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- Summarizing Regulatory Compliance for Small Businesses
As a small business owner, you’re responsible for keeping your company compliant with various local and federal laws. Some of these requirements include record-keeping. Others, however, need to be reported to the government and other external agencies by submitting documents and paperwork. Doing what is necessary for the various regulations, laws, and requirements is called regulatory compliance.
While it can seem pretty daunting, we’ll explain regulatory compliance and discuss some of the requirements you could need to meet as a small business owner.
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What is regulatory compliance?
Regulatory compliance refers to businesses following state, federal, and international laws that are pertinent to their operations. For example, the Equal Employment Opportunity Commission (EEOC) ensures that businesses maintain discrimination-free hiring and operations practices.
These guidelines exist to protect both sensitive and personal information and the people involved in the business.
While there are general laws that most (if not all) businesses must follow, parts of the regulatory landscape are industry-specific. For example, regulatory compliance for a business in the food and beverage industry will look different from compliance for a construction company.
When we say internal requirements, we’re referring to the inside workings of your business. Depending on your small business structure (LLC vs corporation, etc.), you could have different rules to follow when it comes to your internal requirements.
- Corporations: Corporations have shareholders and different management parties involved. Organized documentation of all business decisions and transactions is mandatory.
- LLCs: An LLC - limited liability company - is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation
- Sole proprietorships: These businesses have very few formal regulatory requirements since it’s a single individual running their business by themselves. However, it’s still prudent to maintain your records as a sole proprietor, since this is an important part of helping your business grow.
Beyond the internal workings of your small business, you’ll likely have reports that you’re required to maintain for the state and federal governments. Again, this can change based on your business structure and location. Here are some of the essentials:
- Annual statements/reports: Corporations and LLCs often have to submit annual reports so that the state government can keep track of their financial information and activity. Submitting these statements typically involves a fee that ranges from $10 to about $300 (although it can go higher).
- Franchise tax: In some states, corporations and LLCs have to pay to stay in operation. This is called a franchise tax. Each state might calculate this differently.
- Articles of amendment: When there’s an important change in your small business—like an update to your name or address—you need to report it to your state government.
- Licenses and permits: Depending on the industry, there might be certain licenses, permits and certificates you need to keep current. Always keep the documents that the local government issues you. You never know when you’ll need them.
- Federal taxes: To learn more about the taxes that apply to your small business, visit your Secretary of State online or contact your local government office. For additional guidance, small business owners can benefit from local resources like a SCORE mentorship, and other programs that the Small Business Administration sponsors.
How employers can stay in compliance
If you have employees, your small business will have different requirements compared to a solopreneur. For example, you must comply with the Fair Labor Standards Act (FLSA). This establishes the minimum wage, overtime pay, and other regulations to ensure that workers are treated and compensated fairly. These specifics can vary from state to state.
Other requirements that small businesses must comply with
You’re now familiar with some of the essential internal and external requirements for small businesses, along with other rules small businesses with employees must follow. Here are a few additional things to consider:
- Advertising and marketing: The law requires any claims you make in your marketing and advertising communications to be truthful, fair, and evidence-based. This is especially crucial as social media channels crack down on misinformation.
- Copyright: Copyright protects original works of authorship. Small businesses need to understand to what they hold the copyright, how to obtain copyright, and how to avoid copyright infringement. It’s easy to (even unknowingly) infringe on someone’s copyright these days, thanks to the internet.
- Health care and safety: The Occupational Safety and Health Administration (OSHA) ensures safe and healthy working conditions for employees.
- Other labor laws: In addition to workplace safety, small business owners must verify that individuals are legally allowed to work in the United States before hiring them.
- Insurance: Your small business might require workers’ compensation insurance, which covers your employees if they get hurt or sick while on the job.
- Environmental rules: As an example, if your business handles the disposal of chemicals, it might have to adhere to certain guidelines. Look to the Environmental Protection Agency (EPA) to see how this might apply to your business.
- Data protection: Privacy is a serious matter. That’s why HIPAA exists. The Health Insurance Portability and Accountability Act of 1996 ensures that sensitive patient data isn’t shared with any third party without the patient’s knowledge and consent.
Important note: Remember that not all enforced regulations require you to file documents. This doesn’t mean you can overlook them! You are still responsible for staying compliant.
Regulatory compliance keeps your small business in good standing
Staying compliant is necessary to avoid fines and other complications, and doing so will help you continue to operate smoothly.