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Expanding into a new state is a great way to drive growth and attract new customers. But what works in your home state might not apply everywhere. Each state has unique rules, and violating them can create costly setbacks.
If you’re hiring across state lines or opening new locations, staying compliant can get complicated fast. Fortunately, with the correct information and the right partner, you don’t have to handle it all alone. Here’s what you can expect and how to confidently expand into a new state.
Registering to Do Business in Another State
You might have to register in the new state. This process is often called foreign qualification. It’s typically required when your company has a physical presence, employees, or ongoing operations in another state. To register, you’ll need to file a Certificate of Authority with the state’s Secretary of State along with a Certificate of Good Standing from your home state. Filing fees vary, and most states will require annual or biennial reports to maintain compliance.
State and Local Tax Considerations
State and local tax (SALT) rules vary widely and can be complicated for businesses operating in multiple jurisdictions.
Tax Nexus: Physical vs. Economic Presence
Nexus is the connection a business has with a state that triggers tax obligations. Traditionally, a physical presence was the standard. However, states now apply economic nexus rules based on sales volume or revenue thresholds.
Corporate Income, Franchise, and Sales Taxes
States may impose corporate income taxes, franchise taxes, or both. For example, as of 2025, New Jersey has a top marginal corporate tax rate of 11.5%, while North Carolina’s rate is 2.5%. The rules on tax base, apportionment, and filing requirements differ across jurisdictions. Most states with a sales tax also require businesses to collect and remit taxable goods or services if they meet nexus thresholds. Getting this wrong results in steep penalties or back taxes.
Employer Payroll Tax Registration
Hiring an employee in a new state triggers a requirement to register for that state’s payroll tax system. This includes withholding state income tax, unemployment insurance tax, and sometimes disability insurance. Registration usually needs to happen before or shortly after wages are paid to the employee. Each state’s process and rules vary, so checking early is essential.
Labor Law Compliance in a New State
Expanding into a new state makes labor law compliance more complex. Each state applies its own set of rules for things like wages, employee rights, and required documentation.
Wage and Hour Laws
Minimum wage rates and overtime rules can be vastly different from state to state. Some states have minimum wages exceeding the federal level, while others match it. Overtime policies also vary. You need to align your timekeeping systems and payroll practices with state-specific policies to avoid violations.
Workplace Postings
Every state mandates a unique set of labor law posters covering topics like workers’ compensation, wage laws, and anti-discrimination policies. Some states also require notices in multiple languages.
Paid Leave Laws
Paid sick, family, and medical leave laws vary by state. New York, for example, has its own framework that dictates accrual rates, qualifying events, and carryover rules. In some states, even smaller employers are required to offer paid leave. Tracking the details is key to staying compliant without overextending your resources.
Hiring and Background Checks
Hiring rules are also state-specific. Some states prohibit you from asking about criminal history. Others have tight restrictions on credit checks or drug testing. Understanding what’s allowed during recruitment and onboarding helps protect you from compliance missteps.
Employee Benefits, Insurance, and Workers’ Comp
Employee benefits, insurance requirements, and workers’ compensation rules vary from state to state. This can affect how you structure your plans and stay compliant.
Workers’ Compensation Mandates
Every state has its own set of rules for workers’ compensation. Some states don’t require employers to carry it at all, while others mandate coverage for all employees, including part-time. Coverage minimums, claim handling procedures, and penalties for noncompliance also differ state by state.
Health Insurance
While federal law sets baseline healthcare requirements, states can add their own rules. Some states require coverage for treatments that aren’t mandated at the federal level or regulate how quickly insurers must process claims. These rules all impact cost, eligibility, and plan design.
Localized Benefit Expectations
Employee expectations also change depending on location. For example, outside of government requirements, it’s common to see more generous paid family leave or mandatory disability benefits in some states. What’s considered competitive in one region might fall short in another, and you’ll need to adjust your benefit packages to meet the regional norms.
Expanding into a new state means more rules, more filings, and more chances to miss something important. Each state has its own set of rules, from tax obligations to labor laws.
A trusted partner can help. With the right support, you don’t have to juggle payroll filings in five states or worry whether your PTO policy complies with local laws. Pinnacle Employee Services helps businesses operate with confidence, no matter where growth takes them.
Need help expanding into a new state? Pinnacle can help! We’re here to take care of all your HR needs so you can focus on growing your business. Contact us for your HR Review and Needs Analysis today!