It’s daunting to think that there are 50 sets of rules to follow in business. Each state in our country has its own set of rules, and believe me, they can be very different from each other. You already know that any time you do business in a particular state, there are requirements that need to be met. After all, each state has a vested interest in tracking and taxing the businesses within their jurisdiction. That means anytime you do business outside of Florida, you should be aware that there may be some red tape.
First, what does it mean to “do business” in another state? Does it mean selling a product or service to someone in another state? Does it mean having an office located in another state? How about hiring an employee that lives in another state – or a sales rep or an independent contractor? What if you provide training to people in another state? Advertising in another state? Driving through another state? Storing inventory in another state? All good questions and the answer to all of them is “it depends.”
It depends on how much, what it is and what particular state we’re talking about. Each state has its own rules that govern businesses within its jurisdiction. We do not have the “United” States of Business here. So, let’s look at the general rules to illustrate some of the pitfalls of doing business in multiple states.
Chances are, if you’re reading this, you’re a Florida business owner. If your Florida business sells products online and customers from all over the US buy them, that alone will not require you to register in each and every state. If your business engages in “interstate” commerce, which means that you do business across state lines in a regular and systematic way, then you are not likely to be subject to each state’s jurisdiction (see below for some exceptions).
However, if your business has regular and systematic activities in a particular state, then you are likely to be subject to that state’s business requirements. How regular and systematic does it have to be? Unfortunately, the situation depends on each state’s rules, so it’s not an easy answer. The more extensive and continuous your activities in a state, the higher the likelihood that you will need to comply with their requirements.
If a part of your business is conducted in another state, you need to run it by an experienced business attorney who can help you navigate through the rules. If you do need to comply with a state’s rules, you should expect to register with the state government (sometimes in several departments). For example, you will probably need to register as a “foreign entity” to do business within the state (and by the way, if you do business in Florida but your entity was formed in another state, you must register in Florida as a “foreign entity”). You will probably also be required to register with the state’s tax collection agency, their employment or reemployment agency, their licensing agency and several others particular to your business.
You will need to have the required licenses in that state, pay the applicable taxes in that state and comply with that state’s regulations and statutes. Not least of all, if you sell products in that state, you will need to register to collect and pay sales taxes. In today’s marketplace, collecting and remitting sales tax can be unbelievably complicated. That’s why it is important to have a good accountant on your advisory team who can help you keep out of sales tax trouble. You may be required to register for sales tax even if you don’t have to register to do business in the state. Tricky!
Bottom line = Talk to your business attorney and your accountant about all of your business activities outside the state of Florida. We can help spot some of the issues before they become big problems. There are tons of examples of businesses out there who didn’t follow the requirements and got in trouble. Some consequences came with a hefty price tag. Avoid those pitfalls.