All government regulations on business require companies to comply with federal, state, and local statues and regulations administered by legislative bodies and carried out by regulatory agencies. Some regulations impact the ways in which businesses report income and pay taxes; others regulate how they dispose of their excess materials or waste. For just about any kind of industry and transaction, there are government regulations on business.
The sheer volume of government regulations on business can make your head spin, whether or not you’re just starting out or are a seasoned small business professional. And even finding the locations of these regulations can seem overwhelming. But despite the high volume of government regulations on business, understanding the general rules of the road isn’t actually as scary as it sounds.
The secret to understanding government regulations on business is knowing where to look, and what kind of laws you’re looking for. There are several places for entrepreneurs to go depending on what kind of regulatory information they need. Here’s a breakdown of the common kinds of government regulations on business, as well as where you can go to find help understanding them.
The 11 Major Government Regulations on Business
Federal business laws and government regulations fall into eleven basic categories. Note that each might not impact your business the same way—entire categories might not be a huge concern for your business, depending on your industry.
But you’ll want to make sure your company is in compliance with all of them with the same level of importance and attention. Your business lawyer can help you out to figure out what, exactly, applies to you.
Here’s a rundown of the different types of government regulations on business:
1. Tax Code
For most small business owners, government regulation questions almost always begin with taxes. But there’s more to taxes than merely paying them—knowing which business taxes to pay, when to pay them, and how to set up your business to account for future tax payments can spare you a ton of headaches when it comes time to write the government a check.
Every company registered within the United States has to pay federal taxes. Most companies will also have to pay state taxes, depending on the state in which the company is registered. These are unavoidable. Avoiding taxes—or deciding not to pay them outright—comes with hefty penalties and potential jail time.
But the kinds of taxes you’ll pay depends on how you formed your business. In this regard, not all businesses are treated the same. Sole proprietorships pay taxes differently than, say, S-corporations. Here’s a full rundown of the different taxes for business structures to help you determine what your business needs to file. Despite the differences between each kind of business, there are a few general terms you should know:
- Income tax: Most businesses file an annual income tax return. Businesses must pay income tax as they earn and receive income, and then file a tax return at the end of the year.
- Estimated tax: Estimated tax payments offer an alternative to paying income tax throughout the year as your company earns money. Sole proprietors, partners, and S-corporation shareholders must usually make estimated tax payments if they expect to owe $1,000 or more once they file their return. Note that corporations are usually required to make estimated tax payments if expect to make more than $500 or more in income.
- Employment tax: Companies that have employees are expected to pay taxes related to having staff on their payroll. These include Social Security and Medicare taxes, federal income tax withholding, and federal unemployment tax. For more information, see the IRS page on Employment Taxes for Small Businesses.
- Excise taxes: Excise taxes are paid when your business makes purchases on specific goods, and are often included in the price of the product. One common example of excise tax is the purchase of gasoline, where applicable taxes are baked into the price per gallon rather than as a tally at the end of the transaction. You may be under certain excise tax law if you manufacture or sell certain goods, use various kinds of equipment, receive payment for certain kinds of services, and much more. For additional information, refer to the IRS guide on Excise Taxes.
Some businesses also have to collect sales tax, which we’ll cover more in a bit.
2. Employment and Labor Law
There are also many government regulations on businesses that employ workers and independent contractors, in the form of federal and state labor laws.
Thankfully, if you’re just starting out, you can take advantage of the Department of Labor’s FirstStep Employment Law Advisor. This resource helps employers determine which major federal employment laws apply to their business or organization, the record keeping and reporting requirements required, and which on-site posters they need to hang in their office or work site.
Here are the most common labor laws:
- Wages and hours: According to the Department of Labor, the Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay. This act affects most private and public employment, and requires employers to pay covered employees at least the federal minimum wage and overtime pay of one-and-one-half-times the regular rate of pay (unless they are exempt employees).
- Workplace safety and health: The Occupational Safety and Health Administration (OSHA) requires that employers, under the OSH Act, “provide their employees with work and a workplace free from recognized, serious hazards.” The OSH Act is enforced through workplace inspections and investigations.
