Becoming an Employer: Remote Employees
Part II of my series on expanding your small business. I’ve described how to hire employees who are located outside of your local state. In my case, that means anywhere outside of Wisconsin.
Note: This is not legal advice and is not intended to be such.
At one point Adorable IO had seven remote employees in five different states. Just like in Wisconsin, you have to register your company in each state that you have employees. Each state has their own requirements and process which can be confusing. Some states will issue your business one identifying number that would be used for State Income Tax, Unemployment Tax, etc. While other states will issue a different number for State Income Tax, Unemployment, Workers Compensation, etc. Some state provides a one-stop shop to register and check boxes for the different tax requirements. While others require you to hunt for each url needed and you have to enter the same information over and over again. I am going to share the steps I learned for Florida, North Carolina, Oregon, Utah and Washington.
Before moving onto the steps listed below, obtain a Registered Agent address if you don’t have an office in the state you are looking hire in. The service we use is InCorp. InCorp provides other services as well. They can help you submit the needed paperwork in all 50 states to form an entity.
- Register as an Out of State Business (foreign entity) Florida StartUp Co.
- Obtain Florida Reemployment Tax (formerly Unemployment Tax) Florida Department of Revenue
- Employer Log-in once the account is created Connect: Florida Dept of Economic Opportunity
- Register as foreign entity North Carolina Department of the Secretary of State
- State Income Tax North Carolina Department of Revenue
- State Unemployment North Carolina Department of Commerce Division of Employment Security
Once you register as a foreign entity you will be given your Business Identification Number (BIN). That number will be the core number for State Income Tax, Unemployment Tax and Trimet Tax.
- Register as foreign entity Oregon Secretary of State
- Taxes Oregon Department of Revenue for both State Income Tax and Unemployment Tax. We also have to pay Trimet Tax since our employees reside in Portland.
- Workers Compensation Oregon Workers’ Compensation Division
- Register as foreign entity Utah Government Services. The Creating an Account link is hard to find since the site provides so much information
- State Income Tax Utah Tax Commission
- State Unemployment Utah Department of Workforce Services
- Register as foreign entity Washington Secretary of State
- Unified Business Identifier (UBI) Washington Department of Revenue
- State Unemployment Washington Employment Security Department
- Workers Compensation Washington Department of Labor & Industries
Make sure to inform your insurance agent that you added a remote employee. They will need to know the state and the Unemployment Tax number for each state that you have a remote employee residing. Make sure you understand the difference between an employee and independent contractor. Just recently, American Family Insurance was in the news because they had people working as independent contractors instead of as employees. American Family could pay $1 billion in retirement benefits (according to the Wisconsin State Journal).
A useful tool to avoid missing the steps for onboarding any employee is Manifestly. I have created a checklist template that contains the following items (and more) to ensure that everything has been taken care of as we bring on new people:
- Have your employee complete the necessary new hire paperwork:
- Form I-9 which verifies the employee is legally able to work in the U.S.
- The appropriate State Income Tax Withholding Form, which tells you how much to deduct from their wages for state taxes
- Federal Income Tax Withholding Form exemption form, which tells you how much to deduct from their wages for federal taxes
- File your taxes and your payroll service should do this for you.
A payroll service can further simplify your employee management workflow. We selected ADP. This service deducts the appropriate withholdings for each employee based on the employee’s completed tax forms, and they submit the needed tax returns and payment. This is must have. Your time is better spent elsewhere.
As you can tell, each state as their own process and requirements when registering an entity and hiring employees. I’ve included the process that I went through for five states, but each one is unique. If you are hiring in a state that I have not described contact your payroll service. Find out from them what they need for an employee located in another state. They will be more then happy to tell you and they may even provide links to help you get started.
Jane Clark with Clark & Gotzler