Dodging the Hazards of Out-Of-State Expansion
For many successful local businesses, it’s an idea that seems enormously appealing: Build your company by establishing a beachhead in neighboring states. It makes perfect sense on the face of it: If a product or service is a market success in Michigan, for example, it stands to reason that it will fare well in Indiana or Ohio. And there’s seldom a reason why a restaurant chain that’s popular in Florida would fail to gain traction in Georgia.
It makes perfect logical sense – but business is not always logical, particularly not when government regulation is involved. While market conditions may be nearly identical from one state to the next, regulatory and taxation environments usually are not – and those differences can go a long way towards torpedoing the success of an expansion effort, often almost as soon as it begins.
As is often the case when it comes to the hazards facing growing businesses, the biggest problems are caused by the issues you don’t know exist and the hazards you can’t see coming. Unless your company is already a major corporation with an established presence —and on-the-ground expertise—in other states, it is a virtual impossibility that you’ll be fully aware of all of the potentially problematic differences between your new place of business and your home base. That’s a problem.
Taxation and regulation are the first and most obvious pitfalls. Tax and regulatory codes naturally differ from one state to the next; each state has its own centuries-long index of whys and wherefores that have come to constitute its current-day regulatory and taxation environment. In virtually all cases, these are the cumulative end product of decades of capricious governance: Local and state officials, acting in self-interest or in the interest of special interests, enact a welter of tax and regulatory burdens that remain on the books for years and which usually multiply their reach and impact exponentially over time, creating an impenetrable tangle for businesses to wade through. Income tax, sales tax, property tax, workers’ comp, health and safety, environmental issues – the list of distinct areas potentially affecting a would-be new business are endless.
These are sizeable problems in and of themselves – but they are not the only consideration. Laws and regulations don’t exist in a vacuum; rather, they function within the unique local political, legal and social framework. In practical terms, Ohio doesn’t function identically to Michigan, nor Atlanta to Orlando. Each state, county and municipality is subject to its own localized customs, power structures, and idiosyncrasies. Even when a company operates fully within the letter of the law, capricious local officials and arcane provincial practices can draw new businesses into the regulatory quicksand.
Knowing both what and who you need to know to sidestep these pitfalls is essential – and that’s where Trion has proven its worth to many of our growing clients. As an established national PEO with a solid on-the-ground presence and a wealth of localized institutional expertise, we’re able to navigate the payroll tax and regulatory minefields wherever there’s business to be done – and we shield our clients from costly, time-consuming entanglements with local compliance authorities. Clients usually come to us to handle the routine daily hassles that they know and expect, but we often deliver much of our value in dealing with the ones they don’t expect. As many of them will tell you, that can make a big difference – often between success and failure where out-of-state expansions are concerned.
It’s Not Just Tax Season – It’s Deadline Season
Tax season isn’t really anybody’s favorite time of year – not even the legions of accountants and preparers who earn their living by working inhuman hours for a month or more in the run up to April 18.
If anyone has a reason to complain about the Ides of April, though, it is small business owners. April 18 is the deadline for filing personal income taxes, which of course is a hassle enough on its own – but it also falls on, before, and after a succession of other tax and reporting deadlines. Taken together, they are enough to cause plenty of headaches, consume a lot of time and energy, and increase the likelihood of mistakes on the part of business owners.
Small businesses’ employees probably aren’t aware of it, but March 15 is actually the tax filing deadline for corporations and S corporations, a full month before personal taxes are due (sole proprietorships and single-member LLCs still file on April 18). The March 15 deadline falls just before two headaches facing almost every small business owner four times per year: Quarterly SUTA filings and payment and FUTA payments.
SUTA (State Unemployment Tax Act) and FUTA (Federal Unemployment Tax Act) reporting requirements and payments are no joke. By the end of April, businesses need to submit in-depth documentation along with an amount equivalent to a substantial percentage of every employee’s earnings to date. Federal rates come out to 0.60% to over 2% on each employee’s first $7,000 in earnings. SUTA rates are variable, based on employer experience from under 1% to over 12% depending on your location.
