VANNOY:
Compliance for entity tracking, licensing and more. Really a, a unique topic we haven’t always talked about on the show about the business entity itself. We’ve talked a lot about compliance when it comes to HR laws, payroll tax laws, but one of the most basic things is when you’re setting up a business, or I think maybe where people get the most trouble, is expanding a business. You end up in new states new, new jurisdictions that have their own entity registration, licensing, compliance requirements that you might, you might think you know it, but you don’t because it’s new. So got a great guest here to help me unpack this topic today. Brock Klinger Brock is the Director of Sales and marketing over at Harbor Compliance. He’s been with Harbor Compliance for seven years and they’re a leading provider of compliance solutions, specifically for businesses and nonprofits around entity licensing management, and making them compliant in all these areas. So, welcome to the show, Brock.
KLINGER:
Thank you very much, Mike. It’s a pleasure to be here.
VANNOY:
So, let, let’s maybe start out if I’m a small business owner, how should I be thinking about entity management licensing? What, what are the big buckets where businesses need to be set up?
KLINGER:
Yeah, that’s a great question, and it’s something that can be really a big source of confusion. For a lot of small business owners, businesses of all size have these points of confusion. We see them every day. I find it simplest to think of compliance as falling into really three main categories when it comes to state level compliance. To registered in multiple jurisdictions, you’ve got your entity, right? Everybody’s got an entity, it’s formed in their home jurisdiction. And if it’s operating in multiple states, it should probably have multiple entity registrations in the various states, and that typically will fall under the auspices of the secretary of State office, right? So that, that’s bucket number one. Bucket number two is going to be your, your licensing, right? So you could have professional licensing that may apply. You could have local licenses that apply, permitting, those sorts of things. And then number three would be your tax registration, right? Right. So if you’re selling goods on the ground in various states, or maybe you’re employ employing multiple people and multiple different jurisdictions, you’re gonna wind up with multiple tax registrations. And so keeping things organized into those buckets helps people kind of understand how the different pieces of the puzzle fit together. And you can repeat that pattern across the United States as you expand into multiple jurisdictions.
VANNOY:
So most people, if, so, if you’re listening to this show and watching the show today, you probably have a business. You’re involved in a business, and presumably you are licensed. You’ve set up a Secretary of State, you’ve got your e a n, got your state id you got your tax information. Where is it that you see small businesses get themselves in the most trouble presumably accidentally whether it’s the renewal of these things or it’s expansion where, where, where, where do folks get themselves in trouble?
KLINGER:
So it really depends on what stage of the game they’re at, right? There can be challenges at every stage when you’re expanding. That can be especially tricky because when you move into new jurisdictions for the first time, you’re coming up against something as a business owner that you’ve probably never dealt with before. You might have been right there in the thick of it when you formed your entity way back on when you got started. But as you expanded in new jurisdictions, now you’re going through what feels like a parallel process and should be somewhat similar with somewhat familiar sounding names, but it’s actually gonna be a little bit different everywhere that you go. We have the pl the privilege of working with over 35,000 different clients. And I’ve seen all kinds of crazy stuff from entities that get registered under a new name in every state where they get registered.
I’ve seen businesses formed in one home state, registered under a new name with that state’s name, actually in the title of a name. And states will prove these sorts of things, and it creates a bit of a paperwork mess when folks realize, oh, wait, that’s actually all the same entity. And if I wanted to use a different name, I should have filed a DBA to individuals who will form a brand new entity in every jurisdiction in which they want to, they want to operate, and they wind up with a dozen LLCs instead of just one LLC qualified in all the different jurisdictions where they’d like to operate. So expansion can be really tricky.
VANNOY:
So I’m just trying to think of how to formulate the question, because you, by definition you just said it’s different everywhere. Is, it is one of the common mistakes that if I’m a business owner, let’s say I have some type of a services or retail business with a, a physical location someplace I serve customers customers come to my office whatever, and I open up a new office. Are people unwittingly openings creating new, say, LLCs? Are they unwittingly creating new EINs? Is it one e n multiple E LLCs? How, how, how does all this interplay with DBAs? I mean, so there, there’s the, I think I’m done with acronym soup, but come that a little bit more to, to try to, without getting into specific use cases, demystified this for folks.
