become a hub for federal research with partnerships supporting aerospace and cybersecurity advancement.
  • Structured business laws: Foreign businesses can benefit from structured business laws and programs that offer legal protection as well as access to resources and support, such as the Global Gateway Program. Entrepreneurs and larger companies follow transparent and stable legal regulations guiding expansion in Maryland.

What Are the Downsides of Doing Business in Maryland?

  • High costs: Operating a business in Maryland can be expensive. The cost of living is higher than the national average; however, businesses can benefit from tax incentives and supportive programs for startups.
  • Infrastructure challenges: While Maryland has exceptional ports and transportation solutions for businesses, national roads often become congested. The state agencies of Maryland are currently undertaking infrastructure development, including the construction of fast charging ports for electric vehicles through the National Electric Vehicle Infrastructure Program (NEVI).

Business Expansion into Maryland

For foreign businesses interested in expanding to Maryland, you can register the following entities in addition to hiring a Professional Employer Organization (PEO) or an EOR:

Maryland Employer of Record (EOR)

To expand without a legal entity, you can partner with a Maryland EOR. An EOR acts as the legal employer of the workforce and keeps companies compliant with local labor laws and business regulations. Furthermore, the EOR firm in Maryland manages payroll, tax withholding, benefits administration, onboarding, and offboarding, saving time for your business.

LEARN MORE

Recruitment Agencies

Hiring a professional recruitment agency in Maryland can source permanent employees cost-effectively and quickly by providing access to a large talent pool of qualified job candidates. Recruitment experts help you find employees in specialized professions or high-level positions, and they manage background checks.

Maryland Professional Employer Organization (PEO)

A PEO in Maryland is known as an HR service provider that outsources HR, payroll, and benefits administration. The PEO serves as a co-employer while you retain authority and are legally liable for your workforce. You must have a legal entity in Maryland to hire a PEO.

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Subsidiary Incorporation

To incorporate a subsidiary in Maryland, the following steps must be implemented:

  • Choose a unique business name.
  • Assign a registered agent to collect state-related documents and notices.
  • File Articles of Incorporation with the Maryland State Department of Assessments and Taxation. Businesses forming an LLC must file Articles of Organization.
  • Register for an EIN with the IRS.
  • For a corporation, appoint at least one board director and develop bylaws concerning the operation of your company.
  • If you are registering an LLC, federal law requires a Beneficial Ownership Information (BOI) report.

Branch Registration

Registering a branch in Maryland allows investors to test the market cost-effectively and efficiently. To register a branch in Maryland, you must file a Maryland Corporation Foreign Qualification Form with the SDAT under the Corporation Charter Division. 

The additional location of a company that does not hold licenses as per the Md. Code Ann., Fin. Inst. Art. § 11- 501 et al are exempt from branch registration.

Staffing Agency

If you are looking for contract or temporary employees in Maryland, a staffing agency will connect you to relevant candidates. They can screen candidates and match the required skills and experience to specific job roles.

Business Opportunities in Maryland

Maryland remains an attractive business expansion destination because of its robust economy, tax credits, and resources for entrepreneurs. 

The State of Maryland has been receptive to foreign direct investment and has seen over 710 international businesses operating since 2016, as per the Maryland Department of Commerce. Its prime trade and transport location, in addition to its growing sectors in cybersecurity, aerospace, and research and development continues to attract global investors. 

To facilitate the expansion of your business by hiring the best employees in Maryland, reach out to the experts in global talent acquisition at Remote People. We can help your business with tailored market entry solutions and offer complete workforce expansion support in Maryland.