Starting your own small business can be overwhelming. From writing a business plan to hiring employees, there are so many factors to consider.
Still, one aspect of small business ownership is refreshingly clear cut: You have to obey the law.
If you want to stay in business, understanding—and following—local and federal regulations is crucial.
The U.S. Small Business Administration publishes free resources to help business owners avoid legal issues. Read on to learn four key types of laws you're responsible for following.
Obey Non-Discrimination Laws
Under federal law, businesses are not allowed to engage in discrimination—period. These laws protect workers from unfair practices that would benefit some, while punishing others.
The U.S. Equal Employment Opportunity Commission (more commonly known as the EEOC) offers a list of non-discrimination laws. Key examples include:
- Equal opportunity regardless of race, color, religion, national origin or sex
- Wage equality between men and women
- Fair treatment for pregnant employees and those with medical conditions
- Non-discrimination on the basis of age
- Equal opportunities for workers with disabilities
In each case, it is also illegal to punish an employee who speaks up about a discrimination issue. Businesses are also responsible for providing reasonable accommodations when needed.
Most businesses don't intend to discriminate while hiring, or otherwise. But unconscious bias can be difficult to identify. Along with understanding these laws, create a workplace culture where discrimination isn't tolerated.
Spotlight: The Americans With Disabilities Act
Among other non-discrimination laws, the Americans With Disabilities Act (ADA) is often misunderstood.
Business owners are responsible for accommodating employees and patrons with disabilities. Often, these accommodations are simple and easy to provide.
For example, a restaurant might create a menu in Braille. Or, a business might create a flexible schedule for an employee who needs regular therapy or treatment.
But did you know that the ADA also covers some chronic health conditions? Often, businesses assume that health issues fall under the Family Medical Leave Act (FMLA).
The difference might seem minor. Yet this can significantly impact the accommodations employees are entitled to receive.
The ADA has been enforced since 1990. Still, like many laws, the ADA has been amended over time—most recently in 2009. Even if you're familiar with the law, make sure you keep up with the latest changes.
Comply With the Tax Code
For as long as the U.S. has existed, Americans have groaned about taxes. Even the Founding Fathers weren't exempt. Benjamin Franklin famously quipped, "In this world, nothing can be said to be certain, except death and taxes."
As a small business owner, it's crucial to comply with both the federal and state tax codes. This includes:
- Accurately reporting revenue and business expenses
- Withholding taxes for employees
- Correctly classifying independent contractors, who are responsible for their own taxes
- Filing taxes by mandated due dates
...just to name a few!
The best way to stay compliant is to hire a great accountant. If you can't afford an in-house accounting department, you can always outsource accounting to an expert.
Keep Licenses and Certifications Current
What do cosmetologists, electricians and building contractors have in common? Their fields all require licenses or certifications. These industries, and many others, set common standards for education and training.
So, what's the difference between a license and a certification? And how are these standards enforced? Here's a quick breakdown:
- Licenses: Regulated and issued by state government or educational institution.
- Certifications: Usually issued by a private organization or society, but may be required by a state government.
Note that some fields may require a license, with additional certifications for specialities.
These standards are good news for consumers, who receive consistent—and safe—services. As a business owner, it's important to understand the requirements in your particular industry.
Stay in Touch With State and Local Regulations
While federal laws do set important standards for businesses, state and local regulations matter, too.
After all, state and local legislators set standards for issues such as:
- Minimum wage
- Requirements for paid sick leave
- Equal pay requirements
Compliance with these and other regional laws may be as straightforward as keeping up with news of changes. (And adjusting business operations as needed.)
For franchises that operate in more than one state, the situation can become more complex.
In January 2020, California began enforcing a law known as AB-5. This law aims to protect gig economy workers, who often function as employees but do not receive the same benefits or protections.
The law also shifted classifications for independent contractors. This led to uncertainty, as businesses in a wide range of industries wondered how to interpret the law.
AB-5 is an example of a state law with wide-ranging implications. Business owners outside of California should keep tabs on the situation. After all, their own states might soon implement similar rules.
As a small business owner, your responsibilities are complex and important. As you hire employees, offer services and sell products, it's vital to always keep your legal responsibilities in mind, too.