KLINGER:
Sure. Yeah. Not a problem. I think you went through a lot of the common permutations there. But typically the, the layers, they’ll, they’ll go like this. So let’s, let’s take a restaurant as an example. This is a great example of a small business that would, would benefit from having an overarching view of what this process is gonna look like in a checklist. Okay? So you start with an entity in your home jurisdiction, and your main obligations to maintain a an entity is to maintain a registered agent. So you can receive service of process, that’s a legal requirement in every jurisdiction, and then you file your annual report, okay? That stuff is generally dealt with the Secretary of State. You file those things annually, you keep your agent on file, and you’re gonna be in good standing for the most part right now, as this business expands, you’ll duplicate that registration in multiple jurisdictions, right?
You’ll move into a new state and they’ll ask you, Hey, I gotta have proof of you being a good corporate citizen in your home state. Can you help me out with that? And you would then provide them proof of good standing. They would allow you to register there, and you’d appoint a new registration, and you’d win a brand new annual report to file every year, right? To maintain in all the different jurisdictions where you’d operate. Now, if you have employees in your home state, you’re also gonna be registered for payroll tax. If you need to hire new servers or staff to run your new restaurant across the border in the new state, you would need to have payroll tax registrations in place in those locations as well. And since you’re selling a physical good here, you’re maybe you’re, you’re selling pizzas, right? You’re going to collect sales tax in those jurisdictions.
You’ll need to have unique tax IDs for each of those tax registrations. Income tax registrations will be important. And maybe your, your business would benefit from a branding perspective, from having a specific name that resonates better with that local clientele. Or just for signing contracts under localized names, you would use a, what’s called a doing business as name a dba. You could have a DBA for the store front end, either one of the <inaudible>, right? From there you could have state or local general business licenses. Some states have those generally filed with the Secretary of State. You might wind up with food service licenses. You probably need to be inspected and be permitted. Liquor licenses could potentially be on the, on the docket for you all. And all of this just gets more complex as you add multiple locations. So it can layer on top of one another pretty quickly. And if the first step that you make in this process of expanding your business into multiple locations is to form a brand new llc, which is generally not what most folks would want to do, everything after that becomes infinitely more complex because you off on the wrong foot, you have these cascading issues that result from that, and it may need to be walked back in the future, which can be very costly.
VANNOY:
Got it. Okay. I think there’s a lot of confusion. I’m trying to, I know there’s confusion even for me, and I’m a small business owner. The difference between, say, personal licenses and licensing of the business, right? So if I’m a hair salon, I may have to be, have my license as a as a licensed cosmetologist, right? To be able to even mm-hmm. <Affirmative> put my hands on another human in charge for services. But the business itself may also need its own license as satisfied by the board of cosmetology. And then there’s a local business that might have a business license, and then there’s sales tax and payroll tax. If you’re in one location and your employees all work within your state, you’re fortunate enough to do that with maybe a single Secretary of state, but that could be even multiple organizations within the single state, correct?
KLINGER:
Yeah, absolutely. So I’m really glad that you brought that up. The difference between an individual and a firm license. Okay. it definitely does cause a lot of confusion for folks. So rather than cosmetology, that’s an example. I’m personally not that familiar with. You don’t look like you are either Mike. We’ll stick with like engineering or something like that. There go my wheelhouse. When, when an engineer, when their firm wants to do business in a new state, they’ll follow the same process we’ve been talking about, right? You get your secretary of state registration placed generally, so you can bid on jobs there, and you’ll then quickly follow that up with a firm license so that, you know, you have a, a license to do business as an engineering firm in that location. But in order to meet the stipulations for that state, you’ll first need to have an individual engineer generally pass through a new testing process or some other equivalent filing process to get that individual the permission they need to operate as a professional engineer in that new jurisdiction, right?
So now you’ve got this individual who holds a license probably in your home state and the new one that you’re targeting, they’re what’s called the, the engineer and responsible charge, or they’ll have their license on the line, so to speak. And when they take that exam, they are now able to list themselves as the qualifying individual on the firm license. And if you have that in place then you are able to operate in that jurisdiction. And it’s really important to understand the difference between the individual and the firm license, because the individual may get licensed and be able to stamp drawings or what have you in that particular jurisdiction. But the firm may not be able to operate there until all of these details have been tied up with the, and the firm license and the individual license are maintained simultaneously. The other tricky thing that comes up here is when you’ve got an individual and responsible charge on your license, your company license is tied to that person.
