VANNOY:

Hello everyone. Welcome to today’s show, Mike Vannoy, vice President of Marketing at Asure. And today we’re gonna take a topic that it’s of increasing interest. But I think for some clients, some businesses they need this and don’t even know it. So this whole topic of, of doing business or hiring in multiple states in what you need to know to be compliant. So say back in the good old days of 2019, pre pandemic, I mean, we were clearly, you know, a, a couple decades into this kind of flexible work megatrend, right? Where people worked increasingly from home, from the coffee shop. But the, but the pandemic really was a, an inflection point for a lot of businesses where all of a sudden they had people starting to work, call it full-time from home, or full-time virtually as, as offices closed.

And as business has opened back up, some of those models have have stayed in place. And we see businesses every day that are out of compliance and have no idea. And that’s because most states, most municipalities their, their their taxing, their licensing, their business structures are built around where work is performed, where customers are served. So, if you have I, I live in St. Louis, if everybody came to your downtown office in, in, and performed their work in St. Louis you had a bunch of St. Louis employees, but off all of a sudden, they’re those people who drove across the river from the Illinois side start working from home, and they’re performing their work in Illinois, there’s could be different taxing consequences that you had no idea, right?

 Just because you had to send someone home. So there’s a whole lot more to it. I can’t do it all myself. I’ve got a great expert as my guest today, James Gilmer he comes from the, the Harbor Group at Harbor Compliance. James is a senior member of the Harbor Compliance Team, is the diverse background in nonprofit leadership, corporate compliance, and strategic partnerships. Over his 10 year, James has handled more than 25,000 filing transactions for more than 3000 organizations, 3000 businesses. He’s passionate about educating and consulting with executives on their compliance strategy. So, James, welcome to the conversation.

GILMER:

Well, Mike, thank you to you and the Asure team for having me on today. I’m really excited to talk about this subject of multi-state compliance and hiring out of state, because you’re right, this is a topic that since the beginning of the Covid 19 pandemic has just exploded, really doesn’t look like we’re turning back from that. And, and I love that you cited St. Louis. I think I used Kansas City as my example, cuz there’s people popping over from, from Kansas. So <laugh> great, great minds think alike. So really, really glad to be here.

VANNOY:

Yeah. And you know what, and and I think just when I think timeliness here, the, the megatrend was well underway, not just from say, virtual work from home, but as we enter more of a, the gig economy, right, where people have a primary job in, it’s with increasing frequency. They have a side hustle. They might have two or three part-time jobs that they work because that’s how they just wanna manage their life, right? And so maybe I’m a, a driver part of my day. Maybe I’ve got a 30 hour a week traditional job over here, and maybe I’ve got an L L C that of my side hustle. So this becomes increasingly complex mm-hmm. <Affirmative> as I think the way we do business becomes more and more fractionalized between traditional businesses, W two s, 10 90 nines and, and the gig economy. The just, this isn’t going away. This is gonna do nothing but getting more complex. Would you agree?

GILMER:

Yeah, yeah. There’s no doubt that it, it is, it is already complex. It’s going to get more challenging, especially as government agencies that have been affected by the same pandemic have staffing re you know, they, they have constraints around their resources, the ability to process applications. Many are moving to online systems to streamline the application process, but that means better data on those companies that are registering properly as well as those that don’t, or those that are falling behind. So a big part of what we’ll talk about today is that landscape broadly. And then hopefully address some some examples and ways that, you know, whether it is a, a established company, let’s call it, that has W2 employees multiple states, and then there are folks probably listening in that are setting up their own company and it’s a, a new revenue stream. Maybe it’s a, a side hustle, it’s a passion project. Call it what you want. But those same requirements do apply and, and nobody wants to be caught unawares.

VANNOY:

Yeah. You know, it, it, it’s interesting you say you, you rightly note that states, all, all agencies, they, they’re affected by the same pandemic that everyone else was. And they have real staffing challenges to this day. But not just staffing challenges, revenue challenges. Right? And so I remember, you know, 20 years ago being being in the payroll business for a long time learning about professional sports and we were doing payroll for a professional baseball team, major league baseball team is really interesting cause it was my first exposure to multi-state taxation for an employee. So you, you know, you or I, we go across the river from the Kansas City of St. Louis, wherever our use case is. Does the state really know that they, they probably don’t know. That doesn’t mean you shouldn’t be compliant, we’ll talk about that. But they darn well know when a major league baseball player making 20 million a year is playing in that city. And that player’s contract says that earned $250,000 for playing that game in their city. They want their taxes. Right? And so, oh yeah,

GILMER:

That’ll pop up on the radar for sure.

VANNOY:

<Laugh>. Yeah. Right. And so where it has been obvious in, in use cases like professional sports, cuz you’re talking big money and it’s obvious a person is performing the work, so to speak, in your city or your state. The, the, the message is really the same as people work more and more virtually. And therefore we ha see a talent pool that is more diverse and we can hire better talent, less expensive talent talent that is just better aligned to our mission, vision values where the, the where geography doesn’t matter. This, this continues to, to compound. So, all right. I, I digress. I I why don’t you first maybe James just kind of take us through a, a primer on entity compliance. I think this is the thing that people don’t even think is right. Yeah. we talked on the show weekly about HR compliance and payroll tax compliance. What the heck do you mean by entity compliance?

