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How to Avoid Legal Problems When Expanding Your Business into a New State

October 13, 2022

Moving into new territory for your business is exciting and stressful. However, while you are focused on the logistics of setting up operations, don’t forget about legal compliance. To avoid legal problems when expanding into a new state, you should consult an attorney knowledgeable in that state’s law to guide you through the process. There are several common issues that must be addressed to ensure you get off to the right start but there may be others depending on your situation.

Register with State and Local Agencies

In most states, businesses that want to do business in the state are required to register with the Secretary of State. Failure to do so may result in penalties and legal problems. You could also be prohibited from suing anyone in the state if you are not registered.

In addition, companies may be required to register with other agencies depending on the nature of their business, where they are located, and whether they have employees. For example, you may have to register with different agencies responsible for collecting income, employment, and sales taxes. There also may be local taxing authorities that require registration if you will operate in that region.

Other governmental entities may oversee worker’s compensation insurance, disability, and other benefit programs. Usually, these programs also require that employers make withholding and premium payments for their employees. As a result, in addition to registration, you must ensure that your payroll service is properly set up and coordinated with the state and local tax authorities.

Research Regulations Applicable to Your Business

Some industries are more highly regulated than others and there may be regulations unique to your products and services. For instance, manufacturers may have state-specific health and safety, labeling, and other requirements.

Comply with State and Local Labor and Employment Laws

Labor and employment laws can vary significantly from one jurisdiction to another. For instance, generally, federal discrimination laws apply to employers with at least 15 employees, but in New York State and New York City, they usually apply to all businesses regardless of size. Companies must review state and local laws regarding discrimination, sexual harassment training, and similar workplace regulations and update the employment policies and procedures, and handbooks as needed to comply.

States and localities may also differ in wage and hour laws and benefits, including minimum wage, health insurance, and family and sick leave. Companies must ensure that employees located in the new area receive the appropriate wages and benefits.

Review Real Estate Laws

If you will be buying property, typically, you will need to review zoning and environmental laws to ensure that you can legally use your property how you intended. Further, it is important to review local building codes and obtain permits before doing any construction to avoid legal problems.

These are frequent concerns that arise when expanding into a new state. However, it is best to consult an attorney to help minimize any risks so your new endeavor is successful.

As part of our Fractional General Counsel services, we assist small- to mid-sized businesses with a wide variety of legal needs. We provide services similar to in-house counsel but as an outside consultant on an as-needed basis. Contact us to learn more.


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