So if that individual were to leave your firm or retire, or go into another line of work, or let their license lapse, that is implications for your own license. And so your firm can lose its ability to do business if your individuals are not keeping up to date with their responsibilities, doing their continuing education hours, doing the license renewals on an individual basis, keeping all of these details together in the same spot can be really tricky. And this pattern that we’ve established here for engineering is not unique to that industry. It applies across lots and lots of different regulated industries. So having a spot to keep it all in one place makes life much easier for organizations who operate in these regulated spaces.
VANNOY:
So, sticking with your engineering use case, so not necessarily a multi-location brick and mortar business, right? So how, how would it, I’m Asureming the answer is gonna be, it depends on states, but if I’m an engineering firm and I’m based in Austin, Texas but I’m serving customers on site for major construction projects in those states, am I safe thinking, oh, I’m an Austin, Texas based firm, I don’t need to be licensed there. What, how, how should, how should companies be thinking about that?
KLINGER:
Yeah. it, you’re right, it totally does depend on states, but I’ll tell you what we tell a lot of our clients is that you know, when you are, are doing business in any new jurisdiction, to think that you wouldn’t be triggering the needs or register in those, those places just on, on a, a gut Asuremption can be a little risky, right? The state has these regulations in place to protect consumers to make sure they know who’s doing business in their jurisdiction to generate a stream of revenue for the, the state as well. And it’s all in service of, of protecting consumers, right? And so to think that you could be doing business in another jurisdiction, providing services there whether you have a brick and mortar location or not it, it, it’s a slippery slope to Asureme that you could just, you know, we’ll just give it a try, right?
We’re, we’re not just gonna go out in a limb and Asureme that the state’s not gonna gonna throw the book at us, because if that does happen, the penalties can be quite severe, right? There can be legal repercussions for that. You could have you know, inability to trans transact business going forward. You could lose your right to, to work on the projects for which you’re trying to bid. All of those things are major risks when weight against the, the relatively insignificant cost of getting registered or maintaining a license. It’s sort of a no-brainer. If I’m an engineering firm bending on a multi-million dollar job and I got an application that’s gonna cost me, I don’t know, maybe 50, $7,500 in filing fees, it’s like, why wouldn’t I go out there and get that registration in place, in, in, you know, hopes that, you know, nothing would go wrong, of course, but you’ll know for certain that you’ve taken the steps that were required to do business in that jurisdiction.
VANNOY:
So I want to visit some other use cases, but let, let’s just stay on that path. Cause on face value, it’s like, why wouldn’t I spend 75 bucks to get redshirted? No-Brainer. Right? And, and I think the answer is, I, I suspect people aren’t sitting there thinking, Hmm, 75 bucks, that’d be a nice steak dinner. I, I think I’m gonna risk it. But the reality is people don’t, don’t do it because they’re unaware and they don’t even know it exists, right? So it, it’s an error of omission what not trying to unnecessarily scare folks, but that $75, a hundred dollars registration fee, what could be the potential cost in, in fines or otherwise for not doing this correctly?
KLINGER:
So speaking to any specific examples or is a little tricky here because every state does this a little bit differently, but I’ll, I’ll give you an example of how they might calculate it. We’ve had the pleasure of helping out a lot of customers who’ve, who’ve run up against this kind of challenge, as you’ve mentioned just by mistake. They didn’t realize that it was required of them. And what many states will do is sort of set the counter from the time when they should have been registered, either for a license or for a, a secretary of state registration or entity registration and, and determine how much business they were able to transact over that time period, or however many days they’ve been operating without the proper registration in place. And they’ll apply a formula to say, Hey, you’ve been been here for X amount of days, that means you owe me a why amount of money, and they’re just gonna multiply it by the amount of time that’s passed.