GILMER:

Yeah. And it’s important to understand that when you are hiring out of state and you, you, you think the word payroll, that there’s a couple of steps involved, right? It’s, it’s not just, oh, I need a withholding account. I’m gonna jump in, go there. There’s a few steps involved. So a huge part of you know, what we’ll talk about today and what I discuss elsewhere with my clients is the multiple steps. And how do you not only take those in stride, but develop the internal resources and strategies to be able to do that, to be able to hire, meet your objectives. So the very first thing to your point that comes up is this idea of business entity compliance. So it’s a step removed from payroll tax, you know, registration. But it’s important to have this fundamental understanding. So when we’re talking about the business entity, this is simply your L L C, this is your corporation, however you’ve structured your business.

 And that, that is really the building block. And the first step to registering in any state is typically registration of that entity. So if you’re an entrepreneur, maybe you filed articles of incorporation to create your company in, in Delaware, amazing. You’re hiring in other states, a lot of times having an employee, having a physical presence of some kind is enough to require the registration of that legal entity first. So now you have your Delaware corporation, now it’s also registered with the Secretary of State of California or Colorado or New York, all of these different places. So before we even talk about tax, you have this first level of going through applications with governments fees, ongoing requirements. So I’ll stop there. You know, there, Mike, did you have any, any follow up questions on that? Cuz there’s, there’s a lot, there’s a lot that goes into registering the entity.

VANNOY:

So I, I, I mean, I don’t want to turn this into like, some over pitch for either one of us here, but I mean, how with without a harbor compliance, how would an employer, no. So I, you know, they filed their articles incorporation, maybe it’s maybe it’s just local. Cause you know, I did Missouri, cause I happened to live in Missouri, and that’s what I think I’m supposed to do. Maybe I’m, I’m a little more sophisticated. I have some good reasons. I did it in Delaware. But then my first hire is somebody who, who I found online, they applied via Indeed. And they were awesome. And they lived in Cedar Rapids, Iowa. Yeah. how, how, how would I know what I need to do, what entity requirements there are in Iowa, let alone Cedar Rapids?

GILMER:

Yeah. So there’s a couple ways to answer that question. First and foremost, the way that the state requirements are written when it comes to business entity registration, they’re fairly uniform. You will have state by state nuance, and you will have case law in each state that have interpreted those requirements differently. But fundamentally and generally the requirement to register the entity is based on having a physical presence, which in this context of today’s discussion might be hiring an employee, but it could be anything, right? It could be having a warehouse, an office building ongoing or, or regular transactions. There, there’s, there’s a whole bunch of things that a business can do in the, this, you know, singular form or the composite that would put them, you know, in, in the area of having that nexus and needing to register. The other thing is, sometimes when you go to register for your state payroll tax, it’s gonna ask you, what’s your i Secretary of State id?

Or what’s your, you know, registered agent in that state? And then it’s like, huh. Oh, and I can’t tell you the number of times where I’ve had a client attempt to register and they say, they throw their hands and say, what in the world is this? And then they have to say, okay, well then let’s, let’s take care of this. We call it a prerequisite, this first step to registering the, the business entity first. Whenever there’s doubt though, the, the client’s legal counsel is a great resource to saying, Hey, this is, this is sufficient to trigger the registration. And then that’s where whoever handles those filings, that registration function, they’ll, they’ll take that advice and run with it.

VANNOY:

So James, just, just to be clear for our audience here, so cause we talk a lot on this show about multi-state taxation, we’re gonna get to that mm-hmm. <Affirmative>, but we’re talking about here is the actual entity of the business, right? The, the, like the articles of incorporation, the, the, the C Can you, can you put some, some more definition around this? Is this just as narrow as my llc? What if I’m a multi-location business and each location has its own llc? Or maybe I’m, maybe I’m a sole proprietor, can talk, talk us through the different legal structures as that may or may not pertain in locations as that may or may not pertain to entity compliance.

GILMER:

Yeah. So when you have, again, your, your single L L C or your single corporation or your building blocks of, of all of this, and when you register that in multiple states where you have an organization that has, that has multiple entities within its portfolio, the challenge especially in the United States, is that every state’s requirement is different. And those requirements are different based on the type of entity that you have. So just for example the filing fees, it costs more to register an LLC in Massachusetts $520 than it does to register in Colorado, which I think is, is $50. And then on an ongoing basis, you have annual reporting requirements which are information updates to the Secretary of State, which taken by themselves pretty straightforward. Information is required, but you have deadlines coming up throughout the year because there’s no consistency. And so, whether, again, you have one L LLC that’s registering in multiple states, or you have a portfolio of of entities that each have different activities, different locations, to your point you, you need a way to stay on top of, okay, when did they register? Who are the registered agents in that state? What are the annual reporting deadlines? And that’s, that’s for a larger company, a heck of a lot of administrative ac ac you know, responsibility to stay on top of all of that.

VANNOY:

James, how does so like, some use cases are pretty black and white, right? If I run a restaurant my place of business where, where employees work and where I do business, where I serve customers is, is tied to geography, even if it’s a takeout business, right? But if I’m an architectural firm mm-hmm. <Affirmative> you know people can work virtual, I might generally have an office. I could serve customers via Zoom. How, how, how should, how should employers large and small be thinking about is this a problem for me? Just cuz I have say, employees, well, and I, and I don’t, I don’t want you jump by too much and talk about peril tax, but from the entity side what maybe put some meat on the bone around serving customers. What is, what is the definition of doing business? And maybe I’m assuming that’s somewhat uniform, but very state by state,

GILMER:

State. Well, the, the challenge that answering that question creates is the way the the statutes are written is actually in the negative. They, they’ll list out commonly the things that do not constitute transacting business and then let, what does constitute transacting business up to the business to decide for itself. Of course, in conjunction with its legal counsel. So as a, as a service company, we, we don’t provide that level of legal advice. We would defer to the, the client to, to look at their situation with their counsel. But again, there’s, you know, in this economy, in the way that we do business now, it might not just be having an employee in isolation. So you used the example of an architect architecture firm, maybe creating design ceiling documents and stuff. I, I mean that just for the purposes of having a license with the architecture board of that state may need to have an, and likely does need to have the entity registered.

