Your small business is growing nicely, taking on more and more clients and gradually increasing revenue and profits. In order to sufficiently cater for its growth and additional workload, you’re contemplating taking on remote workers.
By recruiting remote employees, you’ll benefit from having access to a wider pool of talent without geographical restraints, and from a number of cost savings, such as no additional office space to pay for.
However, despite the many benefits taking on remote employees brings, it is not without its potential issues and problems. One primary issue is related to compliance and licensing, an important aspect of remote working that a small business might not anticipate.
If you are deliberating rolling out a remote team that operates from a different state than you do, take a look at some of the biggest compliance/licensing issues and what small businesses need to be aware of.
Be Aware of Payroll Requirements for Remote Workers
If members of your team work in different states than your own, the general rule of thumb is that the employees must pay taxes to the state where they are located and where the work is carried out.
Known as the ‘physical presence’ rule, you must withhold state and unemployment taxes in the state where your remote staff members work, even if your business or main office is located in a different state.
However, the same rules are not applicable in every state. In certain states, remote workers are subject to paying income tax in the state where they are located and work and the state in which their employer operates.
Things become even more complicated if an employer works part of the time from home and part of the time in the company office — in two different states! Due to the complex nature of such a situation, it is advisable to seek advice from a tax expert.
Consider Foreign Qualification Requirements
Foreign qualification involves companies applying to be able to carry out business in a state other than the one where their limited liability company or corporation was set up. Depending on the type of business you run, you may need to apply for foreign qualification if your employees work in states other than the one where your limited liability company or corporation was formed.
In addition to applying for foreign qualification, further compliance may also be required. For example, you may need to file an annual report through a registered agent who has a physical address in the state where your employees operate so you can receive legal documents on behalf of your business.
You May Need Permits for Remote Workers
Certain states require employees who are working from home to acquire a home occupation permit. It is important to check county zoning or local city laws where your remote employees are operating to see whether a permit for remote workers is required.
Be Mindful of Issues Related to Tax Nexus
‘Tax nexus’ refers to the scenario in which a business has a tax presence in a state which is not its principle location. Your business may need to comply with the income, sales and use and other tax laws of the states where your remote employees are operating. This does however depend on the type of work your remote employees are doing.
Be Compliant with Privacy and Data Security
Remote employees rely on wireless networks, mobile devices and other technology and practices potentially making business and employee data vulnerable via public WiFi and other networks. In short, the greater number of remote workers you have working for you, the greater risk of your business becoming victim of a cyber-attack.
It is therefore vital that your business has the correct security, privacy and data policies in place to protect important data and prevent data loss.
Consider Worker’s Compensation
It is typical for states to require businesses to provide worker’s compensation coverage for their employees. If a situation occurred where a remote worker was injured at work, it is important for you to set out clear guidelines involving the duties and working hours of your remote employees. This is so if work-related claims for compensation are made, it is easy to define what is a true work-rated accident.
It is also vital for small businesses with remote workers in other states to get the appropriate guidance and advice on complex licensing issues. This is important for avoiding the potential problems non-compliance could cause.
One way to help ensure you are managing your business licenses properly is to purchase a license research package.
CT Corporation understands that growing a business requires a minefield of legal hoops to jump through. With more than 125 years of licensing and compliance experience, they can provide you with the guidance and support to ensure your business stays on top of statutory requirements when recruiting remote teams.
From Foreign Qualification guidance to Business License Compliance Research, CT Corporation can provide you with the resources you’ll require to expand your business and take advantage of the benefits remote employees provide.
Photo via Shutterstock
This is a sponsored conversation written by me on behalf of CT Corporation. The opinions and text are all mine.
Aira Bongco
Interesting. I thought remote employees is the same as hiring freelancers. I didn’t know that a business license is even part of the question.
There is now a license for remote employees? This is interesting. So where can you apply?