Those fees can rack up really quickly so the monetary penalties can, could be steep, right? Significant fines are, are faced by companies that fail to qualify when they’re supposed to. These states are pretty motivated to go after businesses that do this too, right? They, they’re viewing these outsiders as unfair competition with domestic companies and they’re looking out once again for their, their citizens health and and safety. So they wanna make sure that that the public is protected and they want to collect those, those revenues that result from having these organizations registered. But also for the entity in question, there’s things that go beyond the monetary cost of, of the penalties, right? For instance, you could potentially lose access to the state’s courts if you’re not registered with the Secretary of State properly. And if that’s the case, then your contracts are really difficult to enforce if you can’t go to court or bring a suit to enforce them. So these, these have they have costs associated with them that can be very difficult to calculate, but they can be really substantial on the whole,
VANNOY:
Yeah. I think about the cost. So the 75 to a hundred dollars that you might have spent to register could easily result in thousands, tens of thousands of dollars in fines. Probably the biggest cost is the potential opportunity cost that you might miss out on, right? For, for not being able to do business either on this contract with this customer or who knows how long in the future. How about, so absolutely. So that, yeah, so that’s a use case on, I don’t have a brick and mortar, but I had may have contracts. How would an employer know, where do they go to look, how, how, obviously they could use your company, your software? We’ll talk about that for a minute at the end of our conversation. But in traditional course of business, how would a small business owner even know where the hell to go to check this kind of stuff?
KLINGER:
Yeah. So we start at the top of a top of the hour speaking about the various buckets that compliance is typically divided into. At the state level. You’ve got your entity registration, your licenses, and you’ve got your tax registrations. And that is a pattern that’s repeated many places. But here’s the catch. Generally, no matter where you go, none of those agencies responsible for those types of registrations communicate with one another. There’s not a lot of proactive discussion amongst these departments of the state to say, Hey, I’ve, I’ve got an entity registration here, therefore tax department, department of revenue, you should know that a tax registration is coming. Or, you know, professional licensing agency, you should know that a license is coming your way. There’s not a lot of that internal collaboration. So the answer to your question, Mike, is <laugh> the, they don’t know the, the client, or rather the the firm that’s getting registered, it’s on them.
It’s incumbent upon the, the registering to figure out what regulations apply to them in those jurisdictions. And in many cases, that means somebody has to figure it out, call the state, sit on hold, ask their questions, hope to get through to somebody who’s knowledgeable enough to direct them to departments other than their own that they’ll need to speak to. And in many cases, we see this all the time cuz we submit filings in such large volumes. The responses that we get from the states are, are not intentionally unhelpful, but they are, they’re barred from giving legal advice on you know a whi when clients ask for it or when registrants ask for it. So it can be really difficult for folks to navigate it, that when the best sort of answer that they can get from a regulatory authority is, Hey, you’re gonna have to call this other agency. Good luck.
VANNOY:
Yeah. And I can imagine how I, how ironic if I’m a small business owner, like I’m an engineering firm, I probably know who the associations are around licensing for engineering. Cuz it’s what I do for a living. Same if I’m a cosmetologist, same if I’m a chemist or whatever the case may be. I know, I, I, that’s my industry and so, so I know those things, but Secretary of State, department of Revenue I’m thinking, well, that’s just my state government. Of course they talk to each other, but clearly not always the case. Right?
KLINGER:
Absolutely. The other tricky thing is, for a lot of regulated industries, their licensing board may not necessarily have its own department. See that in a lot of different jurisdictions, if you wanna get licensed in DC for instance, they use a mostly consolidated application from most application types. Most regulated industries all file that one particular application, which is great and actually fairly user friendly in many senses. But it’s not obvious, it’s not immediately obvious to the applicant that, oh, I should be looking for the Department of Consumer Regulatory Affairs. That doesn’t ring a bell to a cosmetologist or an engineer necessarily. Yeah,
VANNOY:
Right, right. What you think about that. Okay, so I kind of skipped over the first one, which is, if, if I, if I have brick and mortar business, I’m opening a new location, that one is probably just intuitive, okay? I’m gonna have to do stuff from to, to set this new entity up in, in the three categories you talked about. Second one we talked about if it’s not brick and mortar but I’m just doing business in a location. What, what about maybe I, maybe I’m a St. Louis based employer and my employees happen to live in St. Louis Proper or West County St. Louis. so they’re all residents of Missouri. But as I grow and I have to tap into a larger talent pool, I have some folks from across the Mississippi over on the Illinois side, they come working for me. I might not even, or maybe one of my existing employees says, you know, Hey, I’m gonna move out to the suburbs, and they move east, not west, and here they’re in Edwardsville, Illinois. And I think none the wiser, what, what are the, what are the legal requirements of the employer for something as simple as a single employee in a different state?
