When One Household Spans Many States: Payroll and Tax Rules for Family Offices

Nov 13, 2025 | Family Office, GTM Blog

For a family office managing multiple properties across different states, employing domestic staff, from estate managers and housekeepers to private chefs and nannies, creates a significant yet often overlooked complexity: multi-state payroll and labor compliance.

When a family office employs staff who may reside in one state but work in another, or who travel frequently between properties in three or more states, the administrative and financial risks multiply exponentially. For the family office, understanding the rules of localization is not just an HR function. It is a critical component of risk management.

The Localization Challenge: Where Does the Employee Work?

The fundamental question surrounding payroll and tax withholding is: In which state is the service performed?

Most states require income tax withholding based on where the employee physically works. However, the unique nature of private household employment, where employees may split time, live on a property, or travel at a moment’s notice, complicates this otherwise simple rule.

State Income Tax Withholding: As a general rule, you must withhold income tax for every state in which the employee’s work establishes a legal presence, or “nexus,” for the employer. This can be triggered by even a single employee working consistently from a remote location.
- A few states have reciprocity agreements allowing residents of one state who work in a neighboring state to only pay taxes to their state of residence. However, these agreements are limited and rarely cover the complex, multi-state travel typical of family office staff.
The “Convenience of the Employer” Rule: Certain states (including New York and New Jersey) may subject a remote employee to the employer’s state income taxes unless the employer requires the employee to work elsewhere. This rule can be particularly tricky for family office staff working remotely for a primary residence or entity located in one of these states.

The Critical Layer of Workers’ Compensation

Workers’ compensation is perhaps the most dangerous area of multi-state employment for family offices. State requirements vary based on the number of employees, total hours worked, or total payroll.

For example, when a family office has a dedicated team traveling between estates in California, Florida, and New York:

Mandatory Coverage: Most states require coverage if an employee meets certain low thresholds. California requires coverage for virtually all employees, while New York mandates it for domestic workers employed 40 or more hours per week.
The Nexus Requirement: If an employee is injured while working at a property where the employer lacks the proper workers’ compensation policy, the family office entity (and potentially the principals) faces personal liability for medical costs, lost wages, and steep state fines for non-compliance.
The Solution: Family offices must secure separate policies or endorsements in every state where an employee regularly works. Relying on a single home-state policy or a homeowner’s rider is insufficient and leaves the principals exposed.

Other Compliance Hurdles

Beyond the primary tax and insurance issues, multi-state employment triggers a cascade of compliance duties:

State Unemployment Tax (SUTA): The employer is generally responsible for paying SUTA to the state where the employee’s work is localized (usually where most work is performed or the base of operations is located). This requires accurate tracking and reporting based on the employee’s work location.
State-Specific Labor Laws: Every state has unique rules for minimum wage, overtime calculation, paid sick leave, and paid family leave contributions. The family office must apply the rules of the state where the work is performed, often resulting in a complex matrix of compliance requirements for a single team.

In Conclusion: The Importance of Proactive Management

For the Family Office, the patchwork of state requirements is a significant operational and financial risk. Errors in multi-state payroll can result in double taxation for the employee (leading to turnover), non-compliance penalties for the employing entity, and legal exposure for the family office leadership.

By prioritizing accurate multi-state payroll and compliance, the family office protects the principals’ wealth structure, ensures regulatory compliance, and provides a stable, professional employment environment necessary to retain high-quality staff across its entire portfolio of properties. To discuss how GTM Payroll & HR and GTM Insurance can help manage these complexities, contact us today at (800) 929-9213 or book a complimentary, no-obligation consultation.