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Hey everybody, this is Gene Marks and welcome to this week’s Small Biz Ahead podcast. Thanks so much for joining me. I wanna talk a little bit about starting up a business but not necessarily just the global, have a business plan and get financing and have a team of advisors and all that kind of stuff. I wanna talk about some particulars about starting up a business in your state because when you start up a business, there are certainly some federal rules that you need to adhere to, filing for a tax return, establishing an employee identification number or getting yourself set up from a federal basis. But, you know, each state has its own particular rules. A lot of them are the same. And obviously, if you’re listening to this, I’m not gonna go through what the rules are for all 50 states in the country, but I just wanted you to be aware of some of the issues that are state issues that you should be following and you should be knowing about when you start up a business, or frankly, even if you’re running a business, regardless of where you’re located in the country.
So, what are some of the particular rules for different states that you should know? For starters, independent contractors, 1099 workers, those rules really differ depending on the state itself. So, some states they have more stringent rules than even what the federal government has. Right now, as I’m recording this, the Department of Labor is taking comments on a change to worker classification rules that could impact many businesses on a federal level. But for years, many states around the country have had their own independent contractor rules. They use things like the ABC testing or they use other parameters for testing whether or not an employee is an independent contractor or an independent contractor is an employee. So my first bit of advice to you is check with your state’s independent contracting rules to see what applies to you…
Because the state’s rules supersede whatever the federal governments are and you need to make sure you’re in compliance. Number two, minimum wages vary per state. I mean, around the country, the average minimum wage is over $15 an hour. I mean, there’s a lot of states that still adhere to the federal $7 and 25 cents an hour minimum wage. But then again, there are a lot of areas, populous areas like New York and Los Angeles, that have higher minimum wages per hour. So that skews the national average. So just be aware that minimum wage is still up when you look at it on average, but your state may be lower. There might be some changes to federal minimum wages in the future but definitely check what your state’s minimum wage is, because again, that supersedes what the federal rules are. Okay? Your state probably also requires hanging posters and notices for your employees too. So make sure you know that too. Check with your state’s Department of Labor. See what you need to be hanging in your office. A lot of times states require these posters to…
Have things like about overtime rules or different rights that workers have, minimum wage as well. And different states have different requirements, as does the federal government. So go to your state’s website, go to the Department of Labor in your state, find out what posters you should be hanging and noticing, notices so that your employees are there because you want to be careful that you are complying with those rules of updating your employees on the different regulations and rights that they have. Next, depending on your occupation and what you do, you may require licensing in your state. There are some states that are really prolific in their licensing requirements. California, New York, New Jersey have hundreds of licensing requirements. If you’re a beautician or if you’re an acupuncturist or if you’re a funeral director or if you’re a nutritionist or a dietician or a hair stylist or a therapist, there’s a lot of occupational licenses and permits that are out there that are required on a state by state basis.
So don’t just think if you want to cut people’s hair that you can just start yourself up as a freelancer and do that. You might be required to get a license from the state, which not only of course would require a fee, but applying for it and also potentially getting, improving some type of training and instruction that you have had as well as real time service doing that job. So check on the professional licensing in your state as well. Very, very important. Next, there are some states that require training for employees about discrimination and harassment. Now again, California, New York are leading that but there are other states that are considering making that law as well. And that is training usually for all size of employers in some cases. So it’s not like you’re exempt, just cuz you’re a small business.
So again, check with your state’s Department of Labor to see if there is any harassment or discrimination training that you need to be aware of to operate correctly in your state. Another big thing is pay transparency. That is being looked at by the Federal Department of Labor, but there are many states that have their own rules about asking about history of an employee. Pay transparency goes back because there are many studies that show that women have historically earned less than men. So if you are interviewing a female job candidate and you ask her what her salary was at her prior job, that theoretically could put her behind the eight ball. So don’t do it. Don’t ask about salary history. And also, some states have some specific rules about asking about prior convictions, whether you can do that on a first interview or not. Is that fair to do? So again, these supersede the federal rules. Find out from your state’s Department of Labor what the rules are about asking for salary history and prior convictions. When you hire new people, most states have a reporting mechanism…
That you have to report those new hires to the state. And the reason why you’re doing that is because the states are tracking people that are on or off the unemployment roles as well as people that might need to pay for child support. So if you are hiring somebody, there’s generally a mechanism that you need to report that new hire to the state. That includes somebody if you’ve rehired them, even if they’re part-time. Depends on your state rules. So you need to make sure you’re complying with that as well. Don’t you think you can hire somebody? You don’t have to tell anybody. Many states do require you to do that. A couple other things, right? Commuter expenses are another growing thing. And some states, they require employers to help out with their commuter expenses. Now, by the way, there is a tax, there is a, the IRS allows you to put away up to $280 a month for commuter expenses, tax free for your employees.
Like to make a facility available to do it. You don’t necessarily have to pay it but you can set up the platform, you can set up that benefit for them to save it pre-tax. So the IRS has that already. There are some states that are requiring employers to do just that. So that means it’s not anything out of your pocket. You don’t have to pay the $280, but you might be in a state that requires you to have that set up. So your employees can put money away pre-tax for their community expense. So make sure you’re in compliance with that. Also, some states have things called whistleblower acts because there’s regulations that protect people that are reporting on potentially bad actors and the companies that they are working with.
And if they do report on them, they wanna make sure that those employees are protected so that the employers don’t go back to them and fire them or terminate them or take away some of their compensation because they’re reporting on them. They’re called like whistleblower protections and they’re in various states around the country. So you want to check on that as well. Now, there’s a lot to know, there’s a lot to get up to date. There are definitely resources for you regardless of the state you’re in. First of all, I like to recommend the Federal Small Business Development Centers. SBDCs, they’re a part of the Small Business Administration. If you go to sba.gov, you can find small business development centers in your state. They’re generally connected to universities and colleges. They can walk you through the requirements that you need to know as a startup.
So reach out to an SBDC. And finally, different states have their own, non-profits or government arms that help out small businesses that are starting up. Usually your state has a Department of Commerce. So if you go to your state’s website, look at the Department of Commerce, all the rules will be there as well. But oftentimes they offer coaches, counseling, assistance, and even organizations that help small businesses. So let’s recap. When you’re opening up a business or you’re running a business in…
A state, be aware of these things. Number one, independent contractor rules. Number two, minimum wages. Number three, those notice posters for employees. Number four, licensing you might need depending on your occupation. Number five, potential harassment and discrimination training. Number six, knowing that you can’t ask about or whether you can ask about prior convictions or salary history. Number seven, reporting new hires. Whenever you hire somebody, you need to report them to the state. Number eight, helping your employees with commuter expenses. Some state’s requirement. Number nine, whistleblower protection, even if somebody reports on you, they are protected. So you wanna make sure about the state rules about that. If you’re ever in that situation, hopefully you’re not. And finally number 10, is just knowing that there are resources out there for you. Small business development centers or your state’s, local centers, or at your state’s Department of Commerce can certainly provide the help.
So those are some of the things to be aware of when you’re starting a business in your state. I hope this helps you because you need to know those rules so that you’re in compliance. And don’t get into any trouble. My name is Gene Marks. You have been listening to The Small Biz Ahead podcast. I hope this information helps you. If you need any advice or tips or any type of thing to help you run your business, visit us at SmallBizAhead.com or SBA.TheHartford.com. I will be back next week with some thoughts and tips to help you run your business. Thanks for listening. Speak to you soon.
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