Maybe there’s a customer that’s looking for proof of corporate good standing to be able to hire them. And these are, these are reasons that could be considered one-off that maybe they’re not predictable, but, you know, businesses really need to be thinking about anything in the state and that just the, the potential for, for needing it. Yeah. And one of the things that we, we, we get asked this all the time, like, what if we just don’t, what, what if we fly under the radar and everybody’s you know, head goes right towards fines and penalties? Is the state really gonna find out? Are they gonna slap me on the races? They’re gonna be a penalty. Yeah. I mean, every state has that ability, but what does it mean for your ability to do business generally, right? Can you hire that employee? Can you bring on that client? Can you open that office obtain that, obtain that permit, you know, the list goes on and on of things that you could be delayed on or, or worse lose out on if the proper registrations aren’t in place?

VANNOY:

James, we, so, I mean, we’re a compliance company first. And so we would never suggest any, we, we always, the purpose of this show is really to help businesses and employers understand how to comply with laws, right? We never usurp them. But one of the things we always try to do is, is kind of give a gauge for like, what’s the consequence of not, right? My experiences that most entrepreneurs, most small in growing mid-size companies they’re white knuckling it. They, they, they’re going down the road. I’m trying to grow my landscaping business. I’m trying to grow my architectural firm. I’m trying to survive in a pandemic with my restaurant. Mm-Hmm. <affirmative> mm-hmm. <Affirmative>, right? And they know everything there is to know about their industry and serving their customers and their suppliers and their supply chain and all that. And they know nothing about this crazy ever-changing of, of, you know, what I always talk about is HR laws, but now just entity compliance as, as well. How should someone other than just a binary Yes, no, how should someone be thinking about the consequences of non-compliance? Can, can you give some specific examples of, you know, what bad thing happens if you don’t?

GILMER:

Yeah, I, I can. So the, the first thing that I will say, and I’ll probably repeat this a couple more times during the show, being proactive is so important and taking the time to research what requirements are and being prepared for them to make a decision to do or not to do something, makes a big difference when it comes time to actually execute on that. So, nobody wants to be in a position where they’re about to hire a rockstar employee and they realize, oh no, I don’t have any of the registrations in place. Right? You want that person to start producing for you doing that amazing work. Yeah. So I’ll, I’ll, you know, I’ll circle back to that a few times later on. But the, the thing is, it, it, these requirements are there, they’re statutory, they, they really need to be viewed as just part of doing business.

And let’s take, for example, doing business in Texas. Let’s take our Delaware corporation. Texas does require registration of the legal entity you know, for a variety of reasons. And the Secretary of State asks on the form, when did you start doing business? Or What is the date that the, you started transacting business in our state? And they assess, I believe it’s a $750 penalty when that date is ex exceeds like 60 or 90 days, and it only goes up. So I’ve seen businesses operating in Texas years and years, and then they finally register with the Secretary of State, and then they come out with a four or five figure penalty assessed by the Secretary of State. So yes, Texas has very high registration fees for the, the business entity, $750 just to get into the state. Then you have all your tax <laugh>, you know, franchise tax, unemployment tax, all of the other stuff. But if, if you, you skip out that step, or you’re not aware or you delay, then you really put yourself on the hook for a, a big financial hit. And it was, it was preventable. Right? You, you can, you can, you can look at what you’re about to do in Texas. And you know, it <laugh>, it’s not fun. I, I don’t necessarily like telling clients they have to pay a $750 registration fee, but it’s better than the alternative of, of thousands.

VANNOY:

Yeah. Right, Jim? So we’re talking about, so the, the umbrella of compliance for entity compliance obviously there’s a, a, a big component that’s around state registration, right? Registering with the state, we, we, we, you know, everybody think if you listen to this, you know that you gotta register your, your e Im with a federal, federal employee identification number. You gotta register with the state, create, create your L L C. But what about municipalities? What about counties and cities and business licenses and industry licenses? I, I think this is, I, I, I’ve, I’ve, I’ve talked to entrepreneurs during the pandemic that they had challenges getting stimulus money because they turned out to not be, have, have business licenses that were much more localized. It wasn’t state entity. Can, can you speak into that?

GILMER:

Yeah. that is undoubtedly more complex than payroll, I think is the local business licenses, local tax requirements. There’s something like 180,000 licensing jurisdictions in the United States. Wow. Yeah. At the, at the federal, state, and local level. So it would be impossible for me to sit here and try to <laugh> li list every, every case, every possibility. The, the way that businesses can consider approaching it is, again, being proactive. So when you’re going into a new jurisdiction, let’s say you’re opening an office in St. Louis, you know, looking at, okay, what are the state requirements for the entity, state requirements for tax, state requirements for the license? And then you get into that local level, okay, so is there a general business license? Is there a license for my industry? Do I need to register for any sort of tax in that place?

