To the surprise of many entrepreneurs and small business owners, you can’t just go out and start doing business wherever you want. You have to register your business, follow labor laws, and obey local licensing requirements. If your business is expanding into other states, mazel tov, your company is growing! Now for the bad part, things just got a whole lot more complicated. Instead of trying to comply with one state’s laws, now you have to figure out the laws of other states as well. But what exactly does this mean for your business? Do you have to comply with the laws of every state you are in? In this blog, we’ll discuss how you protect your company if you do business in New York, New Jersey, and Connecticut (the “Tri-state area”).
Let’s start with the basics; it probably comes as no surprise, but you can’t just start doing business in another state. If you plan to do business in a state outside of the one where your LLC or corporation is incorporated, you will (most likely) need a foreign qualification.
What qualifies as “doing business” will differ from state to state. In New York, for example, there is no specific guideline for what qualifies as “doing business.” In New Jersey, “doing business” is defined under N.J.A.C. 18:7-1.9as, “all activities which occupy the time or labor of men for profit.” Connecticut has an enumerated list which can be found here. An experienced business attorney can help you determine whether you need to qualify to do business in another state.
Generally speaking, we’d look at the following factors when deciding if you need a foreign qualification:
- The nature and extent of your activities in a state;
- The location of your offices and other places of business;
- The continuity, frequency, and regularity of the activities;
- The employment of agents, officers, and employees in a state; and
- The location of the actual seat of management or control of the company.
Additionally, if you do business in another state, you will need to follow the laws of that state. That includes any insurance obligations, licensing, permits, and building codes. If your business becomes the subject of a lawsuit under the laws of another state, it will (most likely) be that state’s laws that govern. To that point, if you are not duly authorized to do business in another state, you may not be able to use that state’s court system. That could have enormous consequences, especially if you’re dealing with large sums of money.
In most cases, the law in which the work is done will dictate which laws you need to follow. For example, when an employee works in New Jersey, New Jersey laws regarding minimum wage, workers’ compensation, and benefits will apply. If that same employee does work in New York, New York’s labor laws will apply. It can get a little tricky if you have employees physically doing business in all of the states in the Tri-state area. In some instances, you may need to withhold income tax for each state in which they work. You’ll also need to be aware of state-specific laws regarding hiring, drug testing, and termination.
As a business operating in multiple states, there are various tax laws that you will have to be aware of. Doing business in multiple states can make it difficult to understand what you should pay, who you should pay, and when you should pay it. If you are doing business in the Tri-state area, some taxes that you will need to consider include:
- Corporate taxes
- Sales tax
- Income tax
- Unemployment taxes
- Property tax
In most cases, you will not be taxed on the same income twice. However, each state treats income and deductions differently. That’s why it’s always a good idea to consult with an accountant if you are doing business in more than one state.
Protect Your Business In The Tri-State Area
Growing your business is an exciting opportunity. Moving into new states means that you will have a greater reach and more opportunity to increase sales. But we’d be sugarcoating it to say the process is easy. It’s important that you know the laws and tax implications of each state you do business in.
At the Law Offices of Elliot J. Brown, we’ll work with you to understand the legal requirements of multi-state business and help you make sure everything’s in order. As a New Jersey-based business, we have experience working with clients who have locations in all three states in the Tri-state area. Our firm offers flat-fee and subscription-based services designed to meet your business’s needs. Contact us today to learn how we can help.