For most businesses, unemployment taxes are a lot to pay out in a single quarterly payment. As part of our services to our clients, Trion enables a more balance sheet-friendly “pay as you go” process, allowing payments to be evenly prorated throughout the year. Along with handling the onerous reporting requirements, this takes a significant strain off of companies who’ve got still more deadlines to worry about.
You’d be forgiven for thinking that this was enough to worry about – but these are tax issues we are talking about, so of course there’s much more. Somewhat helpfully, the IRS has published a tax calendar for employers. While not especially easy to understand or user-friendly, it does provide a reliable resource for many of the deadlines most smaller companies are likely to face throughout the course of a year.
Trion’s clients frequently find the range of deadlines, obligations, and due dates to be challenging under the best of circumstances – and in a changing regulatory environment, that effect is intensified. Successfully managing to meet IRS and state requirements demands constant vigilance, lots of planning – and a good deal of knowledge and experience doesn’t hurt, either. We do our best to put our knowledge to work for our clients in any way we can; we can’t take on all their tax issues, but handling SUTA, FUTA, local municipal income taxes, and other complex payroll task tasks, we can make the deadline relay race a lot easier.
Introducing Trion Advantage
In today’s fast moving, highly regulated, hypercompetitive business climate, it isn’t easy to survive – let alone succeed. Naturally, the challenges of the modern marketplace are magnified for small and medium-sized businesses. Emerging companies’ smaller headcounts, lower cash and credit reserves, and limited capacity increase the impact of any adverse events.
At Trion, we see this firsthand every single day. We work closely with small, medium and large businesses across a full range of industries. We’re there to see their struggles, triumphs and tragedies. Mostly, though, we’re there to help.
We’ve built our business by helping other businesses to succeed – by increasing efficiency, by cutting red tape, by streamlining operations, by driving down turnover. It’s our job to give our client companies every possible advantage when it comes to human resources, benefits administration, payroll management, government/ACA compliance, Worker’s Compensation, risk management and other essential non-core functions within their organizations—and to do so at fixed costs with no surprises. In doing so, we’ve picked up a fair bit of knowledge along the way – and we think it’s a good idea to share some of it.
Introducing Trion Advantage. Trion Advantage is the official blog of Trion Solutions, and we’re going to make it a valuable resource for business insights, suggestions, inspirations, and success stories for people who do the hard work of keeping companies going, day after day.
We want to empower businesses like yours by sharing some of the hard-earned knowledge we’ve gained over the years, and by offering some of the perspectives that only a company in our unique position can acquire. Hopefully, you’ll find the articles and insights we offer here to be not only inspiring, but genuinely helpful. As in our normal business practice, we’re striving to deliver tangible, dollars-and-cents business benefits.
Here’s some of what you can expect to see in the coming weeks and months:
- Knowledge-centered discussions of key HR, benefits, taxation, payroll, and regulatory issues intended to make complex subjects easy to understand – and issues arising from them easier to manage
- Professional tips intended to incrementally improve your company’s operations – or even just your personal day-to-day work routine
- Alerts to regulatory changes and other emerging events that may affect your business
- Explorations of best practices for SMEs (small and medium-sized enterprises)
In short, we’ll be looking to provide whatever knowledge we can that might help you and your business succeed. Hopefully, we’ll be able to provide answers to your questions, and insights that help you meet challenges head on.
We consider ourselves lucky to have achieved the success we have within our field. We know how hard it is to establish, grow, and manage a company within a competitive field – we’ve not only helped our clients do it, we’ve done it ourselves. We understand that as a CEO, as a CFO, as a manager, as an employer, as a strategist, as an HR or benefits professional, you’ve already got your work cut out for you. If we can make things even a little easier for you, that’s what we want to do.
So check back with Trion Advantage every week. We think you’ll like what you see in the coming weeks and months. And we can’t wait to share it with you.