All company regulations are governed by federal, state, and municipal statutes and regulations, which are managed by legislative bodies and enforced by regulatory agencies. Some laws affect how companies report their earnings and pay taxes, while others govern how they dispose of surplus materials or trash. There are government restrictions on business for almost every sector and transaction.
Whether you’re just starting out or a seasoned small company expert, the sheer amount of government rules on business may make your mind spin. Even locating the sites of these rules may be difficult. Despite the large number of government laws affecting company, knowing the basic rules of the road isn’t as difficult as it may seem.
Knowing where to search and what type of legislation to seek for are the keys to comprehending government restrictions on company. Entrepreneurs may go to a variety of locations based on the regulatory information they need. Here’s a rundown of the most frequent types of government laws that affect businesses, along with resources to help you understand them.
The Government’s 11 Most Important Business Regulations
There are eleven different types of federal company laws and regulations. Note that each may not have the same effect on your business—depending on your sector, whole categories may not be a major issue.
However, you’ll want to ensure that your business adheres to all of them with the same degree of priority and focus. Your company lawyer can assist you in determining which laws apply to you.
The following is a list of the many kinds of government rules that affect businesses:
The Income Tax Code
Taxes are nearly usually at the top of the list for most small company owners when it comes to government regulations. But taxes are about more than just paying them—knowing which business taxes to pay, when to pay them, and how to set up your company to account for future tax payments may save you a lot of time and money when it comes time to send a check to the government.
Every business that is registered in the United States is required to pay federal taxes. Depending on the state in which the company is registered, most businesses will also have to pay state taxes. These can’t be avoided. Avoiding taxes, or choosing not to pay them in full, carries heavy fines and the possibility of prison time.
However, the kind of taxes you’ll have to pay are determined on how you set up your company. Not all companies are treated equally in this respect. S-corporations, for example, pay taxes differently from sole proprietorships. Here’s a summary of the various taxes that apply to company formations to assist you figure out what you need to submit. Regardless of the variations between each kind of company, there are a few phrases you should be familiar with:
Most companies are required to submit an annual income tax return. Businesses must pay income tax as they earn and receive money, and then submit an annual tax return.
Estimated tax: Estimated tax payments are an option to paying income tax as your business generates money during the year. If a sole proprietor, partner, or S-corporation shareholder expects to owe $1,000 or more when they file their return, they must generally make anticipated tax payments. Note that if a company expects to earn $500 or more in revenue, it is generally obliged to submit anticipated tax payments.
Companies with workers are required to pay taxes associated with having employees on their payroll. Social Security and Medicare taxes, as well as federal income tax withholding and the federal unemployment tax, are among them. See the IRS website on Employment Taxes for Small Businesses for additional details.
Excise taxes are paid when your company acquires certain products, and they are often included in the price of the product. The purchase of gasoline is a typical example of excise tax, when relevant taxes are baked into the price per gallon rather than tallied at the end of the transaction. If you produce or sell certain products, utilize certain types of equipment, get payment for certain types of services, and so on, you may be subject to excise tax laws. Refer to the IRS Handbook on Excise Taxes for further details.
Some companies are also required to collect sales tax, which we’ll go over in more detail later.
Labor and Employment Law
In addition, federal and state labor laws impose many restrictions on companies that employ employees and independent contractors.
If you’re just starting out, the Department of Labor’s FirstStep Employment Law Advisor is a great resource. This tool assists employers in determining which main federal employment regulations apply to their company or organization, the record-keeping and reporting requirements that must be met, and the on-site posters that must be shown in their office or workplace.
The following are some of the most prevalent labor laws:
Wages and hours: The Fair Labor Requirements Act (FLSA), according to the Department of Labor, establishes wage and overtime compensation standards. This law applies to most commercial and public sector jobs, requiring businesses to pay eligible workers at least the federal minimum wage and one-and-a-half times their normal rate of pay in overtime (unless they are exempt employees).
