Expansion is an exciting time for your business, as it offers opportunities to tap into new markets and grow revenues. It can also prove challenging as you work hard to find your ideal location, hire new employees and set up your operations, including ensuring compliance.
When it comes to legal and regulatory compliance, what works in one state will not usually fulfill all the requirements of the next. Failure to comply, even for a short time, can lead to serious repercussions, including fines, audits and the threat of dissolution of your company.
Therefore, if you want to successfully expand across state lines, you must think ahead to ensure you always comply with local laws and regulations. You can get started by exploring the following areas in detail and applying the rules to your company’s out-of-state operations.
1. Licensing and Regulation Differences
With your expansion, you will need to address your licensing and permits, as each state has its own requirements for your company to follow. Beyond the general standards, each industry operating in that state may have its own set of licensing, permit and certification requirements as well.
If you employ tradespeople, such as electricians, you have to attend to their specialty licensing needs to help them stay in compliance and ensure your operations continue running as expected. Depending on the level of difference between each state, recertification or additional licensing may be required.
2. Tax Variations
Before you move forward with your expansion, it is important to look at the tax laws, as they vary from state to state. In some regions, such as Washington State, business owners do not have to pay state income tax, but they are responsible for business and occupation (B&O) tax on all gross receipts and sales. They still have to follow federal tax laws, however, and file according to the rules for their business structure.
Adhering to these rules is definitely in the best interest of your company, as non-compliance at the state or federal levels can result in an investigation by the IRS. Thankfully, following tax laws is often beneficial to your business operations since it can net serious savings.
Each state taxes businesses at a different rate, and not knowing this figure can put your company at risk of paying too much or too little. North Carolina, for example, has a flat corporate tax rate at 2.5 percent, the lowest in the country, as reported by Tax Foundation. Conversely, Iowa levies the highest corporate tax rate at 12 percent. By understanding the state and local rules governing taxation - and remaining compliant - you pay the right rate and avoid additional costs and penalties.
3. Employee Benefits
As you look at location options for your expansion, you will find that employee benefit requirements are quite different in each region. In certain states, you may need to provide employees with disability insurance, for example, while others just require workers’ compensation coverage. State laws may also require that you extend paid family leave and sick leave to your employees.
In addition, all healthcare plans offered to employees must comply with the federal and local insurance requirements of each state. You will likely need to check that your insurance carrier offers multiple state plans or find one that does to provide the appropriate level of health insurance coverage to your employees.
Ensuring Compliance When Expanding Your Business to Another State
As it is a huge milestone for your company, expanding your business to another state can come with a great payoff – but it needs to be done right to ensure compliance. Thankfully, with the right level of research in these areas, you can achieve your out-of-state business expansion without risking non-compliance. If you want to go one step further, partner with a PEO like PRemployer. These professionals can provide the expertise, infrastructure and support needed to remain compliant during this monumental time.
