This probably varies from state to state. Does anybody who does IT contracting work in Maryland understand the best way to legally put a late payment clause in their contract? Net 15 / Net 30 ? .. charging how much interest per month / year? Flat fee? How is this worded in the contract?

How does this change if I am doing business with a company outside of Maryland?

Related side question:

I am using a standard Maryland consulting agreement that I downloaded from lawdepot.com

If I want to do business with a company in another state, do I need to use a consulting agreement from that state or will the Maryland one I have suffice?

  • It's probably best to submit questions separately. Jan 15, 2016 at 0:49

4 Answers 4


I'm not in Maryland, and I do no do IT contract work.

However, the Maryland state usury laws state 8% interest is the maximum: http://www.lendingkarma.com/content/state-usury-laws-legal-interest-rates/

Some rudimentary searching shows that apparently Maryland has really convoluted interest rate and usury laws: http://www.usurylaw.com/state/maryland.php

You may be better off speaking directly with a local accountant to sort this out, since clearly a concise answer can't be gained by anyone who is not well versed in Maryland interest rate restrictions.

For me, I do Net 15 days, but don't apply interest until Net 30. So there's a 15 day grace period build in. To calculate interest I take my states max per year, divid that by 12 and that's my monthly rate. But my state provides that if a contract is signed with a higher than state max interest rate (within reason) that rate may be honored by a court. So I boost my rate to 12% (just slightly higher than state yearly max) and charge 1% monthly.

As for locale -- in most instances you abide by the state your business is in, not the location of your client. Again, this may vary state to state and discussing these items with an accountant may be helpful.

  • The OP isn't making a loan.
    – Xavier J
    Jan 20, 2016 at 16:04

Even though there's already an accepted answer to this, I felt I must comment/answer. I agree that talking to an accountant or CPA is a good idea.

Usury laws in most states, including Maryland, are designed to protect consumer loans from extreme interest rates. Maryland specifically has a "Corporate Exception" to its usury laws. Alabama apparently says "Usury limit for individuals is 12%, there is no limit for corporations", and "Some states do not restrict the interest rates that corporations can be charged under the assumption that corporations have sufficient bargaining power and business sense to negotiate a fair rate independently" from http://legal-dictionary.thefreedictionary.com/usury .

Do a quick Google or other search engine for "usury laws for corporations". Those above are on the first results page.

I am in Maryland and my business does IT contracting work. Our contract states "Any payment not received by due date may cause a work stoppage and extend delivery date. Late payments are subject to 1.5% late fee per month or part of each month the payment is late.", or similar words (I'm not looking at one of our contracts right now). All our invoices also have a notice on them about 1.5% of payment due as late fee per month or any part of month. Fortunately, we've never had to apply the late fee.

The contract can set out whatever equal parties agree to. Two or more corporations are considered equal parties (with some exceptions, as is the case with all laws. An interesting NY case turned up on the search results http://www.metrocorpcounsel.com/articles/11263/lenders-and-counsel-beware-usury-pitfalls).

  • Guys, I realize that talking to an accountant would be the best way to get my question answered accurately. This isn't a big revelation. Anyway, thank you all for your input. It's been very helpful.
    – spex5
    Jan 20, 2016 at 16:59

While legally you may be able to charge interest or late fees on your invoice, from a business standpoint, you're essentially saying "F* you" to the client.

An alternative method I recommend is 1) getting a deposit on all your projects, and 2) making sure you communicate with your clients over the phone when your invoices are due.

This has generally left me with happy clients that always pay on time


It's business. Rarely have we had to charge a late fee to clients, but those that are in real business and not in it as a hobby understand it and expect it. Manage your finances and pay your bills on time and there won't be an issue. It's standard business practice.

  • Welcome to Freelancing! Whilst this may theoretically answer the question, it would be preferable to back it with references to credible sources and/or academic research. Unbacked posts attract downvotes and disputes. Mar 19, 2021 at 1:15

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