Workplace health and safety: Employers must “provide their workers with work and a workplace free from known, severe risks,” according to the Occupational Safety and Health Administration (OSHA). Workplace inspections and investigations are used to implement the OSH Act.
Chances are equal: The Equal Employment Opportunity Commission enforces equal opportunity rules for most businesses with at least 15 workers (EEOC). Certain employment practices, such as gender, ethnicity, religion, age, handicap, and other factors, are not permitted to affect hiring procedures, according to the EEOC.
Employees who are not citizens of the United States: Employers are required by the federal government to check that their workers have legal authorization to work in the United States. There are many job classifications, each with its own set of qualifications, restrictions, and permitted stay durations (for employees who are not legal residents or citizens).
Security of employee benefits: If your business provides pension or welfare benefit programs, you may be subject to the Employee Retirement Income Security Act’s fiduciary, disclosure, and reporting obligations.
Unions: If your company employs union workers, you may be required to submit certain reports and manage union relations in certain ways. For additional information, see the website of the Office of Labor Management Standards.
The Family and Medical Leave Act (FMLA) mandates companies with 50 or more workers to give qualified employees with 12 weeks of unpaid, job-protected leave for the birth or adoption of a child, or for the severe sickness of the employee, a spouse, child, or parent.
Notices must be communicated or displayed in the workplace for workers to see, according to certain Department of Labor states (for example, alcohol warnings and hand-washing reminders). Fortunately, the e-laws protect you. Poster Advisor is a simple method to figure out which posters you’ll need and to obtain free electronic and printed copies in a variety of languages.
Antitrust Regulations
Antitrust rules may be broken if a business conspires with its rivals, third-party suppliers, or other relevant parties. These are the problems that antitrust laws seek to solve, such as:
Discussing pricing with competitors—even if it only impacts a tiny market—in order to set market prices.
Price discrimination is the practice of obtaining advantageous product pricing from customers while other businesses are unable to do so.
Conversations with other companies about a possible boycott of a rival or supplier.
Conspiring to split markets or consumers: It is unlawful for rivals to make agreements to divide customers, territory, or markets. Even though the rivals do not have a monopoly on the market or industry, this clause applies.
Monopolization is the practice of retaining a monopolistic position through acquiring rivals, excluding competitors from a market, or controlling market pricing.
The federal trade commission may contact you if your business violates any of these rules
Publicity
A strong marketing plan may help your company grow. But, before you get started, double-check that you’re following all of the laws and regulations set out by the government. For example, you must ensure that the statements in your advertisements are neither false or misleading on purpose. Including testimonials in your advertisements is subject to extra rules. Violations of these regulations may result in penalties, which contradicts the original aim of your advertisement.
Here’s how to prevent deceiving your customers:
Follow consumer product labeling regulations, which means you must include all of the components and substances in your goods.
Understand the regulations for using the internet to advertise and sell goods.
Understand the regulations for promoting particular goods, such as alcoholic drinks or toll-free telephone numbers. This will be industry-specific, and dealing with a lawyer who is familiar with your industry’s regulations will be very beneficial.
Understand the guidelines for marketing and advertising via phone or email.
Learn the guidelines for making “green” or “environmentally friendly” statements in advertising. There’s more on it later.
Email marketing
Email marketing is closely linked to advertising. If your company uses email marketing, the CAN-SPAM Act imposes additional rules that must be followed.
This Act governs a number of things, but the following are some of the most important:
Don’t use headers that are deceptive or misleading.
Don’t use misleading headlines.
Make it clear that the communication is a commercial.
Include the name and address of your company.
Show the client how to unsubscribe from emails, and quickly comply with their requests.
Each single email infringement carries significant penalties, so be sure you understand the rules before launching your email marketing campaign.
Environmental Laws and Regulations
Depending on your sector or company, you may need to familiarize yourself with different environmental protection regulations. This is particularly true if you’re selling cleaning supplies, food, or anything else that claims to be natural, organic, or environmentally friendly. At the federal and state levels, there are hundreds of environmental laws and regulations that may impact your small company.
