8 Important Government Regulations Every Business Owner Must Know was written for Playlouder by Amanda E. Clark. Amanda is a contributing writer to LLC University. She graduated from Eastern Michigan University with Journalism, Political Science, and English degrees. She became a professional writer in 2008 and has led marketing and advertising initiatives for several Fortune 500 companies. She has appeared as a subject matter expert on panels about content and social media marketing. She regularly leads seminars and training sessions on trends and tactics in professional writing. Please note that contributing opinions are that of the author. They are not always in strict alignment with our own opinions.
One of the best parts of owning your own business is that you get to make the rules. You’re in charge of creating, reviewing, and implementing company policies. You’re able to develop the company as you see fit.
Of course, there are some limitations. You must still answer to the government even when you're the boss. Rules and regulations apply to businesses, covering everything from ethics to taxation.
These business laws are so numerous that they may be difficult to maintain. That’s why most businesses have an attorney they can call as needed.
Important Regulations for Small Business Owners to Know
However, you don’t want to call your lawyer over every little question. Instead, it’s good for entrepreneurs to have a basic working knowledge of relevant government regulations. Here are some of the big ones.
1) U.S. Tax Code
When small business owners have legal questions, they often begin with taxes. The U.S. Tax Code is a set of government regulations explaining which business taxes you must pay and when and how to pay them.
Every business registered as a corporation has to pay federal taxes, and most businesses also need to pay taxes at the state level. The taxes you pay will largely depend on the type of legal structure you have.
For example, a Scorp has very tax requirements than an LLC. More specifically, a single-member LLC would not require a tax return of its own and would be handled on the owner's tax return.
The Scorp would require a tax return for the business entity and the owner's tax return.
2) Laws Concerning Employment and Labor
If your company has full-time employees or contract workers, you must ensure compliance with employment laws. The good news for new companies is that the Department of Labor provides a tool that makes it easy to start. Check out the FirstStep Employment Law Advisor.
Employment and labor laws cover several subjects. Some of the major ones include:
- Wages and hours (see the Fair Labor Standards Act).
- Workplace safety (see the requirements of the Occupational Safety and Health Administration).
- Equal opportunity hiring practices (see the requirements of the Equal Employment Opportunity Commission).
- Family and medical leave (see the Family and Medical Leave Act).
If you plan to have employees, you must acquire an employer identification number (EIN) for your business, both at the federal and state levels. You can do this yourself or enlist the help of a service like Northwest Registered agents, IncFile or Legal Zoom. Check out Northwest Registered Agent reviews for more info.
3) Regulations Regarding Advertising
Every business needs to advertise its products and services. There are certain regulations to govern your advertising, ensuring that you don’t market your products in a way that is purposefully deceptive or dangerously misleading.
Here are a few guidelines to keep in mind:
- If you are selling food or supplements, use proper labeling to list your ingredients accurately.
- For e-commerce merchants, knowing the federal statutes regarding online advertising is important.
- Avoid making any untruthful or inaccurate claims about sustainability or environmental impact.
- Be advised that rules govern how you advertise products via phone and email.
4) Environmental Regulations
Certain industries must adhere to environmental guidelines. This is true of any company making cleaning supplies or food products. It’s also true of any company that makes claims about its sustainability efforts.
5) Guidelines About Data and Privacy
Sooner or later, most companies accumulate information about their customers and employees. Much of this information is private, sensitive, or confidential. As such, there are laws to dictate how your company should prioritize privacy.
Keep in mind that many of these laws exist with the express purpose of protecting your employees and customers. The law empowers your employees to sue the company if you disclose private or confidential information without their permission.
There are also more industry-specific privacy laws. For example, the Health Insurance Portability and Accountability Act (HIPAA) applies primarily to healthcare organizations. It is illegal to share a patient’s medical information without their consent.
6) Laws Related to Insurance
The law may require you to purchase insurance when you reach certain business milestones. For example, when you hire your first employee, 49 out of 50 states will require you to obtain worker’s compensation insurance. (Right now, Texas is the one state that does not require this.)
Workers comp is an important level of protection for you and your employees should there ever be a workplace accident or injury. Many companies find it advantageous to purchase higher levels of coverage than the law requires.
Additionally, if you have a company with more than 50 employees, the Affordable Care Act requires you to provide basic health insurance protections for your workforce.
7) Sales Tax Regulations
Most states have sales taxes. Companies that sell physical products, including brick-and-mortar retail stores, must collect sales tax on each purchase. These taxes are then paid to the revenue department of the state in question.
Check with your state’s revenue department to determine whether your state requires you to collect sales taxes and, if so, how much.
Beyond sales tax, many professionals must meet specific state licensing requirements. These often include an initial state exam and annual renewals of the license.
Example professions include but are not limited to attorneys, physicians, real estate agents, architects, as well as trades like plumbers and electricians. Even a hairdresser may require a license in many states!
8) Antitrust Laws
When you’re launching a new business, you probably don’t have any short-term plans to turn it into a monopoly. Nevertheless, it’s important to be aware of antitrust laws, which exist to ensure a competitive marketplace. Under federal antitrust regulations, your company:
- May not conspire with other businesses to fix prices.
- May not use any competitive practices that are deceptive.
- May not use mergers and acquisitions to form a monopoly.
Legal compliance is critical for your small business's smooth, successful operation. Be sure you remain up to date on state and federal regulations. And, if you have specific questions or concerns, it’s better to talk with a lawyer than resort to guesswork!