Remote Work: Everything Startups Need to Know on Tax, Legal & Culture Issues


In startup life, cash is king. That’s why it’s essential to ensure you’re avoiding tax penalties and legal fines. One issue you might not have fully considered is employing out-of-state remote workers.

To break down all the implications of having a remote workforce, we talk with two Burkland experts, Brian Lahargoue, with HR Services, and Ardy Esmaeili, Head of Tax Services.

Topics covered:

  • Legal implications for having remote workers
  • Tax implications for having remote workers
  • Managing culture and mental wellness remotely
  • Where remote work is headed

This discussion with Brian Lahargoue and Ardy Esmaeili was taken from our show Startup Success. If you want to hear more episodes like this one, check us out on Apple Podcasts.

If you don’t use Apple Podcasts, you can find every episode here.

Listening on a desktop & can’t see the links? Just search for Startup Success in your favorite podcast player.

Welcome to start up success, thepodcast for startup founders and investors here you'll find stories ofsuccess from others in the trenches as they work to scale some of the fastestgrowing startups in the world stories that will help you in your own journeystart up. Success starts now welcome to start up success. Today weare going to cover everything remote work, everything that, as a start up,you need to have on your radar and be thinking about in regards to remotework, and I'm really excited to have two experts from berkly with me today.To have this conversation. They are the best of the best when it comes to thissubject, and that is already a smiley who heads up berkely's tax group andBrian Laarge, who heads up berkely's HR services group. This is going to be agreat conversation, Brian, I'm going to kick it off with you. I want to cover,you know the people up side of it, the tax implications and all of that getinto some legal and talk about. You know other topics around remote work,but first, let's kick it off with you know in terms of H, r people, ops, whatare the things startups should have on their radar right now? Well, I think a big thing. First andforemost is you know the perhaps image legal, the legal implications of beingremote. You know it's very easy, especially when Ovid came out right andeveryone was very quickly going to remote. You could just have employeeswork anywhere and everywhere, and that really isn't the case. You know as muchas it's you know a great you know benefit for people to work, a mill. Youhave to make sure that you're legally set up to work in that particular dayand your employees can't just say I a great now were remote, I'm going tomove from California to Texas. It doesn't work that way and so so againpartition from a legal standpoint. One of the big considerations here is justthe laws of the state you're going to making sure that you're compliant there.For example, some states require a separate a sick day, a crull versusjust a plant, ptor cruel, and you have to understand these. Even within astate, there can be differences as well, and this is of California is a wonderrequirement in certain cities in this state. There are other requirements andagain legal implications can cause some problems for it. So the idea is to bepro Apti and and not reactor right. You want to be able to put things in placeso that you were able to operate effectively and grow your business andnot worry about being hit with fines and penalties down the line, becauseyou just didn't take something into account that that should have been so.I think that's really important. State registration is a compliance within thevarious states. What the laws are the employment laws in the various statesagain are things that you should consult with someone about it so thatagain you're being re, you know you're, not being reactive, you're, being proactive and being able to put a plan in... I think that's critical, so Ithink now. As far as the legal standpoint, I think those the primaryconsiderations are taken to account so you're recommending that if a start uphas a remote worker in a state, they register that worker with the State forsure, can you require it is going to be. You know if you want to hire so one ofthe great things about remote work is that you hap into a a larger pool ofresources for applicants right, so you can get people now that are coming fromdifferent parts of the country that wouldn't normally apply for yourposition if they had to come into the office every day, so you find a greatcandidate. You know that happens to be located in New York. Great before youcan really. You know I mean you know we get them out. You could hire them andstuff, but before you start paying them you're not to make sure you registeredin the state of New York and you're, taking into account the New York statelaws and regulations for the employment taxes and play taxes so that we arecompliant in that state. So we're not running any running in any problems,and so, as your employment base grows and you're adding more states, you haveto register in every state and you have to make sure that you know the rulesand regulations were each state are a little different. You know, and so wewe can navigate through that process. And it's you know it's a time consumingprocess, but it's an important legal one, because you just don't want tocross problems a be hit with a fifteen sandor penalty or fine, because hedidn't register an employe in that particular state right, so register.And then you also mentioned payroll and like legal, like employee lawramifications as well right you a right as on your radar for each state. You doright. EVERY STATE HAS DIFFERENT TAX LEVELS: Right: employment, taxes at thetherre federal. There are federal taxes to be paid, the state in the localtaxes are being paid and those very depending on the state that you're inemploy a laws, also differ. You know in various states, while there are generalfederal riot guidelines and rules across the board, there are statevariances as well. You know the example I gave earlier it was. It was with sicktime with cocoa calculation in some states require that and some do not,and so again you want to be aware of these things. You know the the parentalleave act. You know there different laws in place again that have differentimplications in different states. While there are federal laws that governedthere are also state laws that governed. You were to make sure that you areaware of what those laws are for your employees, so that you're good, you'rebeing compliant you're, being pro active and you're not going to wind upbeing hit with fines and penalties down the line. Okay, that that I think,that's really important to know, because I think when ovid first started,you know employees would ask you, know the founder or the executive team. Ihave a house and wherever I'm going to go, work there and then months pass andnow we're seeing that these states rot compliance. They want okay and you tax.So our interesting issue there to Cernet but Interno, see you have aperson who's working in a state, but...