KLINGER:
Yeah. So that can be a, a pretty slippery slope. As soon as you move that individual and they are doing the majority of their work in that new jurisdiction, it could mean new registration requirements for you. So that means not just your payroll tax registration, which in many cases you can actually get without form qualifying and registering with the Secretary of State first. But it may also mean that you need that Secretary of State registration just because the Department of Revenue will grant you the tax IDs necessary to, you know, calculate the right payroll taxes. It doesn’t necessarily mean that they’re going to tell you, Hey, by the way, that generally constitutes doing business, therefore you should have a secretary or state registration in this location as well.
VANNOY:
Is that, is that something, Brock, that you guys see pretty common then where I hire either one of my employees relocates to go outta state but maybe it’s the same metro area, they’re just commuting or I hire somebody new, so I’m like, okay, I know that there’s a different income tax rate in, in, in state taxes. So I I, I know I gotta set that up, but they don’t even think about what that may or may not trigger from entity registration, right?
KLINGER:
Yeah, absolutely. So we see that all the time. So I’m in Pennsylvania and we have lots of clients locally here who know the difference between, you know, the regular state income tax, but also the, the difference between Philadelphia and the rest of the state. That one is usually stuck in folks’ mind. I haven’t run into too many people who were totally unaware of the Philadelphia tax rate, but for those that are commuting from across the river and doing the majority of their work in, in New Jersey instead, it may not have even dawned on them because their employer is located in Philadelphia and they’re using that to calculate their rate for all sorts of different payroll tax purposes. And so that can be a real challenge, even if they do update the, the payroll tax registration for New Jersey, so they have the new tax ID that may also mean that they need to be foreign qualifying in New Jersey to do business general purposes.
VANNOY:
Yeah. Something that I think we’re, we’re, we’re still gonna see unfold, I would say for the next several years. You had so many employees that maybe they drive into an office, they’re maybe, maybe they were flexible, right? And so stick, stick with your, your Philly story there. So maybe they lived over in Cherry Hills on the, on the New Jersey side. They drive into Philly every day and their, their tax their income taxes set up for New Jersey all appropriate but all of a sudden Covid hits and now they work from home. And so Prime, instead of being a flexible employee who used to the, you know, the occasional Friday afternoon work from home, or they would stay home on a day that they had a, a kid’s dentist appointment or something, now they work from home every day, right? Maybe the office doesn’t even exist, but they never changed any classifications, any entity registrations c speak to how that is getting employers into trouble.
KLINGER:
Yeah, absolutely. So those folks should really be updating their tax registrations and their Secretary of State registrations on the basis of having an employee on the ground usually constituting doing business, right? And that’s really what the states are looking for. So that could be another instance that, you know, harkes back to the example that we used earlier, how the state will take a look at, hey, when did they, when did they start operating here full-time? That’s what we use as the trigger date for when they should have been form qualified originally. And now I’m gonna count up the days since that started, and I’m gonna bill you for the amount of time that’s passed. You’re gonna be defined for not having been registered. And that can be a real challenge. Yeah.
VANNOY:
And I tell you what, as, as states, and I’m not trying to vilify state governments, but as states get handed down unfunded legislation that they must implement, you know, the states don’t have a printing press, they don’t get to print money, right? They don’t, they don’t, they don’t have a federal currency to get themselves outta trouble. They have to operate on under ba balanced budgets. And so a lot of these states, they are scrambling to, to fill budget needs, right? And so they’re gonna be, they’re gonna be looking for ways to get this money, and regrettably, a lot of it retroactively, right?
KLINGER:
Yes, absolutely. There is a, there is a motivation there on the part of the states to enforce these regulations, and there’s plenty reasons why this is necessary. There are also ample opportunities, especially these days since Covid to go after additional legislation. We won’t open up the whole can of worms of exposure to sales tax Nexus through South Dakota versus Wayfair, that Supreme Court decision, although it does have broad implications for lots of organizations that are selling across multiple states. And that has been a really difficult set of legislation to enforce up until now, because just like everyone else in the world, state governments are facing major difficulty hiring folks to help them out, right? To enforce this stuff. And Covid has really slowed down their ability to go after that type of legislation, which would represent major new streams of revenue to the states. But as the world begins to turn back to normal and the hiring isn’t quite as tight as it once was, they’ll be going after this in full force. And I expect that to be one of the major trends going ahead for the next five to 10 years on state government enforcement,
VANNOY:
Brock. So it, it’s a, it’s a deep ocean to go into to, it’s a whole webinar series in and of itself. <Laugh>, what guidance would you give, say the average EM employer, small mid-size company, how should they be thinking about sales tax as it relates to entity management?
