COVID-19 has had a dramatic impact on daily operations with a significant shift to remote working. This has led to some confusion about the impact of telecommuting on a company’s business license and other compliance obligations.
In this article, we address the important questions being asked about changes in commercial license obligations that many businesses have due to a remote workforce.
How do you manage work-from-home locations?
There are a number of compliance items you should consider when it comes to working from home practices. These include in particular the following:
- Payroll requirements: If a remote employee is located in a state where your business has not previously registered for payroll taxes, you may need to file a withholding and unemployment tax claim. This can come into play when an employee resides in a different border state than where the workplace state is located.
- Foreign diploma : If your business is not registered with the Secretary of State as a business entity, depending on the activities of the employee, you may need to file a foreign qualification. Many states offer a litmus test of “what constitutes doing business.” Analyze these requirements and apply them to your remote employees.
- Home occupation permits or licenses: Many cities require home occupancy licenses or permits. Even if an employee is not technically operating a business from their residence, a license or permit may be required. Read Top Business Licensing Regulated States for more information on the strictest states when it comes to business license compliance. Be sure to check local rules as there has been an increase in regulatory audits to verify compliance.
- Tax link: A tax nexus may be created if a remote employee works from home in a state in which your company has not previously conducted business activities. Depending on the nature of the work performed, your business may be subject to state income or other tax laws. If so, tax registration may be required. Regulators often cross-check to determine if an entity has a business license. It is the first cause of non-compliance among companies. This also raises the need to research the requirements to identify any licensing prerequisites.
- Confidentiality and data security: As your company adds remote employees to your workforce, the possibilities for security incidents increase. Make sure you have security policies in place to prevent data loss and compliance with privacy regulations such as the California Consumer Privacy Act.
For more information, see 10 Compliance Considerations for Remote Employees.
When do employees with work-from-home agreements create business license obligations?
It is important to determine if employees are temporarily working from home or if this will be a more permanent solution. If it’s the latter, you may need to research licensing at the city, town, or county level to determine if they require a license and/or permit. home occupation or remote employee.
CT Corporation’s research service can help you identify all of your remote employee requirements based on their unique locations. Some states do not have requirements for remote employees.
Do jurisdictions require a business to have a general business license if an employee is working remotely in a particular city?
In addition to a home occupancy permit or remote licenses, there may be licensing requirements for your business and employee depending on the city or county and the business activities involved. For example, you may need to obtain a General Business License for your business name and a Home Occupancy License for your employee.
There are also different thresholds for a company to submit payroll statements. These types of deposits are often filed with the General Commercial License.
What technology would you recommend for commercial license management?
If you manage a lot of professional licenses, you might be tempted to use an existing tool such as Excel or SharePoint. The challenge is that these technologies are not designed for compliance management, especially when it comes to maintaining data on all your different business licenses.
Many variables are associated with licenses: changing registration requirements, multiple expiration and renewal dates, active links to authorities, document management, etc. The ability to customize the interface will be essential in managing license renewals.
A dedicated system lets you consolidate and centralize your license data and share that information among your business stakeholders with role-based security. Other features include the ability to track and manage renewals, set up renewal alerts, store documents, run reports, and more.