Expanding your business into a new state.
Expanding your business to other states is tempting when demand rises, or you want to expand your market. Larger customer base + growing business = rising profits! Opening an office in a new state can create more work than you might imagine. You have thought about office space, applying for a business license and a marketing plan. However, have you considered the employer and employee elements?
If these nine items seem daunting, don’t despair! We know a little secret we are willing to share. Read on!
State unemployment and income taxes will vary by state. Additionally, 14 states and the District of Columbia contain cities and counties that also impose an income tax. You will need to be educated on the differences and establish an accurate tracking system.
Payroll tax returns:
You need to file one payroll tax return to each state that charges income tax in which you do business. There are only seven states that do not require this tax. Unfortunately, when it is required, it is not an easy task. You may need to file withholding returns monthly, quarterly or yearly. On top of that, you need to submit unemployment tax returns. The rules are complicated, and the penalties for noncompliance are severe.
Every state has its own set of employment laws. Employers are forced to consider the most stringent regulations and align their policies with those. For example, you may need to revise your paid time off policy if operating in a state or municipality that has a paid sick leave law that is more strict than your current policy. This way, you can offer consistent paid time off benefits to all of your employees. With hundreds of employment laws, this can be a massive research project.
Minimum wage rates vary by state, and many cities and counties have also enacted minimum wage laws. You will find different rules regarding whom the minimum wage applies to, and when and what amount you need to pay for overtime work.
Twenty-one states enforce additional background check restrictions beyond those imposed by the Fair Credit Reporting Act. These other rules may impact discloser language, the type of reported information, and the age of the cases you can request.
Consider your pool of potential employees in the area. Is it likely that you can find the talent you need for your company in this community? For example, if you run a high-tech software company you may want to avoid a blue collar area with low education rates. Research your potential communities.
The Fair Labor Standards Act requires that employers classify employees as either exempt or nonexempt. This classification determines whether an employee is entitled to overtime pay. Many states have laws regarding overtime pay and will enforce those that favor the employee.
Most states require your business to obtain workers’ compensation insurance. However, the requirements including business size, industry and exceptions will vary by state.
A large number of professional license requirements will also differ. If you are in an industry where licenses are essential, consider how the difference may impact your staff selection and your business processes. Other training requirements may also differ, such as sexual harassment training. While some states require no sexual harassment training, others may have complex rules.
While non-compliance can be daunting and costly, don’t be discouraged from expanding business across state lines. Many small and mid-sized businesses partner with professional employer organizations (PEOs) to outsource their human resource functions. These HR experts know the federal and state laws, and will keep your business compliant in the areas of payroll, benefits, employee relations, risk management and much more! If you want to discuss expanding your business, contact Tandem HR today at 630.928.0510 for a free consultation.