 And kind of repeating the process. And that takes time. That’s, that’s the biggest thing that entrepreneurs and established businesses don’t realize. It takes time to do all that research. And then when it comes down to setting up your list and, and taking care of all the applications, and this is gonna, you know, we will, this will kind of get into the what we’ll talk about later with payroll tax registrations, getting all that information. You think, oh, it’s just a form. It’s easy. I’ll fill it out. Yeah, great. It’s 3:00 PM I’ll have it done by closing of this. You won’t, you won’t, because you need entity data that’s probably in your legal department. You’ll, you’ll need some taxable activity information that might be in tax, it might be in hr, cuz they, they know when the employee’s gonna start. You might need to get sensitive records to submit with the application. You might need to conduct an owner or offer management for a signature and putting all that together, that takes time. And then, then you submit it, you wait for the agency. It, it all takes time. So being, being proactive with all that stuff is, is so very important. You can’t just jump in what’s

VANNOY:

Go. And James, what’s going through my mind is all those exact same steps. So like, if you’re a mid-sized company, you got these, you know, I got, I go to a legal department, I go to an owner for a signature, I go to these places and that, there’s that complexity. But God forbid, I’m the entrepreneur. I’ve got 20 employees I run hair salon. And so I’m behind the chair cutting hair, styling hair during the day, running payroll and administration at night. And this is nine o’clock, 10 o’clock at night after the kids go to bed. Just, not that it’s hard, but finding the places to go to get information outta your systems. You need something from your c p A to be able to fill out this form, but it’s after business hours, just the administration of and, and kind of pain in the butt complexity of, of having to fill it all out and submit it, track it. I, I almost feel like that’s maybe the hardest part for, for small business owners. What am am I, am I thinking about this, right?

GILMER:

Yeah, yeah, you are. And <laugh>, it, it’s kinda like that, that middle school book report. You, you try to wait until 10:00 PM the night before it’s due, and then all of a sudden you, you just don’t get it done. Or you, you get a bad grade on the assignment. You <laugh> you really have to take the time to plan out what you’re gonna do. It relieves pressure by taking that, that longer look of things so that you can meet your deadline. You’re not going to be stressed or have to tell the candidate, Hey, you know, we can’t pay you. That’s, that’s not a good look. Or, or tell the, the payroll company, Hey, I don’t have these IDs. And you know, that, that causes a snag in, in your workflow. There, there’s a whole lot of things that you know, can go wrong.

And that’s why we like to educate. So for example, Harbor Compliance. We have an information center. There’s about four or 5,000 pages of free state specific content on registering your business entity, registering for taxes, and not just payroll by the way, like sales tax. That’s a huge topic these days as well with Wayfair and, and Covid all of your licenses, whether it’s general or industry specific. A and that’s a resource that we make public. We, we put a lot of time and, and resources into keeping it current for those very same business owners so that when they’re Googling you know, late at night after they finish a day at the salon, that there is something out there. And then of course, as a, as a service, we can help with that and, and, and you have services as well to, to take care of those, those responsibilities. But there are, there are ways that, and even if you’re doing it yourself, there’s, you’re not without help entirely.

VANNOY:

Right. James, is there anything else you want to say on entity compliance before we start moving into state payroll taxes?

GILMER:

I think the very last thing on business entity it, it comes down to the, the ongoing requirements as well. It’s not just a one-time setup all ongoing, right?

VANNOY:

Yeah, that’s a great point.

GILMER:

Yeah. So you have to have your registered agent to receive lawsuits, serve as a process. Hopefully you don’t get sued often or ever. But again, it’s a statutory requirement. You need to have a reliable, reliable designee there. And then those annual reporting requirements. So as we talk as we will with payroll, you do need to have the right vendors and technologies and systems to stay on top of all that stuff.

VANNOY:

So, may maybe close out, if you could James, and, and maybe I’m not setting this up properly, but the way my brain is working, I’m thinking what is the, what is the hierarchy about how, how an employer should be thinking about this from the federal to the state, to the local? How do I, how do I get in compliance? How, how do I research? And then how do I stay in compliance? Is there, can you just kinda,

GILMER:

Yeah. Yeah. So chances, chances are you’ve already set up your company, whether it’s <inaudible> Corporation, you have your e i n Yeah. The next step, and you’re gonna repeat this, every time you go into a new state, you’re gonna say, okay, this is what I’m up to. This is where that activity is going to take place down to the local level. Right? The first thing you’re gonna do is look across all those agencies. What are the requirements? Most often it’s gonna be your legal entity first. So you’re gonna, the process is called foreign qualification with that Secretary of State. Then you’ll typically go out, open your state tax accounts. So employer withholding unemployment, sales, whatever you, you’re up to from there, you get into that local level, you know, or, or maybe your state level license, if there is one, then you’ll get into your local licenses, your local tax accounts. There, there’s too many to try to name off here, but you’re really going to go in that order most of the time because you’re gonna need information from the previous step to move on. And the, the legal entity that we just talked about is that first step. It is that building block.

VANNOY:

Got it. Okay. So back to our hair salon example. I get my e a n at the federal level for my entity. I register with Secretary of State my entity with so Missouri. Cause I’m in St. Louis. And then I have five locations spread around the greater metro area. Probably all five, or some of those have local lo those local townships or local cities are gonna have their own business license requirements. And then once I get it all done, now I’ve gotta put it <laugh> in the tickler file to know when each one must be renewed each year. Is that kind of a good way to think of it?

GILMER:

That that’s that’s a good way to think of it. So thank, thankfully, your, your salon example takes a little bit of time to open up the location, kinda look at what’s, what’s the requirement of that township securing the lease. It’s not just jumping in. So you do have some time to look at the requirements, but yeah, I mean, that’s, that’s the other challenge is keeping up with or keeping records, right? You’re gonna have a ton of registration certificates as you go. And then you have ongoing renewals. You might have interim reports. What if something changes? What if, gosh, what if your ownership changes? What, what if your, your address changes or content? All this has to be wheel and spoke out. So we, we’ve built a software to help clients track all that when it comes to their entities and licenses. We’ll talk about that later on. But most of the businesses that we come into contact with are not doing it efficiently. It’s a spreadsheet, it’s Outlook. It’s in two different departments, three different departments. Nobody’s doing it at all. And there’s a whole bunch of things that can cause challenges when this isn’t centralized.

