Business owners who operate small and middle market businesses in multiple jurisdictions need to evaluate everything that touches the business, including tax codes, environmental regulations and a host of other factors. To do this, business owners considering expansion must first understand the caveats of each state they plan to operate in. With proper planning, you can run your businesses in multiple jurisdictions both effectively and legally.
Licensing Requirements and Other Factors
Small and middle market businesses that operate in multiple jurisdictions may find doing business in one state easier than in another. For instance, a 2013 survey from the Kauffman Foundation and Thumbtack.com found that the top five "friendliest" states to conduct small and midsized businesses in were Utah, Alabama, New Hampshire, Idaho and Texas, whereas the bottom five states were Hawaii, Maine, Rhode Island, California and Illinois. Carefully consider the ease of conducting business in one state versus another before deciding where to locate your business.
According to the Kauffman Foundation, "40 percent of U.S. small businesses are subject to licensing regulations by multiple jurisdictions or levels of government." Business practices that are perfectly fine in one area may not meet compliance regulations in another. To avoid potential legal implications, check or register with the appropriate state agencies to obtain licensing from all states in which you do business. Resources such as the U.S. Small Business Administration can help guide you in identifying specific licenses a particular jurisdiction may require.
Other factors to consider before operating in multiple jurisdictions include health and safety regulations, environmental regulations, zoning regulations and tax codes, and labor laws, to name a few. These factors vary from state to state, so proper analysis of how to operate legally in specific areas is critical. For example, tax liability may differ, so you'll need to understand the tax implications of each area your business operates in. You may also want to consult a tax adviser, who can help you take charge of your taxes and avoid tax penalties or potential legal issues.
Planning Is Key
For small and middle market businesses in multiple jurisdictions to operate successfully, proper planning is necessary. Analyze each state you're interested in to determine the requirements you need to meet to reach business compliance. This will help you mitigate risks to your business and operate with fewer hurdles. Once you gather the necessary information per state, your due diligence will not only help you make better informed decisions, but this knowledge will also help you devise an overall business plan that increases your business's chance of success.
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