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How to Start a Small Business in Maryland

Lawyer Gwen-Marie Davis Hicks | Lanham | Rockville

Video Transcript:

Gwen-Marie Davis Hicks:

Put everything down in writing, I would say, before $1 is spent.

Rob Rosenthal:

You want to start up a business in Maryland, but do you know what you need from a legal standpoint? Well, that's what we're going to find out right now, because that's what we're going to ask the lawyer.

Hi again, everybody, I'm Rob Rosenthal with askthelawyers.com, and my guest today is Maryland attorney Gwen-Marie Davis Hicks, who has experience in this area and has helped a lot of people navigate the legal waters of starting a new business.

I want to remind you, if you want to ask questions about your specific situation, just go to askthelawyers.com, click the button at the top of the page that says, “Ask a Lawyer”, and you can do your asking right there.

Gwen-Marie, it’s great to see you again. Thank you for helping us out.

Gwen-Marie Davis Hicks:

It's great to be here. Thank you so much for your time.

Rob Rosenthal:

So I'm sure there are a lot of things, but let's narrow down some of the top things people need to know as far as legally when they want to start up a business. What are some of the things they need to know?

Gwen-Marie Davis Hicks.

That's an excellent question. Navigating starting a business is something that you want to make sure you have an attorney to hold your hand throughout the whole process. Don't try to go online and get a form, because you may get a form that's not state-specific for your specific state. That's very important; also, that same form may not hold up in court, and then you may also incorporate your business all by yourself and not do the proper entity for your business.

It's important to sit down with a professional to understand the needs of your business. Do you plan on hiring employees? Do you have a partner? Is the name of your business even available within the state website, or is it trademarked? There are a lot of things that you have to consider in great detail when going into business. I don't want to jump the gun, but I also want to say too, if you have a partner, make sure you have a partnership agreement, an operating agreement, depending on what type of institute that you have. Put everything down in writing, I would say, before $1 is spent in terms of making money. It’s easy to put things down on paper before the money starts flowing yet, but afterwards if things aren't in writing, that's when a lot of people call me, and things could have been avoided if they were all set up properly.

Rob Rosenthal:

So let's talk about some of the things that could happen. Let’s say, I don't even bother with the paperwork, or I download a form and I'm going to save so much money. What are some of the downsides? What could go wrong there?

Gwen-Marie Davis Hicks:

Okay, let's start with downloading a form. I've seen it time and time again, where someone goes to a website and downloads a form and says, “Hey, I'm doing this agreement,” but you didn't realize that you're in the state of Maryland, and you found a form online that says, “The state of Ohio”, for example. You want to make sure your forms are state-specific.

Some people I've seen have had non-compete forms signed in a different state for a business. They had their business draft it up and signed for one of their employees, but that form wasn’t going to hold up anywhere; it was too detailed. It couldn't work anywhere in that whole state, and they couldn't compete against anyone in that business for over five years. It was just so cumbersome that no judge in the state of Maryland would hold that up. That person thought that they got something online, but it ended up costing them so much more in the future.

Or incorporating a business but not putting the proper language down for what your business does. And if your business shifts or changes, having a lawyer to draft up your agreements properly and filing it with the state is very important.

Rob Rosenthal:

It sounds like a lot of it is just knowing what questions to ask. Let's say I'm starting a bakery; I might be great at making cupcakes, but I don't know all the legal ins and outs and questions. That's why you go to somebody who's an expert.

Gwen-Marie Davis Hicks:

Correct, and also to piggy-back off of that example, if you're starting a cupcake business, are you going to have employees? Are you going to have a partner? What's going to happen if, for example, you're in your bakery business and you and your partner have a big fall out? Or you and your partner are doing great, but something happens and your partner passes? Is your partner married and will the spouse take over the company? You don't know. All those things need to be written out, including the solutions. What if the bakery doesn’t work out? Can you dissolve it, and under what terms? Who pays for what if it is dissolved? Oh my goodness, the list goes on and on.

So it's very important not to just start a business without thinking it through, and having a business attorney go through your documents, make sure it is state-specific, go through your employment guidelines if you start hiring employees. What's going to happen for liability purposes if someone burns themselves? The list goes on and on. Do you have the proper insurances for the business? These are some of the things that we just go through with a fine tooth comb to make sure you're not just starting a business, but we want to make sure that your business is successful, and you know what?