VANNOY:

Yeah. And I would say, and I’m not taking a shot at my fellow entrepreneurs here, but I think an awful lot of us, if you’re doing the Excel, that means you’re probably doing a good job. You’re managing it. Most probably wait to wait to be notified in their inbox saying, Hey, time, time to renew <laugh>, right? So that the, and, and then, and that’s where we follow and, and get into trouble. Mm-Hmm. <affirmative>. So, yeah.

GILMER:

And Mike, you probably see this with your, your revenue agent. Your revenue authorities, not all of ’em will inform the business that something’s due. They put it, they, it falls incumbent on that company to keep track of its deadlines and, and register, renew report on time. So waiting for that tickler to come doesn’t often happen.

VANNOY:

Yeah. That, that’s right. Or it comes in a piece of mail to a front desk that gets discarded as, as it gets not to either discarded is junk mail or not taken seriously and passed on to the owner to act upon. I mean, I’ve seen, I’ve seen endless horror stories on, you know, the, the agency, whatever it is, whether it’s a, a licensing entity business license of a city. It could be a state taxing authority. You know, they’re gonna rely, Hey, we sent you the piece of mail. I got proof of it right here. Whether you received it or acted on it is completely different story. You have to be proactive in managing this stuff.

GILMER:

Absolutely. Absolutely. So you’re ready to talk tax, move on.

VANNOY:

Yeah. Let’s move on to tax. So I feel like this one is as complex, maybe more complex and simpler. The hierarchy way to think about this one is perhaps simpler, but there’s more moving parts. Why don’t you, why don’t you unpack this one for us?

GILMER:

Yeah. So this is why a lot of us are here, right? How do I get my state withholding account? How do I register for state unemployment? I need these things because it sure’s asking me for them, right? And once you’ve registered the, the business entity, once you’ve registered your LLC or your corporation with the Secretary of State, now you’re moving on to a next step with revenue authorities. And the challenge in a lot of states is you have, we, we, we call it payroll taxes, but it’s more than one in a lot of places, right? You have your withholding, you have your employment. California has four different payroll taxes. Pennsylvania has three. What do you do? How do you approach this situation? And the reality is, you have to know first what agency to start with, right? So a lot of times it’s, it’s a department of revenue.

 But in others it’s, it’s bifurcated. You have a a separate agency, a, a department of employer services or Department of Labor administering the unemployment tax. Cuz it’s, it originated from a, a federal program in thirties. So now you have registration with the Secretary of State registration, with revenue registration, with Department of Labor. That’s three different agencies that you have to, to work your way through to get the, the stuff you need to bring on onboard, hire and pay your employees. So again, proactive mindset, looking at all these requirements or working with somebody who, who does know what they’re doing in each state is so important so that you can meet your, your goals. Now you, you mentioned the information, and I think that’s very important, Mike, when you’re registering something like an L L C with the Secretary of State, it’s not easy.

Most businesses don’t love doing it, but it’s, it’s not all that complicated in terms of what’s needed, addresses, names of officers, directors, or, or members, managers. Not all that intensive, but when you get into your state tax registrations, the information really ratchets up. So not only are you providing that same basic core company information you need, how the company’s taxed at the federal level. Is it an S-corp? Is it a partnership? Is it a C-corp? Is it something else? Is it a nonprofit? If it’s a 5 0 1 C, good luck. It’s very challenging when you’re, you’re dealing with unemployment, right? You get into ownership and it’s not just names, it’s home addresses, dates of birth, social security numbers, sensitive information that, you know, as a service company, we get asked, why do you need this? And certainly if you’re tasked with doing this inside of your own company, and you, you ask your, your company owner, Hey, what’s your social security number?

You really need to be able to show exactly why. And, and you say, here’s the form, but it’s this, this additional level of information that’s required. And then you get into what you’re up to in that state, right? When are you hiring this employee? When’s the first date that you’re going to pay wages? When it comes to unemployment, like, what was the first day that you exceeded $1,500 in wages, or you had more than four employees? You get into all of these nuanced questions that, depending on the organization who’s tasked with it, it’s, it’s a fact finding mission that it is a large body of administrative work that you need to be prepared to do, so that when you get into each of these different agencies, you have all the information handy. And that, that’s a project in and of itself.

VANNOY:

James, I, I think about, you know, if I’m a, if I’m a bigger company maybe I have a director of finance who’s pretty knowledgeable in tax world, and maybe a VP finance, CFO even who really is, has a career in competencies in these areas. Maybe I’ve got, at that point, I’ve got a, a payroll manager who is a dedicated payroll manager, doesn’t do all their functions. They’re certified by the apa, the American Payroll Association. A lot of moving parts, but they got it. I, I think about the, that the, the, the small business, right? Mm-Hmm. <affirmative> where I literally, I got 15 employees and somebody from across the river applied. And they were an awesome candidate. So I just hired ’em. I didn’t mm-hmm. <Affirmative>. I mean, I, I’m a, I’m, I’m an expert in remodeling kitchens and baths and helping you make your home look beautiful and hiring great contractors and in, in, in and construction guys to, to help me out. I don’t, I don’t know anything about this stuff and, and be because of that. I don’t even think about it. So what, what’s your guidance for the small business or growing business? That just dare I say, accidentally doesn’t even think any about anything about hiring somebody from another state

GILMER:

Mm-Hmm. <Affirmative>. Mm-hmm. <Affirmative>. Yeah. It kind of reminds me of a short story. I was working with a Maryland based company. I was talking to their cfo and on our call she told me that they had an employee starting in state of New York in a month. And she figured like, that’s plenty of time. It’s a month. I’m super busy. I’m an executive. I’ve got a ton of stuff to do. Yeah. Who wouldn’t say that? Right? And she said she’d turn her attention to red stringing the week that the employee starts. Now the Department of State of New York takes three or four weeks alone to process a foreign entity registration. And that’s step number one. Then you, you have to go over to the Department of Tax and Finance, making sure you have all the information submitting that. You’re adding another, like three or four weeks on top of that.

