Protecting Business Compliance During COVID-19

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COVID-19 reshaped how U.S. companies think about business compliance. You’ve experienced it firsthand: everything from how you recruit employees to how you keep sensitive information secure has changed. 

As your company adjusts to the “new normal” of remote working arrangements, one area to watch is business entity compliance. Specifically, we’re referring to how your business complies with the requirements for LLCs and corporations that operate within the borders of a given state.

You may be well-acquainted with the rules in the state where your business is formed and operates. However, you may be less familiar with the requirements elsewhere, which vary in each state. As your company pivots to hiring out-of-state employees and acquiring new customers via online channels, you should be aware of potential challenges.

This article serves to introduce you to the challenges of expanding a company into new jurisdictions. We’ll also suggest an approach and technologies to help you navigate the way.

Business Compliance 101

At the heart of your business is a legal entity, such as an LLC, corporation, or partnership. These entities have various ongoing responsibilities before they can register and legally operate in a new state. The exact list varies by state and on your specific activities, but it generally includes:

  • Obtaining a certificate of authority to transact business
  • Appointing a registered agent to receive service of process
  • Registering for state-specific tax accounts 
  • Obtaining business licenses and permits, which also may be required at the local level
  • Applying for any DBAs or trade names

Once your company has registered with the appropriate agencies in each state, it can expect to do the following to maintain good standing :

  • File annual reports with the secretary of state
  • Maintain current registered agent information
  • File tax returns with the state (and localities, if applicable)
  • Renew any DBAs, licenses, and permits before the expiration

Preparing to Enter a New State

Chances are, the COVID-19 pandemic has stretched your company’s “footprint.” Out-of-state sales, employees, and other activities raise the real prospect of registering in one or several new states. However, following any state’s unique set of steps can be simplified by following this approach:

  • First, review the requirements in your state and determine whether your activities trigger registration of any kind. Consult your attorney if you need clarity.
  • Second, develop a plan to register the entity and secure tax accounts and licenses. This may include assigning tasks to your attorney, in-house staff, or third-party service providers.
  • If you manage registrations in-house, ensure staff has access to the information needed to register your company. Establish a system to track submissions, approvals, and rejections. It’s also a good idea to keep records of filed applications, receipts, and agency correspondence.
  • At this point, you will have evidence of registration typically needed for banks, customers, payroll companies, and other agencies. Be sure to provide them with these documents in a timely fashion.
  • Internally, maintain all relevant registration data, such as approved filings and state-issued ID numbers in a central, secure location. You will need them again to file renewals and meet requests from vendors, customers, and other stakeholders.

The most important thing of all is to be proactive. Government agency processing times will vary, sometimes extending into weeks or months. Don’t let paperwork slow down your ability to hire a star employee or win a huge account. As soon as you recognize an opportunity, take action.

Leveraging Technology to Maintain Business Compliance

The  COVID-19 pandemic brought about a new paradigm of (mostly) virtual work. Companies that expanded into new states will have good reason to stay there. After all, they have new customers, employees, and opportunities driving profitability.

One key to ongoing success is maintaining good standing. Just like with registration, your company needs a plan to manage information, deadlines, and ongoing reporting in each state. With each new state, the complexity increases, and relying on manual systems creates risk.

Your company has likely invested in videoconferencing technology, project management software, and other platforms to allow your employees to collaborate virtually. With compliance at the heart of your company’s ability to operate and grow, an investment in productivity software can benefit your business during unprecedented times.

Creating a Plan

With this new information, work with your management team and review your need for any of the following:

  • Entity management software
  • Governance and records management software
  • Sales and payroll tax reporting software
  • Secure, cloud-based document and information storage systems

If you’ve already researched technology to support your entity compliance, you’ll know there are plenty of options for organizations of all sizes and industries. If you have yet to begin that journey, start a discussion with your management team. The right software solution can support your staff and instill more confidence in management and external stakeholders.

As we look beyond the changes brought about by COVID-19, companies also face broad administrative challenges in meeting state-specific compliance requirements. These challenges require a proactive approach and a modern technological solution. By doing so, you prepare your company for ongoing success and profitability. 

Disclaimer: Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency.

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James Gilmer is a Compliance Specialist at Harbor Compliance, a leading provider of compliance solutions for companies of all types and sizes. Founded by a team of government licensing specialists and technology trailblazers, Harbor Compliance has helped more than 25,000 organizations apply for, secure, and maintain licensing across all industries. James is passionate about helping nonprofit organizations leverage compliance to enhance their fundraising and program activities and educating the sector on compliance issues. James is also a Co-Founder of Berks Sinfonietta, Inc., a nonprofit chamber orchestra located in Reading, Pennsylvania.