Registering Your Business in All States Where You “Transact Business”
Each state is legally able to determine what constitutes “doing business” in their state. For all states where your company might “transact business” you will want to be sure to do it legally by registering with the Secretary of State there. For example if you are a Georgia business (originally incorporated and domiciled in Georgia) and your company also does business in South Carolina, your business will want to register with the SC Secretary of State’s office and to file all of the required corporate and personal income tax, sales tax, payroll tax return there. The below is a sample letter we might send to a client to help them understand the rules and regulations surrounding “doing business in other states:”
Just got off the phone with the Department of Revenue in the state where you have independent contractors and they advised based upon the type of the business that you are doing in their state that:
• You are required to register as a foreign company doing business there. I would suggest you have your attorney handle this.
• File state tax returns corporately and personally there as well in Georgia, where your business originally incorporated, as you are an S Corporation.
• That your company will be subject to the Gross Receipts Tax and all other attendant taxes including sales tax, business licenses and payroll (withholding and unemployment).
ASAP after you get a copy of your incorporation papers and I will take the necessary steps to register your business to pay the Gross Receipts Tax. At present your independent contractors will be required to pay this when they file their personal tax returns as you are not. After you begin doing so you will be able to provide them with a certificate acknowledging that you are paying the tax so they will then not have to do so.
Please be reminded that tax laws in all states where you transact business require you to legally register there and to pay taxes accordingly. The below is a general outline of how states determine where you transact business.
Basics of Incorporation
Knowing a few of the basics of where and when to incorporate your business in Georgia will provide you with needed insight to avoid unnecessary pitfalls, fees, and legal issues that befall many as a result of their failure to have a rudimentary understanding of the issues. There is a lot of hype out there about where to incorporate that may well lead you to discover that the steps you made to protect your Georgia business while in good faith have caused complexities that hurt rather than help your business. In general there are several criteria to evaluate when considering where to originally incorporate/domicile your business. All the criteria should be looked at in aggregation to consider including:
Core Business Operations – Where your business actually earns money and produces income is a critical component to consider in determining where your business should legally domicile and register. For example if your headquarters is in Georgia, you would incorporate in Georgia absent any other substantive issues. Then if your business transacts business operations in other states you would want to consider registering your corporation as a foreign corporation in another state. This designation does not register you as a foreign corporation to the U.S. but to the state where you are transacting business and have substantive business operations.
Employees – For all states where you have employees you will want to be sure to register and incorporate in those states whether you have an office in that state or solely have employees who work out of their homes in those states. Accordingly, if you have employees in Georgia, you will want to be sure that you comply with all Georgia payroll taxes.
Physical Location – For all locations that your business has a physical location and on-going physical presence, you will want to register your corporation as doing business in that state. Having a sound risk management plan is an integral part of the incorporation/registration process and is tantamount in making wise and informed decisions. For example, if your business headquarters and management are local, you will most likely want to incorporate the business in Georgia.
Working with your CPA and attorney on these issues before you incorporate is your best defense to ensure that you make wise and informed incorporation and registration decisions so contact us today.
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Atlanta/Alpharetta/Johns Creek CPA: Corporate Income Taxes