So that’s like a six to eight week total timeframe for that business. And we’re, we’re good. We know how to get this stuff done, but agencies are gonna move at their pace. Yeah. So really the best time for that business would’ve been month before <laugh> she called me. And probably the second best time would’ve been right there and getting it going. Cuz the, the requirements are what they are. But you’re, you’re not, you’re not usually gonna be in a position to change the government processing time. So unfortunately, if you find yourself in that position where you know it’s required, get, get on it, is is the answer that,

VANNOY:

And I’m not looking to scare anybody listening today, but it’s important to understand consequences of not doing this. I, I worry more for the person. So that person, they at least knew to call you, or they at least knew to, to call the agency to do it. They just happen to be missing, not understand the lead times required. Mm-Hmm. <affirmative>, I’m more concerned for the entrepreneur who just doesn’t even know. Right? They hire the person from a different state and they had no clue. And they start, they start paying them, forget the lead time. They just start paying them mm-hmm. <Affirmative>. and they’re out of compliance in a, in a terrible way without an ever knowing it. And this could go on for a long time. Can you just talk about the consequences on the tax side for doing it wrong, not being compliant?

GILMER:

Yeah. And it, it’s almost, I I ironically, I kind of wanna ask you the same question. I mean, what we see is, is a business that knows they’ve been employing for a while, they need the ID because Asure whoever their payroll provider is asking for it. We know that generally there’s gonna be penalties that increase the longer this activity goes on. You’ve probably seen some specific horror stories that you know, based on specific examples. We, we typically get get that like 11th hour phone call saying, help me, like right away, <laugh>, right? But they’re call

VANNOY:

They’re calling you after they realized, oh my gosh, we actually have to do something. So you’re getting it downstream from that. Yeah.

GILMER:

Yeah. Yeah. And that’s, that’s where, you know, we work so well with Asure and, and providers that, that do this stuff because you’re in a position to ask for the IDs, we’re in the position to secure them. Yeah. it, it really, it really makes a good good fit. But to your, your first question, how does a business, you know, even know where to start? I mean, sessions like this are a great starting point. So the, the more broadly we can share this and people tune in, that’s amazing. Information center, the resource that we’ve built it is amazing. But the <LAUGH> businesses kind of just are expected to know that’s the way that compliance requirements in the United States are set up. And if there’s entrepreneurs listening, I know you’re trying to get to revenue quickly, you’re trying to get your product out the door, you found an amazing CTO in the next state, awesome. Do those things. But again, part of your process, part of the ongoing responsibility and, and call it a cost if you want, or call it an opportunity, because it’s gonna unlock a lot of the ability to do these things is your out-of-state compliance. So however you do it, if you’re a d I Y person, you have legal counsel, you have an an attorney or an accountant, whatever you use to help you get into that state you know, you really need to build that into your, your thinking.

VANNOY:

I swear. If if entrepreneurs had any idea the legal requirements on them in, in areas that they had no idea, whether it’s entity registration business licenses L L C grant registrations, the, the truly countless number of HR laws that all layer on top of each other frequently contradicting each other. If you had any idea how hard it was, many would never start mm-hmm. <Affirmative>, which, which is, which is why, why somebody needed help. Any other advice here about what makes registering the, these entities from a payroll tax perspective? Tricky. What are, what are the some, so if you got a, got a small mid-sized business and they’re on it, they’re managing this proactively mm-hmm. <Affirmative> what are the ch challenges that they still face?

GILMER:

Yeah. I, I think again, com compliance and these registrations are viewed as straightforward or low skill or you know, just something you can pass off to junior level admin. So, you know, paralegal, somebody lower in, in, you know, whatever department. And the reality is it takes expertise to source the information to know where to go when it comes to a, a government website, know how to get everything submitted properly, work with the payroll provider to get them the information they need. Maybe there’s, there’s some troubleshooting. Maybe the state loses the application or makes an error. It, it can happen, right? It’s the people too. It, it becomes a project. So there, there’s some, there’s some project management skills there that, that are really essential. And the other thing is like, when you have a state, take Minnesota, for example, Minnesota lets you register for employer withholding for an employer withholding account, you know, whenever you need to.

But for the unemployment tax account, it’s a separate agency and you can’t register until after wages have been paid. So let’s, let’s say you’re trying to be proactive with the first part, but you have to wait for the second one. Now you have a, a period of time where you know, you can’t forget <laugh> first and foremost. And then you, you might have a payroll company saying, Hey, where’s your employment unemployment id? Where, where is it? Where, and you have to explain, look, it’s not available because this is the state’s process. And, and so somebody’s really having to give their attention, then keep their attention there for the duration of that. And again, it’s not just something where you can pop in and get it done handed off. You really have to dedicate some resources for that period of time to ensure that the company gets properly registered.