- Equal opportunity: Most employers with at least 15 employees must comply with equal opportunity laws enforced by the Equal Employment Opportunity Commission (EEOC). The EEOC mandates that certain hiring practices, such as gender, race, religion, age, disability, and other elements are not allowed to influence hiring practices.
- Non-US citizen workers: The federal government mandates that employers must verify that their employees have permission to work legally in the United States. There are several employment categories, each with different requirements, conditions, and authorized periods of stay (for employees who are not legal residents or citizens).
- Employee benefit security: If your company offers pension or welfare benefit plans, you may be subject to a wide range of fiduciary, disclosure, and reporting requirements under the Employee Retirement Income Security Act.
- Unions: If your business has union employees, you may need to file certain reports and handle relations with union members in specific ways. See the Office of Labor Management Standards’ website for more information.
- Family and medical leave: The Family and Medical Leave Act (FMLA) requires employers with 50 or more employees to provide 12 weeks of unpaid, job-protected leave to eligible employees for the birth or adoption of a child, or for the serious illness of the employee or a spouse, child, or parent.
- Posters: Some Department of Labor states require notices to be shared or posted in the workplace for employees’ view (for example, alcohol warnings and hand-washing reminders). Fortunately, the elaws Poster Advisor is an easy way to determine which posters you need, and you can use it to get free electronic and printed copies in multiple languages.
3. Antitrust Laws
Any time a company conspires with its competitors, third-party vendors, or other relevant parties, it may run afoul of antitrust laws. These are the issues antitrust laws strive to address, such as the following:
- Conspiring to fix market prices: Discussing prices with competitors—even if it affects a small marketplace.
- Price discrimination: Securing favorable product prices from buyers when other companies can’t.
- Conspiring to boycott: Conversations with other businesses regarding the potential boycott of another competitor or supplier.
- Conspiring to allocate markets or customers: Agreements between competitors to divide up customers, territories, or markets are illegal. This provision applies even when the competitors do not dominate the particular market or industry.
- Monopolization: Preserving a monopoly position through the acquisition of competitors, the exclusion of competitors to the given market, or the control of market prices.
If your company runs afoul of any of these regulations, the federal trade commission might contact you.
A good advertising strategy can do wonders for your business. But before you dive in, you’ll need to make sure that you’re playing by the rules and government regulations. For example, you have to make sure the claims in your ads are not untruthful or purposely deceptive. Using testimonials in your ads comes with additional regulations. Violating these rules can result in fines, which defeats the purpose of your advertising in the first place.
Here’s how you can avoid misleading customers:
- Comply with labeling laws for consumer products, meaning that you list out ingredients and chemicals within your products.
- Know the specific rules for advertising and selling products over the internet.
- Understand the rules for advertising specific products—whether it be alcoholic beverages or 900 numbers. This’ll be specific to your industry, and where working with a lawyer who knows the rules around your business will really benefit you.
- Understand the rules for marketing and advertising over the phone or via email.
- Learn the rules for making environmentally friendly or “green” claims in advertising. More on that below.
5. Email Marketing
Closely related to advertising is email marketing. If your business engages in email marketing, there are separate regulations you’ll need to comply with under the CAN-SPAM Act.
There are several things that this Act regulates, but some of the main components are as follows:
- Don’t use false or misleading headers
- Don’t use deceptive headlines
- Indicate that the message is an advertisement
- Include your business’s name and address
- Show the customer how to opt out of emails, and honor the opt-out requests promptly
Each separate email violation is subject to hefty fines, so make sure you know the ins and outs of this law before you set up your email marketing strategy.
6. Environmental Regulations
You might need to acquaint yourself with various environmental protection laws, depending on your industry or business. This is especially pertinent if you’re marketing, say, cleaning products, food, or anything with claims to be natural, organic, or eco-friendly. You’ll find dozens of environmental rules and regulations that might affect your small business, both at the federal and state level.