...their city is across two states right.So now they used to go to work every day in the state of Kansas, but theylive in Missouri you right and the living in Kansas City, which is a citythat crosses both states where once they were, you know working in Kansas,going to work in Kansas, the Ropein, Kansas tasses. But now is there ahundred percent remote worker they're staying in Missouri every day, all day,they're working in Missouri every day, all day, they're never coming to theoffice. Guess what you need to be registered in the state of Missouri andbe able to pay that person's boy taxes instint in Missouri. So again,something that might not veeve be thought about now becomes a criticalissue, Forty Port- and that is a great example because Missouri wants thosetaxes right and I actually grew up in Kansas City, and I know that's reanexample because I lived in Kansas City Missouri and I went to school in KansasCity Kansas and it was like a difference of four streets, and I thinkyou know there's a lot of states and cities set up that way. So I'm glad youbrought that up so taxes so already jump in here and tell us a little bitabout what is going on. I mean taxes is something that everybody's going toperk up for because it's such a critical, you know factor for yourstart up both employee tax and sales tax. So what what do you start up toneed to have on their radar around taxes? For sure you know, as Brianmentioned, but registering in this state? You already have a present inthat is tats by having an employee, so you may establish a necess on alsoincome tax and sell stocks, so what it means that, at the end of the year, thecompany needs to find the corporate income tax in that estates and alsothey might be fighting sell stacks when they saw the product and some of thesestates. You know, depending on this, this you're dealing with fir thedifferent is that some selfs taxes is some states charge self tax on the sumproducts on some estate. They don't so there's going to be a lot of you know,research and being productive to see before registering their employee. Whatare this taxing polecat on not only under employment tax, but also on thiscells, tax and income tax? In addition, there are some states that chargeexcise that or they tax you on and the revenue, so they don't care about thenet income or net loss of the business. Whatever revenuer girls receive thatyou have from that estate from that source, you have to pay taxes on andthose groceries as well. So the next us is a big E, no topic, and it's a bigdeal and obvious they once there you know they're shore off, you know, taxesby having the employee. You know it's one of the major factors for theestablishing mixes in the states, and this is this is real. This is not youknow, I mean states are now going after this right. I mean this, isn't justsomething I think a lot of startup founders are thinking no one's going toknow that I have one employee in...

Montana and one in Florida, but I meanthis is real right, of course, yeah, and what, when you register it with theGovernment Agency with the employment agency, they the state has theinformation they know who the company is. What is the tax ide number and ifthere is a present, if there's a office there or not, having an employeeremoves work on to a remote employee definitely show them that there is apresent there. Of course, there is exemption in some of this did,depending on the position of that at that entoures. Sometimes we seeing thatif there is a cells person in that I state, so they stop the next, asestablishment is more stronger than having just an engineer, you knowworking in a back office or Ann the working in it in product got it okay. So when you're meetingwith a client is that one of the kind of the first processes you go throughwith them is finding out where all of their remote workers are e and thenwhat they've done so far? In regards to that exactly so, we ask that the threemain portion that we asked we are asking about their cells or he therevenue by states there and before you visit and their office location or ifthey do have, you know, property in different estates. We will look at thelocation of those property and also the dollar Amat, because sometimes each asit is a different threshold based on the pay, roll cells and property andbased on that, we we analyze the nexus establishment in those estates got itand Brian do go through a similar process for the people, ops, hr side ofthings. We do again it's critical to know. You know where they currently arelocated, where they plan on moving to do. They have a pipeline of peopleready to be. You know on boarded, and so we want to make sure that we puteverything in place and ready to go so that there isn't an issue. Definitelysome pet questions that we need to ask God and beginning and Brian. It's yourteam also available to help with you know, outside of just the legal andcompliance factors around remote work, but some of the other things thatimpact you know, culture, mental, well, being those kind of issues I mean. Whatare you saying there, because culture is so critical for a scaling start up?Oh my gosh, it's great! You brought that up because I come to culture iskey right. Every company has a culture, and you know sometimes it's verypalpable. When you walk into a business or the the very beginning, right you're,in the entry way, you can feel the cold, you can get a sense of the culture.Well, if a business is a hundred percent remo, how do you create aculture? How do you create a company culture? And I think that's that's akey component that you know these founders need to take into account.What is the culture they want to create and if it's a hundred percent remote l,what does that look like? How does that feel? What is the engagement like anyou way? We talk about engagement, yeah,...

