When startups have employees in a state, conduct an acquisition or sign up customers there, they typically need to register in the state and maintain themselves in good standing. That includes paying their state taxes and fees on an ongoing basis, Andrea Schulz, a lawyer at Grant Thorton, told TechCrunch. If they don’t, they risk being fined by the state, or other consequences.
The problem, experts say, is that each state has its own complex fees, tax, and business registration requirements. And state-level compliance isn’t something top-of-mind for startup founders, nor is it a priority for an early-stage founder’s precious budget dollars, Schulz said.