I appreciate it when people call me early on as they're getting their business set up, so it can be set up right, versus later when you have unnecessary litigation that could have been avoided. You might need contracts along the way as you run through your business, as you're hiring subcontractors for your bakery business to deliver a certain amount of baked goods or whatever you need to run your business. It's very important to have all those details. Subcontractor agreements, I mean the list could go on and on. I can talk about this all day.

Rob Rosenthal:

It sounds like trying to save a few dollars at the beginning could really cost you some money down the road.

Gwen-Marie Davis Hicks:

It could have ruined your business. They say that businesses, the majority of them fail, so trying to save money could really be the start to your business on a downhill spiral. You want your business to be successful, and you want to set up yourself for success. So in order to do that, it's like paying the minimum now or paying more later. Be smart. Invest in your business. If you're starting a business, investing in it and having a lawyer is so important at the onset of your business.

Rob Rosenthal:

What are some of the business structures that are available in Maryland, and are there some that you recommend for a small start-up business?

Gwen-Marie Davis Hicks:

Yeah. So, there's an LLC; you can also do an LLC escort for tax purposes, and I would definitely say when you're starting off to have a CPA help you with the proper tax structure depending on what you're needing, depending on what you're doing. There's different types, but oftentimes a lot of people just want to say, “Oh, let me start an LLC.” Well, that may be a good entity, but it really takes time to sit down because not all businesses are created equal, to understand what your structure is like, what you're looking for, and where you see yourself going. I go through it with them and talk about the pros and cons of the different types of entities, and then we go ahead and file it, and in Maryland, you file it with the State Department of Assessments and Taxation, it's called the SDAT, and that's where you incorporate your business there, and then we don't just end it there. A lot of people start and incorporate their business and then they don't remember to pay their annual fees every year. In Maryland that’s $300 a year to keep your business from being forfeited. So things like that, we really are able to help our clients with.

Rob Rosenthal:

It would seem also, Gwen-Marie, that it's helpful to have somebody like yourself to help when you're setting up the business, but also as the business changes and/or grows, and you’re able to come back and go, “Okay, now what do I need? Do I need to change something?”

Gwen-Marie Davis Hicks:

Exactly. You know what we do too for a lot of businesses in our firm is that we have businesses who can every month just pay a small amount to have an attorney on demand, so if you need something, we're here to answer that question for you. We customize it for you; we have different packages, they run from lower amounts to higher amounts depending on what the business needs are. We customize the packages for you, and we're hoping to keep costs down but also make sure that you’re in our faces, so if you need anything, we can hopefully catch it before something big happens. But if something big happens too, we're here for you as well, but at least we set up everything right and you're protected. That's important.

Rob Rosenthal:

That's a great thought. Plus, when something big does happen, there's somebody that knows you and they know what your situation is, rather than now I'm going to start looking around for somebody and have to pay.

Gwen-Marie Davis Hicks:

Exactly. It's a family atmosphere here. And that's what we like; they call us, I'm here for you. Our firm is here for our business clients, and that's important. It's fun. I love helping businesses, and most times are the happy times when things are going well. Having, like you said, that familiar firm along the way helps when lawsuits come, and sometimes they do; sometimes it’s a cost of doing business, but making sure that everything is there and set up properly to avoid it.

Rob Rosenthal:

I know that the community and giving back to the community is important to you too, so helping these businesses get going, I guess that's a way to help the community stay strong too for you.

Gwen-Marie Davis Hicks:

Absolutely. It's important. Small businesses are the lifeblood of Maryland, and any state, quite frankly, and it's important. Small business is higher. I mean, making sure things are set up right is important. It does bring me joy; you can probably see it. It does bring me joy to be able to help and start another business, and help a business avoid troubled waters. I love helping, and I hope that I can help more businesses chart through uncharted territory.

Rob Rosenthal:

And now I want cupcakes.

Gwen-Marie Davis Hicks:

I do too.

Rob Rosenthal:

Gwen-Marie, thank you so much for making some and answering our questions. You've been very helpful as always. Thank you.

Gwen-Marie Davis Hicks:

You're welcome.

Rob Rosenthal:

That's going to do it for this episode of Ask the Lawyers. My guest has been Maryland attorney Gwen-Marie Davis Hicks. Remember, if you want to ask questions about your specific situation, just head over to askthelawyers.com; there's a button at the top of the page that says, “Ask a Lawyer,” and you can click on that and it'll walk you right through the very simple process. Thanks for watching everybody. I'm Rob Rosenthal with AskTheLawyers™.

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