The EPA Small Business Gateway is a great resource to make sure your business is in compliance with environmental law. Note that you may also need to consult your state environmental protection agency to make sure you meet their requirements as well.
Businesses with staff and employees wind up amassing a ton of sensitive personal information about their employees. As a result, there are a variety of rules and regulations about how employers must save and secure this data.
If your business discloses an employee’s private information, including Social Security number, address, name, health conditions, credit card, bank numbers, or personal history, not only do various laws exist to keep businesses from spreading this information, but employees can sue for disclosing sensitive information. For instance, the Health Insurance Portability and Accountability Act (HIPAA) prohibits the release of health data without a patient’s permission.
Although employees have clear and specific rights to privacy in the workplace, the rights are balanced against the employers’ privileges to monitor their business operations. It’s important to understand what rights you have as a business to monitor employees, and to be clear and transparent about that monitoring to your employees.
8. Licensing and Permits
We’ve focused on federal laws and government regulations on business so far, but that doesn’t meant that there aren’t ample state regulations to consider for your small business. Many state and local governments have their own requirements for businesses, and they’re just as important to understand as their federal counterparts.
You might be wondering, “do I need a business license?” Indeed, in many states and localities, you do need a business license to operate. This can be particularly important for businesses in heavily regulated industries, such as childcare or health. Without the proper licenses, states can fine your business or even revoke your authority to operate.
As soon as you hire your first employee, you’re legally obligated to purchase workers compensation insurance. All states, with the exception of Texas, require businesses with employees to purchase workers comp insurance.
Workers comp insurance protects both you and your employee in the case of an accident on the job. The employee will receive medical care and compensation for some of the income they lose while injured, while the insurance company will defray the costs of any lawsuit filed by the injured worker.
Other types of insurance generally aren’t required, but it depends on the circumstances. For example, if your business contracts with the government or gets a government-guaranteed loan, then you’ll need to show proof of certain types of business insurance.
10. Reporting Pay Data
If you employ more than 100 people (or more than 50 if you’re a federal contractor), you’re required to report how much you pay each of them, broken down by race/ethnicity, job category, and gender, to the Equal Employment Opportunity Commission each year.
This is to ensure that you’re complying with federal nondiscrimination laws (i.e., that you’re not paying a woman significantly less than a man with exactly the same job title and responsibilities). The report, which is known as the EEO-1 form, has to be submitted by the end of each May.
11. Collecting Sales Tax
Most businesses that sell physical goods must collect sales tax from customers and submit the tax to their state’s revenue department. A few states do not collect sales tax.
In general, the law specifies that a business must collect sales tax in any state with which it has a physical connection (known, in legal terms, as a “nexus”). That nexus might mean a physical retail shop, or hiring employees in the state. Even online sellers might have to collect sales tax in any state that they sell to.
If your business has a nexus, you need to collect sales tax. If you live in Alaska, Delaware, Montana, New Hampshire, or Oregon, you don’t need to collect sales tax anyway—those states don’t have sales tax. Depending on what you’re selling, you might be exempt to begin with.
Does Government Regulation Hurt or Help Your Business?
There are opinions on all sides about whether government regulation hurts or helps businesses. The World Bank ranks the U.S. as the seventh-best country in terms of ease of doing business, but some people think there is still too much regulation.
On the one hand, regulation protects consumers and ensures that all businesses are treated evenly and contributing their fair share to the society. On the other hand, too much regulation can stifle businesses and prevent them from creating jobs and contributing to the economy. The amount of regulation certainly changes as the political tide changes, but it’s always wise to stay up to date on the regulations affecting your industry. If you need help keeping up with regulations, we suggesting consulting a business lawyer.
The Bottom Line
There’s a lot for small business owners to digest as far as government regulations are concerned. The good news is that you’re not alone in making sure that your business is compliant and on the right side of the law. The best thing you can do is check in with your local SBA office, and as the need arises, set up legal representation for your business in the event that you need additional counseling.
- WorldAtlas.com. “Best Countries for Business Friendly Regulations“
Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera.
Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.