KLINGER:
So sales tax as it relates to entity management has a lot of parallels to the payroll tax registration situation in that when it’s, it’s easy, easy enough to know when you’re being exposed to sales tax registration, maybe not easy at one as it once was, but there are actually a lot of helpful calculators out there on the internet and Google around a little bit and find any number of different sales tax exposure assessments on the web that’ll tell you at a high level where you’re likely to be exposed to sales tax Nexus due to these new regulations. It can be more difficult though to put two and two together that just because I’m exposed in sales tax, I know now exactly what I need to do to fix it, right? So to bridge the gap between, okay, I’ve got some exposure here because I’m selling a good, that would, you know really trigger Nexus requirements in these jurisdictions to then go and say, I’m gonna register for sales tax, or I’m gonna, I’m gonna file some sort of paperwork to alert the tax department tax authorities in these states that I’ve been selling this good.
And I’m gonna, I’m gonna actually disclose that to the state voluntarily, then also connect that to the fact that if I am selling those goods in the state, that could also mean that I’m doing business there. And therefore I should have a Secretary of State registration on top of that. So the simple fact is that the vast majority of of organizations that we work with are drastically under registered, especially if they’re operating in these various industries that sell a lot of goods that trigger these requirements.
VANNOY:
And so just the, the, the good old fashioned brick and mortar business who maybe all their employees live locally within the state covid hits, they start getting creative, how do I serve customers? And they ramp try to ramp up what was previously a non-existent e-commerce business all of a sudden find themselves selling products to customers outside of their state, right? Because God bless ’em, they were successful in, in, in in, in e launching e-commerce. And they unwittingly walked themselves into a hornets nest of entity compliance issues, right? I’m, I’m not overstating that, right?
KLINGER:
Absolutely. Yeah. It, it can be a real challenge. So my, my in-laws, they run a, a local winery here in Pennsylvania and this is the exact example that you just shared. They had zero online e-commerce business lit heading into the pandemic. Everything was local. The pandemic, pandemic shut down in person sales in, in many fashions for their business. And so they were forced to go online, and it was a lifeline at the time to be able to sell those products locally. Now they’re recognizing all of a sudden, oh, wow, I’m getting a lot of interest from folks in other states, and it becomes a really difficult andor question to navigate, do I open myself up and allow those folks to, to buy this product? Because if I do, it means I’m going to have a new licensing requirement. I’m gonna have new sales tax registration requirements, and I’m gonna have new reporting requirements in all of these different jurisdictions, which can be, which can be a major challenge and, and you know, really difficult problem to untangle, especially for a small business owner.
VANNOY:
Are there other use cases, Brock, that we should be thinking about here? We don’t have to hit every single weird nuance, but we talked about brick and mortar businesses when you open a new brick and mortar location, and really you should be thinking location, not just multi-state, right? Because your example taxes in Philly are different than, say, rural of Pennsylvania. Pennsylvania, right? Mm-Hmm. <affirmative>. So brick and mortar, if you’re gonna open a new brick and mortar, even if it’s the same e i n, same llc, same d doing business as same dba, it’s just location number one versus two. There’s still entity registration issues that must be at, at minimum explored to see to, to eliminate. Maybe there aren’t, but at least explored to see if there might be issues, right?
KLINGER:
Yeah. Yeah. I mean, to, to put it simply, you know, who does this apply to? It’s, it’s essentially everyone, right? Regardless of how many states you’re operating in today, at the most basic level, you know, you’re gonna have that entity registration requirement. You’re very likely gonna have some kind of tax registration requirement and potentially that, that professional licensing regulation requirement, applying to it, there’s very few organizations that aren’t gonna be impacted by all three of these. And I, I struggle to think of any business that won’t be impacted by at least two of them. So it’s worth any business owner’s time to investigate these things and understand where their current status is. And the benefits of that are huge because it allows you to be proactive and nimble as a business. Whether, you know, it’s new bid requests coming up in new jurisdictions that allows you to respond really quickly.
