How Small Businesses Can Avoid Compliance Pitfalls

You formed your new business. You (or your attorney) drafted and filed your articles with the state. You obtained your EIN from the IRS. You are ready to turn your attention to the matter of running your business. After all, that is why you formed it!  But wait. You may be skipping a step, and this can end up costing you resources and no doubt testing your patience.

Starting a new business involves a series of steps and levels. Formation is first and very important, but so is the next step—compliance. Compliance is required for most businesses at both the state and local/county level, and every locality has its own unique compliance requirements. Fun! Compliance is also an ongoing process, as many registrations and licenses expire if not renewed. Figuring out what the compliance requirements are for your business and staying on top of deadlines and renewals can be challenging. Here are some brief summaries of compliance requirements for businesses in some of the more populous counties in the Northern Virginia region, as well as DC.

Small Business Compliance in Virginia

Virginia: In Virginia, businesses are generally required to register with the Virginia Department of Taxation if any of the following are true:  1) the business has employees; 2) the business has more than one member/owner; and/or 3) the business sells tangible goods (i.e., something that you can touch). If any of the above is true for your business, you need to register with the Virginia Department of Taxation to open the applicable accounts. 

Fairfax County

With few exceptions, new businesses in Fairfax County are required to obtain a Virginia Business, Professional and Occupational License (BPOL) within 75 days of formation. Late filings will have penalties assessed. Think of a business license as a county business tax, and the amount owed on the license is a percentage of your gross receipts. You can apply for your BPOL online. Business owners must renew their BPOL each year. Both filing and payment are due by March 1. 

If your business owns tangible personal property (i.e. computers, furniture, equipment, machinery and tools), you also must file a business return of tangible personal property tax form by May 1 of each year.

Do you run your business from your home? All home-based businesses in Fairfax County must obtain a Fairfax County home occupancy permit from Fairfax County Zoning. Yes, this is true even if your only business activity is sitting behind a computer at your kitchen table. Sigh. A home occupancy permit can be obtained online via Fairfax County’s PLUS portal. Be prepared to report the square footage of office space, as well as to submit photos as well as your floor plan (a labeled drawing is acceptable). Not a home business? Your business may need a non-residential use permit to operate out of certain buildings and structures. 

Arlington County

Arlington County requires businesses to apply for a certificate of occupancy (for non-home businesses) or a home occupation permit, as a first step in the compliance process. The next step is an Arlington County business license application, which must be submitted within 75 days of formation (or penalties will be assessed). Business license fees are assessed based on gross receipts and must be renewed every year by March 1. In addition, Arlington County businesses must register for business tangible personal property tax. Business tangible personal property returns must be filed each year thereafter on or before May 1, and payments, if applicable, are due each year by September 5.  Arlington County compliance can be completed via the county’s online system.

Small Business Compliance in Washington, DC

In Washington, DC, every business must register with the Office of Tax and Revenue by filing an FR-500. Care must be taken to select the correct tax accounts on this form, or your business will run into issues down the road with back taxes and/or denials of business licenses and permits, which is known in D.C. as the “Clean Hands” mandate. This registration can be done online. Be careful to register for ALL relevant tax accounts. Remember, even though you might not owe a particular type of tax, you may still have to register for the account to have “clean hands”. Having the proper OTR accounts set up is a prerequisite to having a DC business license and zoning permits approved.

In DC, every business is required to have a business license and a Certificate of Occupancy (if not a home business) or a home occupancy permit (if a home business). Similar to Fairfax County, it does not matter if you are doing nothing more than using your home computer to run your business, a home occupancy permit is a must. In DC, both business licenses and home occupancy permits are applied for via the same DCRA portal. Both are issued for either two-year or four-year periods and, therefore, must be renewed at that point. The DCRA “should” send renewal notices, but you should be advised not to rely on them to do so! If you are a lessor of residential property in DC you have additional compliance requirements unique to you that include securing a home inspection as well as the submission of self-certification forms.

Small Business Compliance in Maryland

Maryland and Montgomery County make the compliance process a little easier for most businesses. Generally, service-based businesses do not need a business license. If you sell tangible products though, you likely will. Montgomery County does not require a home occupation permit unless your business generates more than five visits to your home per week, or if you have a non-resident employee.

Are you uncertain about the compliance requirements for your business? Are you concerned about the many pitfalls along the compliance road? The Geller Law Group can help! Please contact us to make an appointment to assess your business’s compliance status and needs and mention this post.