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As a small business owner, you know your niche inside out. You know how to manufacture the best products and offer top-notch services that differentiate you in the industry. And this is all good. But if you neglect compliance or skirt around it, you’ll backtrack your success or lose your company license altogether when the concerned regulatory agencies come knocking.

The cost of non-compliance can be detrimental to a small business just as it is to a blue-chip company. While you may not be fined 1.2 billion Euros like Meta for non-compliant practices, even moderate fines will set you back financially, especially if you’re a budding business. It’s no wonder 42% of teams prioritized compliance training in 2023 and spent 25% of their revenue on compliance costs.  

To stay compliant, you should first establish the primary types of compliance touching your small business.

Regulatory Compliance

Business regulatory compliance involves adhering to the laws and guidelines of pertinent federal, state, and local regulatory bodies. The level of compliance depends on the type of business activities you engage in and your state and local government regulations. 

It means you have to obtain different business licenses to achieve compliance. These include:

  • A Federal license and permit from the pertinent issuing agency. For instance, if you manufacture, import, distribute, or retail alcoholic beverages, you must obtain a license from the Alcohol and Tobacco Tax and Trade Bureau and the Local Alcohol Beverage Control Board.
  • A state, county, or city license and permit per your business activities. Your state’s policy determines how many licenses and permits you need to run your business within their jurisdiction.

HR Compliance

The number of workers in your company determines the federal employment laws you’re subject to. If you only have one employee, you must comply with these labor laws:

  • Immigration Reform and Control Act (IRCA)
  • Equal Pay Act (EPA)
  • Employee Polygraph Protection Act (EPPA)
  • Fair Labor Standards Act (FLSA)
  • Employee Retirement Income Security Act (ERISA)
  • Jury Systems Improvement Act
  • Consumer Credit Protection Act (CCPA)
  • Uniformed Services Employment and Reemployment Rights Act (USERRA)

If you have 15 or more workers, these additional employment laws apply:

  • Americans with Disabilities Act (ADA)
  • Genetic Information Nondiscrimination Act (GINA)
  • Pregnancy Discrimination Act (PDA)
  • Title VII of the Civil Rights Act

With 20 or more workers, you must observe these extra laws: 

  • Age Discrimination in Employment Act (ADEA)
  • Consolidated Omnibus Budget Reconciliation Act (COBRA)

If you’ve employed 50 or more workers, you’re subject to these additional laws:

  • Affordable Care Act Act (ACA) – Employer Shared Responsibility Rules
  • Family and Medical Leave Act (FMLA)

 With more than 100 workers, you must comply with these additional labor laws:

  • Worker Adjustment and Retraining Notification Act (WARN)
  • EEO-1 Report

On top of federal employment laws, you should also comply with the state’s employment laws pertinent to your business. 

Tax Compliance 

The structure of your small business determines your tax obligations. If your business is a sole proprietorship, S corporation (S-Corp), or C corporation (C-Corp), you must file a federal income tax return annually. 

However, if your business is a Limited Liability Company (LLC), tax returns depend on whether it’s classified as a partnership or corporation. If it’s a partnership, all owners declare partnership income by filing Form 1065. If it’s a corporation, you pay ordinary income tax by filing Form 1120.

The federal government issues you an Employer Identification Number (EIN) to manage all your transactions for tax purposes, while states issue you a state tax identification number (state EIN). 

Other types of business taxes you may pay include:

  • Excise tax 
  • Self-employment tax
  • Employment tax
  • Estimated tax
  • Franchise tax

Besides tax, HR, and regulatory compliance, other fundamental types of compliance you must adhere to include:

  • Data Compliance
  • Health and Safety Compliance
  • Corporate Compliance
  • Financial Compliance

Here are Five Practical Tips To Achieve and Maintain Compliance

Consider implementing these tips to keep your small business compliant. 

Develop and Implement a Compliance Program

Craft an in-house compliance program detailing your company’s internal policies and the set of external and industry-specific compliance policies you must adhere to. Your compliance program will serve as a benchmark for your implementation activities. A comprehensive program makes delegating compliance activities to your staff members easy. It also provides a roadmap for oversight, auditing, and course correction. 

Train Your Employees on Compliance Best Practices 

Ideally, businesses should have a dedicated compliance officer who manages all compliance issues. But if you can’t afford to hire a compliance manager, employee training is your next best course of action. When all your workers know the expected compliance standards, they’ll be more prudent to avoid non-compliance issues.   

Consider organizing internal compliance training programs or sending employees to relevant compliance seminars. Make compliance training part of your onboarding process so new employees catch up fast without causing discrepancies.   

Carry the Right Small Business Insurance 

Mistakes happen even when upholding the highest compliance standards. Insurance shields you from financial losses when errors occur. Errors and omissions insurance and general liability insurance are the standard policies most small business owners purchase. 

General liability insurance covers issues such as:

  • Lawsuits costs
  • Employee injuries
  • Libel and slander claims 
  • Damage to a client’s property

Errors and omissions insurance covers the financial losses you may cause a client because of your mistake. For instance, if you or your employees commit clerical errors that cause your customer financial losses, this policy pays for the damages. 

Invest in a Reliable Compliance Software 

Today, data privacy compliance is a critical issue for small businesses. Especially if you handle sensitive personal information such as financial and healthcare data, you’ll deal with more stringent compliance regulations. A robust compliance software automates compliance management, keeping you on the safer side of data privacy laws.  

Leveraging compliance software is particularly critical if you operate across multiple states or countries. These are some of the data privacy laws that compliance software helps you uphold:

  • California Consumer Privacy Act (CCPA)
  • General Data Protection Regulation (GDPR)
  • The Gramm–Leach–Bliley Act
  • Health Insurance Portability and Accountability Act (HIPAA)

Seek Professional Advice from an Expert

Keeping up with the ever-changing compliance laws is quite demanding. While monitoring compliance updates is a must-do, it can derail your progress when your plate is full of other revenue-generating deliverables. Engaging a business consultant saves you time and energy, helping you focus on your core business activities without running non-compliance risks.

Resourcing Edge: Your Small Business Compliance Partner

You can count on Resourcing Edge compliance experts to help you achieve and sustain compliance in all pertinent areas. When you work with us, we’ll serve as your company’s compliance partner and scale as your demands increase. This way, you can focus on growing your business countrywide or globally without worrying about non-compliance. 

Contact us today, and let us help you develop, implement, monitor, and audit your compliance program year-round.

Jami Beckwith

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