Whether it allows you to speed up your hiring process, right? The faster you get your tax id, the faster you hire and onboard your people, the faster they begin to make an impact for your business once you win that business in new jurisdictions or even just locally staying on top of what DBAs you have or local permits you have, or who your individual professional license holders are in locations. So you know who your next qualifier and charge for your professional license in a new state could be. All of those things are super important. And at a high level, you know, big picture, it’s all about having your compliance functions in, in one place and at your fingertips so that you know where these things are at any given time. Because playing catch up is no way to operate your business. It allows leadership to make faster, better quality decisions when they can see this information when they know where and how their business is registered. And not to mention, no, the teams that would take on this regulatory work can be spending their time doing things that are a little more value adding than, than researching these requirements on a state to state or county to county basis.
VANNOY:
Yeah, I mean, you could spend hours and hours researching to find out a pr the, a solution that is actually extremely simple and inexpensive, right? But it took you mm-hmm.
KLINGER:
<Affirmative> absolutely
VANNOY:
Five, 10 hours to, to learn that.
KLINGER:
Oh yeah. You know, there’s no shortage of regulations to research when you go state to state like this, right? And that pattern continues to cross multiple jurisdictions. So save yourself the time and, and skip ahead to the, the expert solution.
VANNOY:
Yeah. And, and I’m gonna, and I’m gonna close on that in in just a minute here. I wanna make sure I tie off on the, on the most common high probability use cases for anybody watching listening today. So, brick and mortar expansion seems obvious, and I think probably business owners don’t get themselves. I would, I’m gonna Asureme business owners don’t get themselves into as much trouble because it’s obvious I’m adding a location of my business. There’s probably gonna be new rules and regulations applied. Another use case we talked about that they get in trouble because it’s not so obvious. Maybe I, maybe in my brain, my brick and mortar business is still right here, but I’m performing work in a different state, a different part of the country. Maybe it’s a construction job, maybe I’m installing some equipment that I manufactured here, whatever the case may be, may be.
So it’s the doing business in a different place. There’s the performing work, even if it’s a virtual employee, if they are serving customers. So maybe the core business hasn’t changed, but the location in which my employee sits has changed while they perform the work. So there’s where there’s fulfilling contracts serving customers in different locations, there’s employees sitting at different locations that could be impacted. And then finally, this is maybe the the wild west and probably a follow up conversation for the show is more around the sales tax side of where consumers sit, what their domicile is that they’re purchasing your product or surface from, and what legal requirements that puts upon you as a product or a service provider for sales tax registration. The last one that I want to come to what are the biggest areas that customers, your customers, but I guess just businesses in general, maybe they’re not multi-state, maybe they’re, maybe they, they aren’t just one location and they don’t have employees spread all over. They’re, they’re relatively static, but they still get themselves in trouble in all the time across those three buckets that you mentioned at the top of the conversation. What about, yeah, maybe that most common use case of all for the static business customer base, employee base in brick and mortar is relatively unchanged. Where do they get themselves in the most trouble?
KLINGER:
Yeah. Yeah, great question. So for, for those folks, usually the challenge is that because they’re unchanging, it is never a major focus for them. It’s never a top priority to be reviewing these sorts of things. So I’ll give the example of Pennsylvania where we’re located. Yeah. as long as I’ve been in, in this business Pennsylvania has always had a desk annual, it’d be a once every 10 year annual report filing for all for-profit businesses that operate in this state, right? Everyone who’s been operating under that regime is about to have their world shaken up next year when it goes to an annual filing requirement. And I can guarantee that most folks who are faced with this, that is most of the businesses in Pennsylvania are not going to be aware of the change in the requirements unless they’re paying very close attention to what the Secretary of State and Department of State is, is saying about this new requirement.
So that is the number one issue that we see with businesses that are in a static state, that they think they know what they’re doing and they think that they have a process in place that can handle the existing set of requirements. But every once in a while the requirements will change and they may not find out soon enough to act. And you can wind up with all sorts of problems once your entity falls outta good standing and you’re having to reinstate and filed back due filings and penalty fees along with it. They could have been avoided by analyzing your situation and finding, you know, a purpose-built software to store all of this information in one place centrally located so that your leadership is aware of where things stand before pro problems arise.