...that's a key factor there we hearengagement talked about a lot right. Well, your employes engaged you first,you want to ask you the what is engagement me. I mean it doesn't meanemployee happiness, it doesn't mean employees, satisfaction, it means. AreYour employees engaged? Are they willing to give up discretionary effortto have the company thrive and be successful, and if we take a look atsurveys across the county even before coved, you know very many servers havebeen done on this, but generally all the numbers kind of fall around twentyto twenty five percent of employees are engaged, which means they have noproblem, giving a discretionary effort. The they're concerned they put in thetime and they care they're bought in it, isn't just a job. It is a placethat they help define, create and want to go to. Well. Seventy five. Eightypercent of the employees within any organization are not engaged or they'redisengaged. That's a large number of people, you know, and so we, if we wewere seeing that problem in house with companies now we're going a remote. You know theideas. Well now we have even less kind of you know, understanding of what'sgoing on and what the workforce is like what they're doing? What's the culturelike, so we have to be concerned about, engage you know how do we? How do wekeep our engagement level high the higher? It is, the less turnover we seeright, the better productivity we see the more propriety turns into you know,revenue for the company right and coping on. If come is growing, makingmore money. Then that's more money we can offer to the employees in terms ofpay and incentives, and so that's a key factor. You also mentioned mentalwellness. I mean that is a key component that I think we're missing,perhaps across the board in the country, and it's particularly present right nowbecause of Covin right I mean so corbet hit. We all had to hunger down, we hadto isolate and our lives became very isolated and while people thought well,this is great. I get to hang out now at home and I going to work at home after a while that. Why is it not beingso cool anymore right? You know, and I conduct a lot of interviews and a lotof people are asking me great. Is this a hundred percent remote, or do I getto go back to the office at some point? You know what I'm telling them. Well,it's a hundred percent a month, like I'm kind of done with that. I want togo back. I want to be in an environment where I'm mixing and mingling would beright, live the idea of going to get myself a cup of copy and talking withsomeone you know, I mean that component is missing and that's a key element ofthe work force of our daily lives. That is missing and again something to couldthink about as a remote worker. How do we manage not just employe engagementbut employee wellness, a key component that I think we as a country need tofion right now? Yeah, I think that's a great point and I really like how youfind engagement, that's so key and should be on a startup founders radarjust as much as tax or you know, payroll compliance or things like that.That being said, you know on every episode of e this podcast we've talkedto our guests, about where they think...

...remote work is headed and the future ofremote work, especially in the start up ecosystem. So I would love to get bothof your takes on this already I'll start with you, I mean. Where do youthink we're headed from here? I think for sure you know it depends on the onthe team, so there are some teams that they can definitely work remotely ahundred percent and they enjoy it, but I would definitely think hybrid wouldbe. You know the best option. You know having different exibit to work somedays from the office and sometimes but from home being in the office.Sometimes you know, as growing mentioned, it's not only helped withthe mental but also even makes you to engage more and having to bring a stormin you know session the spending time three four hours with the cowork andtalking about the topics which we are missing with the zoom in is in now, andthese are the things that definitely felecitie would be a key and also inthe future, and I'm seeing it as is going to be happy for a lot of for thestart. UPS, that it's a great point. I M, I agree Brian. What about you? Imean: What are you saying O to earn a clients every day? Yeah? I do thinkremote work is here to stay. I mean what's interesting, is that many peoplewere so opposed to remote work right before coved it and many people were ofthe old school philosophy of A. I have to see people in my min the obvious efyou day. That's what it. Let me know that they're working right. What wefound actually is that remoter are much more or can be much more productive atworking it remote that they were befreit. So I've spoken to employersand no owners like Oh, my God. I had no idea that my this team would have beenso successful working revolt at the same time, remote work isn't foreverybody, and you know some jobs might not allow it. You have to be in a spotto go to every day, but even even from an individual standpoint, it justdoesn't work for some people. They might not have the space in their home.They not don't. Have you know the ability to manage their time and beself directed right and be isolated, so I think offering them the opportunityto go to work specifies like these in Manice ters. Now you can go and justshow for the day and people like like a hang out place for people working right,and you mean many people going there and those kinds of environments. Ithink we were going to see employers moving towards in the future, so itoffers like what already said that hybrid model you can. You can do that.You like and again some people, just love, Rem out, they're super successfuladded, a ray, productive, very engaged and others are like. Oh my gosh, I thisisn't working for me, so I think employers need to understand that andcreative balanced situation. You have to understand your work force. You haveto understand what works for them and the idea here is to get them to beproductive for a year right. We have to have employees, employers needemployees. So, let's, let's set up, you know options for them that we cancreate the most engaged employe in the environment that works the best forthem yeah exactly it's. You know. We saw that employees, they come mute, twoor three hours to get to work, and...

