If you own a small business, following applicable laws keeps you in compliance. Failure to heed regulations can result in costly fines and penalties that hurt your operation and result in you closing your doors.
Depending on your operating model, you may need to obtain specific licensures. You always need to comply with safety regulations and pay the tax man when he comes. Here are six areas you shouldn’t neglect if you hope to remain profitable and secure:
1. Privacy Rules
If your organization works with personally identifiable information (PII) of clients, you need to take specific measures to safeguard their privacy. For example, if you work in accountancy, the Internal Revenue Service (IRS) rules require you to install on all devices, including computers, routers, tablets and phones.
Additionally, back up all data to an external source disconnected from your full-time network. When disposing of old devices, you must wipe the hard drives clean and delete any sensitive documents pending in printer queues. Require all staff to establish strong passwords of eight characters or longer and hold annual privacy training. Even if you don’t handle PII, you need to protect your proprietary business information.
2. Building Safety
If you work out of your home, don’t mistakenly believe you’re exempt from building codes. In California, for example, you must install a battery backup on your automatic garage door. During the wildfires of 2017, where several people lost their lives after becoming trapped by these bulky devices, to safeguard against future tragedies.
In commercial facilities, you’re responsible for safety even if you lease your space. While the law varies between jurisdictions, in general, whoever occupies the property it is liable for injuries resulting from improper maintenance. Make sure you perform quarterly inspections and address any hazards promptly.
3. Filing and Taxes
The United States uses a pay-as-you-go income tax structure, meaning you need to file your quarterlies. Don’t fall into the trap of thinking this requirement only applies if you have employees. Any individual who owns a business has or risk a penalty.
If you have employees, you are responsible for paying their withholding. This process involves income, Social Security and Medicare taxes. Typically, you withhold the requisite amount from each check and hold it in trust until it’s time to file your quarterlies.
Whatever you do, resist the urge to use employee withholding money to cover other operating expenses while intending to make up the difference later. You as the owner or trustee — if an S-corp — can be held personally liable for the trust fund recovery penalty. You could lose your business for unpaid taxes, plus the IRS can also force the sale of your personal residence to cover outstanding debts.
4. Licensing Requirements
If you operate in industries like food service or personal care, your state has requirements governing your profession. You can’t practice cosmetology without a license, for example, and the penalties for cutting hair in your garage without taking the proper steps can range from fines to misdemeanors.
Licensing matters in the construction trades. Some states permit the use of unlicensed individuals for small jobs not exceeding an amount like $1,000, but you open yourself up to potential liability claims if your work goes overbid.
5. Environmental Regulations
Depending on your industry, you may need to pay attention to environmental regulations. These rules also fall primarily on the construction trades. If you perform demolition, to a landfill certified to handle such materials. If you run a fleet of cars as a delivery or rideshare service, each vehicle must adhere to emissions standards to avoid potential penalties.
6. Workers’ Rights
If you hire others to help you, make sure you understand the difference between an independent contractor and an employee. You have different responsibilities regarding each, and misclassification can result in liability for past-due Federal Insurance Contributions Act (FICA) and The Federal Unemployment Tax Act (FUTA) taxes.
The general rule is that if you control only the result of the work, not how it is done, you’re safe to classify workers as contractors. However, in light of the changing economy, some courts and federal agencies now implement an “economics reality test.” It looks at the dependence of the worker on the business for which they work.
Understand These Six Regulations to Keep Your Small Business Compliant
Falling out of compliance can result in costly penalties, fines and lawsuits. Know the regulations above to keep your doors open and profits flowing.
About the Author:
Oscar Collins is the managing editor at Modded. He writes about cars, fitness, the outdoors and more. Follow @TModded on Twitter for more articles from the Modded team.