The EPA Small Business Gateway is an excellent resource for ensuring that your company complies with environmental regulations. It’s also worth noting that you may need to check with your state’s environmental protection agency to be sure you’re meeting their standards.
Confidentiality
Businesses with employees and staff collect a lot of sensitive personal information on their workers. As a consequence, there are a slew of laws and regulations governing how businesses must preserve and protect personal information.
If your company reveals an employee’s private information, such as their Social Security number, address, name, health problems, credit card, bank account details, or personal history, not only are there laws in place to prevent companies from doing so, but workers may also sue you. The Health Insurance Portability and Accountability Act (HIPAA), for example, bans the dissemination of health information without the consent of the patient.
Employees have distinct and explicit rights to privacy in the workplace, but these rights must be weighed against employers’ rights to monitor their business activities. It’s critical to know what rights you have as a company to monitor workers, and to communicate those rights to your employees in a clear and open manner.
Permits and Licensing
So far, we’ve concentrated on federal company rules and regulations, but that doesn’t mean there aren’t plenty of state requirements to consider for your small business. Many state and local governments have their own company regulations, which are just as essential to understand as the federal regulations.
“Do I need a business license?” you may ask. You do, in fact, require a business license to operate in many states and municipalities. This is especially essential for companies in highly regulated sectors like childcare and health care. States may penalize your company or even take away your ability to function if you don’t have the necessary permits.
Insurance
Workers compensation insurance must be purchased as soon as you recruit your first employee, according to the law. Except for Texas, all states require companies with employees to obtain workers compensation insurance.
Workers’ compensation insurance covers both you and your employee in the event of a workplace accident. Medical treatment and reimbursement for lost wages will be provided to the employee, and the insurance company will cover the expenses of any litigation brought by the injured worker.
Other kinds of insurance aren’t usually necessary, however it depends on the situation. If your company works with the government or receives a government-backed loan, for example, you’ll need to provide evidence of specific kinds of business insurance.
Pay Data Reporting
Each year, if you employ more than 100 people (or more than 50 if you’re a federal contractor), you must disclose to the Equal Employment Opportunity Commission how much you pay each of them, broken down by race/ethnicity, job type, and gender.
This is to verify that you’re not breaking federal anti-discrimination rules by paying a woman substantially less than a male with the same job title and duties. The report, also known as the EEO-1 form, is due by the end of May each year.
Sales Tax Collection
Customers must pay sales tax to most companies that sell tangible products, and the tax must be remitted to the state’s revenue agency. Only a few states don’t charge sales tax.
In principle, the law mandates that a company collect sales tax in every state with which it has a physical relationship (referred to as a “nexus” in legalese). A real retail store or employing workers in the state may be part of that nexus. Even online retailers may be required to collect sales tax in the states where they sell.
You must collect sales tax if your company has a nexus. You don’t have to collect sales tax if you reside in Alaska, Delaware, Montana, New Hampshire, or Oregon, since those states don’t have it. You may be exempt at first, depending on what you’re selling.
Is Government Regulation Beneficial or Harmful to Your Business?
There are differing viewpoints on whether government regulation benefits or harms companies. The United States is ranked eighth in the world for ease of doing business by the World Bank, yet some individuals believe there is still too much regulation. [1]
On the one hand, regulation protects consumers and guarantees that all companies get equal treatment and contribute their fair part to society. Too much regulation, on the other hand, may suffocate companies, preventing them from generating employment and contributing to the economy. The level of regulation varies depending on the political climate, but it’s always a good idea to remain informed about the laws that impact your business. We recommend contacting a company lawyer if you need assistance staying on top of rules.
Final Thoughts
When it comes to government rules, small company entrepreneurs have a lot to consider. The good news is that you’re not alone in your efforts to ensure that your company is legal and compliant. The best thing you can do is contact your local SBA office and, if necessary, arrange for legal representation for your company in the case that you need further assistance.