...during the day you know. Sometimes it'sgot in two or three hours: it bring down the different, no efficiency andproductivity, as so for those team members definitely staying home andworking from home. They can no work. I are nine hours per day and beproductive and efficient and at work. That's why, as Brian mentioned, we seemore efficiency with some of the team members, like that's a great point,because he wasn't having even those that have children right I mean nowthey can actually be home when they get home from school right I mean it,they're, not racing define, define daycare or what are we going to do? I II'm string traffic. You know, Oh my, not my kids, an me stay tree cior me tocut pick em up right right and there's flexibility with that.I see a lot of people with young kids. You know they're off from three to fourand then they log back on once you kids are settled and end up working. Youknow till six or whatever, because they don't have to commute and deal withthat, and I think you both brought up great points that it also depends onthe person and the type of role and the type of team. I know, there's you know,start up founders who talk about getting the engineering team together.You know every few weeks to come, you know brain storming and to talk throughproduct development problems is really critical, whereas a sales person, soulproducer, it's a different type of role. You have to look at each situation as we wrap up. I mean this has been sohelpful, anything that we didn't cover from either of you that a start upfounder should have on their radar around remote work for the rest of theyear. I think we covered most of it. I thinkwe covered those o again. I think it's. I think it's just understanding. Youknow, I think, when I speak to these founders of companies and an they'vegot great ideas. They've got plans and place business plans in place. It'simportant to all support our in HR planer place so that that isn't missedin the process, and I think it's important to build to build thesemodels. You know to work parallel with each other, so that again it's allabout creating you know a great product or service, but also, how are you goingto declare with that product to service? You need people to do that, and sodon't forget that important. You know people obs component in the in theprocess that that sometimes gets missed right, because they're so creative andin right excited about Grittin, their prim market. They he about that thepeople off part of it and then they're back tracking and back pelling to kindo fill in the gaps. Yes, that is such a good point, because I just had a goodfriend resigned from a start up because of all this turnover and issue withhiring and training and the company that doesn't have an HR people of plan.They have a great product they're, you know very successful, but they can'tkeep their team. I think that is such an important recommendation. Brianyou'll have to come back on the show, so we can talk more about that arty.Anything on your end, yeah. Definitely... know the hat. The commendation thatI have is before hiring an employe in another state. Definitely talk to yourtax consultant to your accountant and if your HR person to you know find outand also be on, find out what are the tacks, legal and accounting them. Iknow impacts at when you hire that person. Is it worth it? Is it it a lotof work? You know as as mentioned previously and each estate, andsometimes the CDIS, has a different law and drolls and that we need to complywith excellent excellent. That is so critical. I mean everybody knows. Taxesare a huge component for a start up where cash is king literally. So thankyou both this was such a great conversation. Really helpful definitelywant to have you both back here again soon. Thank you and thanks to ourlisteners, you can reach out to Brian and already on the Brooklyn website formore information thanks. Thank you about you've been listening to start upsuccess to make sure you don't miss out on future episodes subscribe to theshow in your favorite podcast player. Like would you hear tap the number ofstars? You think the show deserves an apple podcast for more tools andresources for your own start up. Success check out Bergland associates.Thank you so much for listening until next time. I.

In-Stream Audio Search


Search across all episodes within this podcast

Episodes (26)