VANNOY:

James, I think maybe put a tie off on this section here. It’s entity compliance and payroll taxes are two separate things, clearly. But the way you approach both from a compliance standpoint and not the actual paying of taxes, that that’s kind of a payroll world, the different topic but the registering with the taxing agencies the approach is the same, right? I mean, there’s a federal top layer. There’s a state where you gotta research each state that you’re doing business or hiring employees, and then there’s local. This sounds like if I don’t wanna, I don’t wanna understate this. It sounds like each thing in and of itself isn’t extremely difficult, but it a requires the knowledge of what you even have to do in the first place. Mm-Hmm. <affirmative>, that’s the most important thing. Mm-Hmm. <affirmative>. And then really then it’s an administrative pain in the rear to actually do it and keep up on it and keep them all current.

GILMER:

You’re, you’re, you’re exactly right. And going back to that first example, whether you have that single LLC in multiple states, or that multiple, you know, location or multiple LLCs all over the place. Like we, we were just talking about one state there. Imagine going through that every single time. Yeah. And that’s why part of our messaging is you can’t just trivialize the stuff. It’s not just filings to be done. You do need a mindset, a strategy, and you need the right resources and technologies to go out and be able to do this stuff well without drowning in red tape, or not being able to get your payroll company the stuff they need or, or to be able to hire or execute on your organization’s goals.

VANNOY:

Yeah. Right. What, what, what are some of the big questions that you, that, that you face? You know, go ahead.

GILMER:

Yeah. Well, I mean, I think, I think we covered a lot of them. How, how long does it take? That’s the biggest one. I think anytime you’re about to go into a new state, giving yourself a two or three month lead time is, is reasonable. And that may come as a shock to some people. We know that businesses are hiring <laugh> as much as they can, right? It’s a, it’s an employee driven economy. You’re, you’re gonna try to get that top town in the door as soon as possible, but perfect world, I mean, it takes time for these registrations to go through. So if you can somehow make that work, do it. And, and if not, you know, the second best time is Now the other question that we get is, is what does it cost? What does it cost to register out of state?

 And this is one where, thankfully, when it comes to registering for state payroll taxes, you’re not gonna pay any kind of registration fee. You’re gonna already pay taxes. That would be ki kind of adding I forget the phrase, just, you know, paying to the, paying to the punishment or whatever to tap to register pay taxes. But you know, when, when you get into the, the legal entity stuff, the, the, what happens before you register for payroll, you will have your, your filing fee to that agency. Like I said, Massachusetts, 520 bucks for LLCs taxes is 750. It, it’s gonna vary. Some are, are much, much less. So you do have to anticipate some sort of registration fee. And then you have other fees. So if you are going to register with another state that’s not your own, and you don’t have a physical location in that state, and you don’t want to use your employee, you’ll need a registered agent in that state.

So it’s a, a company that’s designated to receive serve of process lawsuits, all that scary stuff. It’s, it’s required if you don’t have that address, you will have to hire a company to do that. And then on an ongoing basis the, the annual reporting fees, that’s where you’re also gonna see some cost. So we have a whole bunch of resources on our site. What does it cost to do all these things in each state? It’s publicly available on our information center. I don’t know if Yeah, I can, I can share a link with you, Mike. You can send it out to your listeners. Yeah, you know

VANNOY:

What? Make sure so we’re recording and we’ll, we’ll have this on demand. We’ll make sure to have a link to your site in, in the, in the notes so people have that

GILMER:

Resource. I, I think that would be very helpful. And then just the ongoing service fees, right? If they’re hiring us, they’re hiring you, they’re hiring somebody else or, or doing it themselves, you have to look at the cost benefit of doing it in house, handing it off, the, these are all very individualized decisions that a business needs to make, understanding what’s gonna make them efficient, get it done right, get it done in time. It’s, again, it’s, it’s a cost of doing business. And every, every organization has to go through that.

VANNOY:

I think that’s the right way

GILMER:

To think analysis

VANNOY:

Is you just have to treat it as a cost of, of doing business. And it it’s an area where most entrepreneurs and and growing companies that, that they don’t know what they don’t know. And it’s, while it’s true that if you don’t have customers, you don’t have revenue, you none of this matters. And so that clearly should be the, I will say the priority, but not your sole focus. Because you don’t want to be building a, a business, making customers happy, generating revenue, you’re generating a profit, and all of a sudden you find yourself out of business because you just ignored some of the compliance stuff. That’s, you said it perfectly, it’s a cost of doing business. Yeah,

GILMER:

Yeah. And no, and it’s, it works both ways, right? We like to frame compliance in a positive light, believe it or not, because it does let organizations pursue those big goals, securing that, that huge contract or that customer hiring that amazing talent, you, you really have to have the, the right skeleton in place to be able to do that. And that’s where the compliance pieces that we’re talking about come in. Yeah. So we really encourage organizations to be proactive and, and, and, and take care of it.

VANNOY:

So you hit on something there that I think it’s a perfect segue to our last topic. I’m a, I’ve been talking about this for years. I’m a huge fan of the flattening of our world in our ability to tap into talent. So that I, if you, if you were in a restaurant, you, it’s a, it’s a, it’s a location based business, right? I, I can’t have a server in a different hemisphere serving my customers. So I gotta have local employees. But maybe there’s back office function out to my restaurant. Maybe I’m, maybe I am an architect architecture firm. Maybe I’m a software company in geography. Doesn’t matter. I think, I think sometimes people are just still thinking too small where they think, oh my employees can now work from home, but if they can work from home, they can work from anywhere, right?