VANNOY:
Yeah, I, I I, I, I’m Asureming that that last bucket, what sounds so simple, is probably the biggest trap because that’s the, that’s the one that just lulls you to sleep cuz you think everything is fine and the reporting requirements may have changed and it’s not the kind of thing that you see in the, on the six o’clock news, right? And in a world where our news is so fragmented and we don’t necessarily respond to unsolicited email and phone calls cuz it looks and feels an awful lot like spam it’s pretty reasonable to think that a, a business owner, a a small employer mid-size company just simply isn’t gonna know about reporting rules rule changes mm-hmm. <Affirmative> and, and new compliance requirements, just cuz it’s not what they do for their day-to-day, right?
KLINGER:
Absolutely. So, I mean, look it, these filings at the, the base most basic level are not difficult things to complete. For the most part, when you do a Secretary of State annual report filing, it’s asking you for the, you know, names of the organizers and the people who are involved in forming that business. And maybe some details about this location, who it’s registered agent is, most folks who do those filings in no time, it’s not a, a huge burden to complete them. The challenge is remembering to do the thing that’s the challenge for everyone, and that’s really where a lot of the value is added. Not to mention the curve balls that will come up inevitably when those requirements change from time to time.
VANNOY:
Yeah. Yeah. Brock, let’s do this. So the purpose of this show truly is to share the very best information we possibly can with small mid-size businesses so they can grow their business so they can stay compliant, they can find talent, they can have the right people, motivate them, inspire them, pay in a compliant way so that they can grow. And the value is meant to be the information itself. But I will give you a chance here, you know, take a second to explain what Harbor Compliance does because this is kind of one of those things that just kind of feels like a no-brainer because, you know, like you said, once you know what is required to stay compliant, most cases it’s pretty simple and in most cases it’s pretty inexpensive. It’s the cost, it’s the opportunity cost of all the time it takes to research these things. Maybe just take a second and tell us about our compliance.
KLINGER:
Yeah, absolutely. So Harbor Compliance is a software and services business, and we’re really focused on helping organizations maintain compliance and regulatory requirements across all states and across multiple industries. So our, the way that we help folks is to help them maintain those Secretary of state registrations. We are a nationwide registration provider. We do the annual reports and we offer purpose-built software to help organizations manage all three of the categories that we cover, right? The entity registrations, the tax registrations, the professional licenses, all of those things are also backed by our proprietary reference database, which is massive database. It’s the, the world’s largest license library of US licensing requirements. And so when something like an annual report due date or a professional license filing requirement changes, because we do so many filings for so many different organizations, we’re often first to know the states will even reach out to us examiners to let us know proactively before the public knows.
We’ll update that database and let all of our clients who have their data in there know about the change. So there’s a network effect there. The more people who use the software, the better the experience is for everyone. And this is the type of software that allows you to really be bulletproof and keep your process airtight. You don’t have to worry about something changing and throwing your established processing at a tailspin. We will update things proactively as changes occur so that you have peace of mind and can run your business focus on the things that matter most to you, which is growth and expansion.
VANNOY:
Well, we’re big fans and, and we’re, we’re as Asure as then entered into a new partnership with our compliance, just cuz we see this, you know, we, we talk to talk to small business owners every day. And this is one of the areas that they say that they need help with, right? Is, is these registrations for new states. Hey, I’ve got a new employee in this state, I need to register with a state. I don’t know how to do that. Can you help me? After, after enough customers ask you that question, you find who the best is in in, in our experience, we, we found those harbor complaints. And so Brock, I appreciate the conversation today. Appreciate you sharing the information. And, and I think this will be a huge value add for, for our customers as well. So, Brock, is there anything else we didn’t talk about that you wanted to today that you think our audience could get value from?
KLINGER:
No. No, absolutely. I think we covered the gamut here, Mike, and appreciate the opportunity to share it with anyone. I’d welcome any questions that anyone has. I’d be happy to support you going forward and, and answer those compliance questions and make your life a little bit easier.
VANNOY:
Okay. Brock, I enjoyed talking to you very much into our audience. Thanks for attending today and we will talk to you on next week’s show. Thanks.