Doing Business in Multiple States
by NicoleD, Former Moderator
- Created: December 9, 2010, 5:36 am
Most small businesses owners choose to start their business where i;s convenient- on their home turf, in the state where they live. But what if your business activities are-t so straightforward? What if have customers in other states, sell online, or have a business partner or employee that lives across the country?
Doing business in multiple states can be rewarding' but it can also be challenging if you do't have a grasp on the regulations that affect your business activities. This guide outlines some of the frequently asked questions that business owners have when their operations expand out of their state of residence.
Do I need to register in multiple states?
The state where your principal business activities happen is where you should register your business. If you are doing business activities in other states' besides the state where your business is registered - you will likely need to obtain a certificate of authority, or certificate of foreign business, from those states.
States define'business activitie' differently' wha's considered doing business in one state, may not be the same in another state. For detailed information on a particular stat's requirements, contact that state's business registration office or state Secretary of State. Examples of what constitutes doing business in a state may include:
- Establishing physical presences in that state by opening a new business location
- Hiring employees in that state
- Solicitation of business in that state, which could mean the use of Internet, mail, telephone, or print or media advertisements, to conduct sales with residents of that state
How do I get permission to do business in states where I am not registered?
Generally, to receive a certificate of authority (or certificate of foreign business) you may need to provide documentation about your business, pay a filing fee, and declare a registered agent for you business in that state. A registered agent is someone with a permanent address - not a P.O. box - in that state who is authorized to serve as your business's agent. A registered agent can be a partner, an employee, or a third-party, but it should it be someone that you trust to handle business matters.
Does my business activity qualify for an exemption?
Just as state requirements vary, so do their exceptions. Depending on the state, exemptions may be available if your business is conducting infrequent transactions, or conducting sales solely through a web site, or for other reasons the state deems acceptable. If you think you may be eligible for an exemption, contact that state's business registration office or state Secretary of State.
If I am doing business in multiple states, how do I pay my taxes?
Generally, the state where your business was registered (often your home state) is where most of your business income is generated. In this case, your home state will tax the bulk of your business income. Other states where you do business will tax the income that you earned in that state. In some cases, your home state may tax all your income and offer a credit for the taxes that you pay to other states.
Note that some states do not collect income tax - but that doesn't necessarily mean the income is tax-free. Your home state's taxation office may require you to report it with them. For more detailed tax information, contact the appropriate state department of revenue.
What are the penalties for not registering in the states where I do business?
State tax offices are cracking down on business income and sales tax compliance offenders through questionnaires, reporting deadlines, and periodic inspections. Failing to register your business in the states where you are considered to be doing business can result in fines, penalties, or corrective action by the state.
- If you are doing business in multiple, neighboring states you may want to consider hiring an accountant that is certified in both or all of those states.
- If you choose to incorporate your business, you can register in any one of the 50 states or the District of Columbia, regardless of where your business currently operates. If you operate in multiple states, you can determine which state is the friendliest to corporations and incorporate in that state. Learn more about incorporation at Business.gov.
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