In our webinar, 6 Steps to Creating a Business License Compliance Plan, we asked the audience about their level of confidence in handling business license compliance — 81% expressed definite room for improvement.
The results were not surprising. COVID-19 has had a dramatic impact on day-to-day operations with a large shift to remote working. This has led to some confusion about how telework impacts a company’s business license and other compliance obligations.
In this article, we address important questions asked about changes to business license obligations that many businesses have as a result of a remote workforce.
How do you manage work-from-home locations due to COVID?
There are a number of compliance items that you should consider related to work from home practices. These include the following:
- 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 come into play when an employee resides in a border state that is different from where the workplace state is.
- Foreign qualification: If your company has not registered with the Secretary of State as a business entity, depending on the activities of the employee, you may need to file a foreign qualification. Many states offer a litmus test of "what constitutes doing business'.' Analyze these requirements and apply them to your remote employees.
- Home occupation permits or licenses: Many cities now require home occupation licenses or permits. Even though an employee may not be technically operating a business from their residence, a license or permit may be required. Read Top regulated states for business license for information on the strictest states when it comes to business license compliance. Be sure to check local rules as there has been an increase in regulatory audits to check for compliance.
- 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. Depending on the nature of work conducted, your business may be subject to that state’s income or other tax laws. If so, tax registration may be necessary.
Regulatory agencies often cross-check to identify if an entity has a business license. This is the leading cause of non-compliance among businesses. It also raises the need to search for the requirements to identify all license prerequisites.
- Data privacy and security: As your business adds remote employees to your workforce, the avenues for security incidents increase. Ensure that you have security policies in place to prevent data loss and adherence to privacy regulations such as the California Consumer Privacy Act.
For more information, see 6 compliance considerations for remote employees.