Finding success in business entails opening new doors for further development. Some of you might be thinking of opening a new location or expanding into new territories. It’s quite possible that means a transition into becoming a multi-state business.
Growing into a multi-state business can be exciting and fun. At the same time, it also takes considerable effort to accomplish and can bring a whole new set of compliance obstacles. It is a decision that should be made with careful planning and consideration.
Here are some things to think about, with regards to payroll, while planning your multi-state expansion:
State Unemployment (SUTA): Tax rates and wage bases vary from state to state. So, make sure you understand the true expense of hiring in each new state you expand to. Also, you’ll need to register with the each new state as an employer to receive your SUTA account.
State Income Tax (SIT): State income tax is an employee tax withholding, so there is no additional tax for the employer, but you’ll still need to register with each state to get your SIT account. (States with no payroll income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming)
Local Tax: Not all counties have local income taxes, but if you hire in a state or county that does, you’ll need to register for a Local Tax account.
Workers’ Compensation Insurance: Different states have different workers’ compensation insurance rates. Be sure to talk with your insurance agent on any plans to expand to new states, so you’re not surprised by any added expense of insurance.
HR Compliance: HR law varies from state to state. Important things to consider are minimum wage, overtime law, final paycheck law, etc. Make sure to understand the HR laws of any new states you expand to, so you don’t deal with costly compliance issues.
Determination of State: There are some circumstances where you will need to determine what state an employee is taxed in. Such as, an employee that live close to the state line, and works in another state. Please seek professional advice on these issues to avoid incorrectly paying taxes in the wrong state.
Logistics: As employers increasingly move toward paperless payroll, logistics of getting payroll to out of state employees is becoming much easier. For employers who aren’t completely paperless, you need to think about shipping cost of getting out of state employees their paychecks.
Onboarding: Employers need to have a plan for onboarding out of state employees, whether it is having them fill out all hiring paperwork by hand sending it in, or onboarding software that can make the majority of the onboarding process paperless.
This is by no means an all-inclusive list of considerations of expanding into new states, but it is a great start to understanding what it may take to become a multi-state employer.