Mm-Hmm. <affirmative>. And I think for, for a long time people thought, okay, labor arbitrage, I can, I can spend 20 cents on the dollar and get this work done in a different country. And, and there’s, there’s probably not probably there, there, there’s a valid reason to do it for cost structure frequently. I’ve got a friend who’s a CEO of a, of a tech company. He’s just made the declaration that this is what we pay an engineer. And so if you’re in Silicon Valley it’s a competitive wage, but if you’re in some other parts of the world, you’re the richest man in your town, <laugh>. But he’s just made the declaration that this is how we value engineering talent. And I don’t care where you work, I’m looking for the 1% of the 1% most talented engineers in the world. Mm-Hmm. <affirmative> mm-hmm.

<Affirmative>. And he’s crushing it. Yeah. Because he has unbelievably talented skilled employees. I mean, if you, if you think about sports coach and strategy and what plays you call, all that stuff matters. The biggest impact is by having the greatest players on the field, right? Yep. So there, there, there’s my soap box, but so, so I’m all for hi hiring people whenever you can, if it’s that 1% top talent outside of your traditional model, but there’s compliance impacts. Mm-Hmm. <affirmative>, can you just, we’ve got about five minutes here. Maybe gimme, gimme your closing thoughts on how businesses should be thinking about hiring specifically out of state when it comes to compliance.

GILMER:

Yeah. So first, if I’m talking to the C ceo, I’m saying focus on that, that hiring that top talent, do it grow, run amazing, but you need to be able to hand off compliance to somebody that’s going to ensure it gets done on the backend. And that, that could be a variety of, of people within the organization. And then parts of that can be outsourced. So the, the overall approach needs to be understanding the different components of what we talked about. How do you do that research? How do you know where to go? How do you get it done? How do you track it? Right? What are the costs for doing that? And then figuring out who’s doing each. It needs to be outlaid. A lot of times when you’re working across departments, across people it hasn’t been clear up until this point.

Now’s a great time if you are going to be going on this really bold campaign of hiring those amazing engineers everywhere. Just make sure everybody knows what they’re doing. Make sure that there’s backup. If somebody’s supposed to be doing something important to go on vacation, win the lottery, you know, you have some coverage there. That’s, that’s super important. Just like you would for anything else. If you, if you have a, a way that you get your product out the door, you would’ve a process for that. You have to have a process for, for knocking out your compliance requirements. Right?

VANNOY:

That’s a really smart way to look at it. I like that. Yeah.

GILMER:

Yeah. The, the other thing is, you know, PE people are always the core pe people drive results, but it, it can be supported by technology. So when we talk about keeping track of what, what your registrations are across states, across entity tax, license keeping track of all of those certificates cuz your customers, your banks, your vendors are gonna need them. Keeping track of all of those registration deadlines as renewals and stuff. You have all of these different stakeholders. It’s not just HR who’s hiring, could be finance, could be tax, could be illegal, could be payroll. All these different people need that same information. So bring it in. Bring it in. So we’ve built a cloud-based software that keeps track of all that stuff, all the requirements in every state, and lets all those users see what’s going on in a central place. And that, that takes the business largely off of spreadsheets.

It, it reduces those discrepancies in communication, centralizes visibility. So if you’re in charge, Mike of that compliance program, you can go to the, the CEO or you can go to the vice president of business development, say, Hey, yeah, we’re ready to go here. We can bid on that job, we can hire that employee there. And that’s a much better feeling than not knowing who’s handling what, being behind the eight ball being, you know, reactive, idiom you want to use. We, we really wanna equip businesses with, with the right tools and the right ideas to make this a true program for success.

VANNOY:

Yeah. You know, the primary purpose of this show is to, is to bring the best information we can to employers to stay compliant and grow their businesses. And this is an area, I, I think the genesis of why, you know our, our relationship with our compliance started in the first place is this is just an area we saw our customers struggle with. Yeah. Obviously we’re, we handled the tax side and the apparel tax side. But we just saw customers struggling with we would, we would generally see someone, see someone after they’ve done their initial entity compliance work, the initial registrations, but it’s the ongoing maintenance and renewals of these things that people just struggle with because they’re busy, right? They’re, they’re working their butts off trying to run their businesses, grow their companies, and, and this is just an administrative headache that is difficult for them to keep up on, cuz it’s not this instant impact of revenue and it’s not this instant impact of an expense. So we, we, we really appreciate the partnership with Harbor. Glad and appreciate your information today.

GILMER:

And Oh, we, we appreciate it as well. We’re so glad to be here. Sorry, <laugh>.

VANNOY:

Yeah. No, by, by all means. And if there’s any way we can help clients whether it’s state taxation state tax tax filing certainly this is core to providing payroll services, but also HR software, time and attendance software that helps you stay compliant with F L S A overtime rules and HR services to, to help make sense of this all. James, I really enjoyed our conversation today. Appreciate the information. Make sure we, we capture the link to your site. We’re gonna include it in follow up email to all attendees today. We’ll also include it on the on demand version in, in the notes so everybody can take advantage of the free resource. And by all means anybody who wants to sign up for your services we would encourage them them to do so. We won’t talk price on, on a show like this, but I’ll, I’ll just say very, very affordable for the high value work that you get. So, any, anything else you wanna say, James?

GILMER:

Yeah, just on that last point, we’re always happy to have a conversation to see how we can help every organization is, is different and, you know, most of the time we’re in a, a great position to help. So I appreciate that. Mike, thank you to you and, and the entire Asure team for having me on today. It was a pleasure. I hope we can you know, continue to educate and, and help all of these businesses with these, these complex challenges. So really wanna thank you.

VANNOY:

Yeah, my pleasure. Until next week, everyone. Have a good day.