I run a small e-commerce LLC registered in NYC. I'm looking to hire a couple of remote folks (customer service, maybe a part-time developer) who live in Pennsylvania and North Carolina. Do I need to register as a foreign entity in those states? Also, how does payroll work? I'm not a lawyer, clearly, just trying to avoid a mess.
Remote Hiring
Can a New York City LLC hire remote employees in other states?
I'm not an accountant, but I've been through this. Short answer: probably yes for the foreign registration if the employee is there regularly, but it depends on the state. PA is pretty strict about it. NC less so, but still. Get a CPA who knows multi-state payroll.
Why not just hire them as 1099 contractors? Way less paperwork.
Because misclassification penalties can ruin you. If they work set hours and you control their work, they're employees. Don't do the 1099 dance unless it's truly independent.
Yeah, what Steve said. The IRS and NY state don't messs around. Also, if you hire a PA employee, you likely need PA withholding and unemployment insurance there. It's a whole thing.
So it sounds like I need to file as a foreign LLC in PA and NC? Even if they're remote and I have no office there?
The trigger is usually "doing business" in the state. Having an employee physically located there can count as doing business. But some states have thresholds. You realy need to check each state's secretary of state site. It's not one-size-fits-all.
I looked into this for a client once. NC actually has a pretty clear rule: if you have an employee working in NC, you're considered to be doing business there. So yes, forteign registration.
This is why I only hire roobots. Way simpler.
Until the robots unionize.
Also, don't forget local taxes. Some cities in PA have their own earned income tax. It's a nightmare. You might want to use a PEO or an employer-of-record service if it's just a couple of people.
PEO is a good call. We used one when we had remote staff in three states. Costs a nit but saves you from filing a dozen returns.
Never heard of a PEO. Going to Google that. Thanks.
Just be careful with PEOs. Some are sketchy. Read the contract.
Or just move your LLC to Delaware like everyone else. Kidding. Sort of.
Delaware doesn't solve payroll. You still have to register where employees are. But yeah, the Delaware circlejerk is real.
One more thing: workers comp insurance. If your employee gets hurt working from home in PA, you might need PA coverage. Don't skip that.