Greg Corombos: Hi, I'm Greg Corombos. Our guest this week on Expert Insights is Donia Wade, a compliance business consultant at CT Corp. And our topic for today is getting your business in compliance and preparation for long-term telework.
COVID-19, of course, has had a dramatic impact on day-to-day operations with a large shift to remote working, and many companies are starting to consider extending remote working long term. This has led to some confusion about how telework impacts a company's business license and other compliance obligations. So that's what we'll be discussing now. And Donia, thanks so much for being with us today.
Donia Wade: It's a pleasure to join you today, Greg.
GC: Well, let's dig into this because it's a topic that some businesses had embraced long before the pandemic and many were forced to embrace as a result of the pandemic. But how do you manage work from home locations due to COVID?
DW: Sure, well, there are several compliance items to take under consideration relating to work from home practices.
So, the first is payroll requirements. If a remote employee is located in a state that your business previously did not register for payroll taxes, you may need to file for employee withholding and unemployment taxes. This may especially come into play when an employee resides in a border state, which is different from where the workplace is located. Additionally, some states which border each other may offer reciprocity, allowing withholding tax of the work state to be applied.
Another consideration is foreign qualification. So, more qualification may come into play if you have formed a corporation or a limited liability company and you have employees working in a state other than the state in which your company was formed.
So depending on your type of business, your remote employees’ business activities, how many remote workers are located in a state, and how long they will be working in that foreign state, you may need to qualify or register your company with the Secretary of State or equivalent. Many states offer a litmus test of what constitutes doing business. So, it's really important to analyze those requirements and apply them to your remote employees.
GC: Well those are certainly two very critical areas for business owners to consider, Donia. What are the other three?
DW: Sure, so home occupation permits and business licenses are another area to consider. Many cities and counties now require home occupation and business licenses or permits for remote employees. Even though an employee may technically not operate a home-based business from the residence, a license or permit may still be required.
Another consideration is your tax nexus. A tax nexus may be created if a remote employee is working from home in a state in which your company previously did not transact business. So again, depending on the nature of work being conducted, your business may be subject to that state's income or other tax laws.
If so, your registration for tax may be necessary. Keep in mind, regulatory agencies often cross check to identify whether or not an entity holds a business license. And we find that this is the leading cause of noncompliance across businesses.
So, the last consideration would be data privacy and security. As your business adds remote employees to your workforce. The avenues for security incidents increase. Having security policies in place will ensure the prevention of data loss and adherence to privacy regulations such as the California Consumer Privacy Act.
GC: All excellent information, Donia, and important things for business owners to consider. When do employees with work from home agreements create business license obligations?
DW: The first thing to consider is whether employees are working from home on a temporary basis or whether this will be a permanent arrangement. If permanent, you may need to conduct business license research at the city, town, or county level to determine if they require a home occupation or business license and/or permit for the remote employee.
GC: Do jurisdictions require a business to have a general business license if an employee is working remotely in a particular city?
DW: In addition to potential home occupation permits or remote licenses, requirements may exist for both your company and the employee, depending on the city or county and the requirements may also be based on the business activities involved. For example, you may need to obtain a general business license on behalf of your company and a home occupation permit for your employee.
GC: Okay, so after a company attains compliance for its remote employees, what comes next?
DW: Once a company satisfies the initial tax and business license registrations needed for the remote employees, a maintenance plan will need to be created to ensure long-term compliance. Subsequent requirements may include monthly, quarterly, or annual reporting. In addition to an annual or bi-annual renewal of the registration itself, changes to the business may also need to be reported to the authority, such as a change in address for your principal place of business, officer changes, a change in entity type, an amendment to the company name, or a change in ownership.
GC: There are lots of tools now to help with this sort of thing, Donia, so what technology would you recommend for business license management?
DW: Sure, so you may be tempted to use an existing tool or resource that you already have access to, such as an Excel spreadsheet, an Outlook calendar, a SharePoint site, or maybe even a CRM platform. If your company holds one or more licenses, there is an added component of complexity and the challenge is these technologies are not designed to store your business license data or to manage the required tasks that are part of maintaining compliance.
There are many variables associated with managing licenses, such as changes and registration requirements, varying expiration and renewal dates, active links to the authorities, webpages, and document management to name a few.
Using a customizable interface is optimal in managing license renewals and adopting a dedicated system, which allows you to consolidate and centralize your licensed data. Sharing that information across the stakeholders in your company with role-based security is recommended and brings added efficiencies into your process. Other features to seek are having the ability to track and manage renewal tasks and dates, setting up renewal alerts, storage of document copies, and generating on-demand reports.
GC: Well, whether business owners are seeing the value in it or conditions are kind of pushing them into this situation, knowing exactly what they need to do to be compliant is critical. Thank you very much for your insights today.
DW: Thank you for having me.
GC: Donia Wade, compliance business consultant at CT Corporation. I'm Greg Corombos. And for more information on this subject, please call CT at 844-787-7782.