The rules where you work $17
A first 30 days checklist, everyday forms, licenses, workers’ comp and taxes for Maryland, with a yearly calendar. Instant PDF download.
Buy the packet: $17Digital product, all sales final. Informational only, not legal, financial, tax or business advice.
What Maryland expects from a new trade business
Maryland licenses home improvement directly: if you take remodel or repair work from a homeowner, you need a state license and an exam. Liens go through a circuit court with a judge, not a recorder's stamp. And every LLC owes a $300 annual report fee.
Home improvement needs a state license, and a test
The Maryland Home Improvement Commission licenses anyone who performs or sells home improvement for an owner: remodeling, repair, alteration or replacement on a residence. You have to pass the exam before you apply, and since June 1, 2024 you must carry at least $500,000 in general liability insurance. The Guaranty Fund assessment is $100 with an original license and $175 at each two-year renewal. New homes aren't home improvement under this law, and neither are apartment buildings with four or more single-family units. Since 2016 there's no sub license, so a sub working for a licensed contractor doesn't need one.
Electricians, plumbers and HVAC techs have their own state boards. Electricians also deal with county registration.
Acting as a contractor without a license is a misdemeanor: up to $1,000 or six months the first time, up to $5,000 or two years after that.
Contracts must be written, legible and signed by both sides, with a copy to the owner before work starts. Each one carries your name, address, phone and license number, any salesperson's name and number, approximate start and completion dates, the work and materials, the price, any monthly payments and finance charge, and the Commission's licensing and consumer notices. If payment is secured by the owner's home, a bold notice goes on the first page for the homeowner to initial. Sold away from your place of business for $25 or more, the buyer gets a cancel notice and has until midnight of the third business day. A construction attorney can check your contract form.
Source: Md. Bus. Reg. 8-101, definitions · Md. Bus. Reg. 8-301, license required · Md. Bus. Reg. 8-302, examination · Md. Bus. Reg. 8-501, contracts · Md. Bus. Reg. 8-601, penalties · Maryland Home Improvement Commission · Md. Bus. Occ. 6-301, electricians · Md. Bus. Occ. 12-301, plumbers · Md. Bus. Occ. 9A-301, HVAC · Md. Bus. Reg. 8-302.1, liability insurance · Md. Com. Law 14-302, door-to-door sales
Who to call: an attorney near you
LLC members are covered if they're paid, unless they opt out
Each Maryland employer has to secure comp for covered employees. The owner rules matter here:
- Sole proprietor: not covered unless you elect in, and only if you work the business full time.
- LLC member or corporate officer paid for services: covered by default. A member who owns at least 20% of the profits interest can elect out, with written notice to the Commission and insurer. Some corporate officers can also elect out.
If you sub out part of your own work, you're a principal contractor, and you can be liable for comp to the sub's employees as if they were yours.
Failing to secure comp is a misdemeanor, with up to a $5,000 fine or a year in jail. An insurance agent who writes contractors can price it and handle the election.
Source: Md. Lab. and Empl. 9-206, officers and LLC members · Md. Lab. and Empl. 9-227, sole proprietors · Md. Lab. and Empl. 9-402, securing compensation · Md. Lab. and Empl. 9-508, principal contractors · Md. Lab. and Empl. 9-1107, penalties
Who to call: an insurance agent near you
Getting paid: file a petition, not just a paper
Maryland runs liens through a judge:
- Subs: give the owner written notice of your intent to claim a lien within 120 days of doing the work or furnishing materials. Use registered or certified mail or personal delivery. If notice can't be given, you can post it on the door with a competent witness inside those 120 days.
- New house the owner is building for himself: a sub loses out if the owner paid the contractor in full before your notice, and your lien is capped at what he still owes. That cutoff doesn't appear to reach a remodel or repair of an existing home.
- Everyone: file a petition in circuit court within 180 days after the work is finished or materials are furnished. The court reviews it and can order the owner to show cause within 15 days of service. A judge who finds probable cause but won't grant the amount claimed can set an interim lien, a bond and a trial within 6 months.
- Enforce within one year of when you first filed the petition, or the right expires.
A repair job has to reach 15% of the building's value to be lienable. A contract can't make a sub waive lien rights ahead of time, and giving credit or taking a note doesn't waive them. A bona fide purchaser who gets title first takes free of the lien. At final payment, the contractor owes the owner a signed release from each sub and supplier. This one really needs a construction attorney from the start.
Source: Md. Real Prop. 9-102, property subject to lien · Md. Real Prop. 9-104, notice to owner · Md. Real Prop. 9-105, petition · Md. Real Prop. 9-106, show cause · Md. Real Prop. 9-109, one-year limit · Md. Real Prop. 9-113, waiver · Md. Real Prop. 9-110, credit is not a waiver · Md. Real Prop. 9-114, release of lien
Who to call: an attorney near you
You pay 6% on materials. Labor stays out of it.
In Maryland, real property contractors pay the 6% sales tax on building materials and supplies, and out-of-state purchases brought in for use here are taxable too. When materials become part of the real estate, like fencing, windows or doors, the purchase is taxed to you and you don't charge the customer tax.
Labor to install, erect, assemble or repair real property isn't taxable, separately stated or lump sum. Fabrication labor on goods is a different story, and it's taxable.
If you sell materials as personal property, a resale certificate can apply. Nonprofit customers' exemption certificates can cover materials incorporated into their property, but materials going into government-owned realty aren't exempt. A CPA who works with contractors can help you keep it straight.
Source: Comptroller of Maryland, Business Tax Tip 18, Real Property Contractors · Md. Tax-Gen. 11-101, definitions
Who to call: a CPA or tax pro near you
LLC, sole proprietor, or S-corp?
Forming an LLC through SDAT costs $100, and a trade name filing is $25. Then the $300 annual report is due April 15 every year, with a free online extension to June 15. It's owed even if you hold no property. The report also carries a personal property return. Miss it and penalties and interest build, and the state can forfeit your charter.
So budget that $300 before you decide an LLC is worth it.
Pass-through profit lands on your personal return. Maryland's state brackets run from 2% up to 6.5% at the top, and county income tax comes on top of that, 2.25% to 3.30% for 2026.
Hire even one person and more lands on you. Register for FAMLI, the state's family and medical leave insurance. File unemployment insurance reports and pay the tax within 1 month of each quarter's end, on the first $8,500 per employee. Give W-2s and file your withholding reconciliation by January 31.
When an S-corp pays off is a numbers question. Bring what the business clears after your floor rate to a CPA and have them run it.
Source: Maryland SDAT, businesses · Md. Tax-Gen. 10-105, income tax rates · Maryland SDAT, fee schedule · Comptroller of Maryland, 2026 withholding tax facts · Maryland Department of Labor, unemployment insurance tax · Maryland Department of Labor, new employers and FAMLI
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in Maryland before you rely on it. Last updated November 2026.