US government regulations for business deal mainly with:
- Licenses and Permissions
- Business Structure
- Employment of people
- Health and Safety, including environment
Other US government regulations for business include those concerned with intellectual property protection, privacy, registration of business names and above all, business contracts.
The consequences of failure to comply with government regulations could be very serious for your small business. Take some pains to acquire a general picture of the regulatory environment at your small business start.
US government regulations for business allow you to adopt different structures to carry on the business. You can do business as a sole trader, in partnership with others or as a corporate entity. There are sub-categories under these categories.
The structure becomes significant in the context of
- Your personal responsibility for business liabilities, including third party compensation claims, and
- The tax you and your business pay.
As both these are important considerations, you should select your structure after careful thought.
The structures allowed by US government regulations for business are:
- Sole Proprietorship: The simplest form under which you, or your family, do business on your own. You would be responsible for all business decisions, as also for all business liabilities. If business assets prove insufficient to meet the liabilities, creditors could attach your personal assets. For tax purposes, your business income would be clubbed with your other income and taxed.
- General Partnership: You join other persons, who might bring money or skills needed by the business, in doing business. You and your partners agree on the managerial roles for each, and on how to share profits or losses. As to tax, partners pay tax on their respective shares of the income. The partnership has to file a return with IRS giving details of partners and other information. Your personal assets could be attached if the partnership could not pay its business liabilities. This could happen even if the situation arose from bad decisions by other partners.
- C Corporation (Inc or Ltd): This is a separate entity distinct from you and other shareholders. Your liability for business debts extends only to any unpaid dues on the shares you have taken (and any personal guarantees you have given to the business creditors). Taxation could, however, be heavy. The corporation is taxed on its income and you are taxed on any dividends you receive from the corporation.
- Limited Liability Corporation (Llc): Under this structure, you have the option to be treated either like a corporation or as a partnership for tax purposes.
- Limited Liability Partnership: Individual partners could be protected from liability for actions not under their control. US government regulations for business do not allow LLPs in all states.
- Limited Partnership: The liability of investor partners is limited. There must be at least one general partner with unlimited responsibility.
US government regulations for business also allow structures like S Corporation, Professional Services Corporation and Nonprofit Corporation that are either restricted to certain businesses or not relevant for doing business. You would do best to consult an attorney before selecting your business structure.
Taxation might be the one US government regulation for business that you might not want to hear about. Yet there is no escape from taxes if you do business in the US.
The general pattern is:
- You pay Federal Income Tax to Internal Revenue Service on your business income. Business income means net income, after deducting all business expenses from sales or other type of gross income. Your personal expenses cannot be so deducted and IRS scrutinizes claimed expenses to check whether these are indeed business expenses.
- In addition to your own income tax, you have to deduct income taxes from the salaries to your employees, and pay it to IRS.
- You pay tax on your sales to your state government. Unlike income taxes, however, sales taxes could be passed on to your customer. You collect sales tax from the customer in your invoice and pay it over to the state government.
- You pay municipal taxes to your local council – building tax, profession tax, business license fee, and so on. Contact your local city council office for details of the particular taxes that would be applicable to you.
You are obliged to obtain tax ID numbers from Federal and State departments. Additionally, you have to file different kinds of returns with the taxing authorities. A good tax consultant could help your small business to comply with all these US government regulations for business relating to taxation. Or go to the IRS Web page Small Business/Self-Employed and follow the links to the relevant topics.
US government regulations for business stipulate that you could recruit only those who are authorized to work in the US. These include special visa holders as well as US citizens. Equal Employment Opportunity regulations prohibit discrimination on grounds of race, color, religion, sex, national origin, age or disability.
Fair Labor Standards Act lays down current minimum wage requirements. Exemptions are allowed for apprentices and certain other categories of employees. There are also state minimum wage laws, which differ from state to state. State laws generally override federal law. Hours worked over 40-hour-week must be paid at 1.5 times the regular rate, except for administrative and outside sales personnel. Hour laws also stipulate how breaks and ‘on call’ times must be paid, and conditions relating to prolonged hours of continuing work.
Employees are entitled to paid vacations and sick leave. Even fathers are entitled to leave for attending to newborns in some cases.
Employers must provide safe working places, and there are also programs for ridding work places of drug abuse and terrorism related events. US government regulations for business relating to occupational safety and health are discussed in the next section.
US government regulations for business also make it obligatory on the part of employers to deduct certain dues from employee wages and pay it over to concerned departments. These include payroll taxes, child support payments and wage garnishments (subject to conditions).
You could go to Department of Labor Web site for more details.
Health and Safety at Workplaces
Employers are responsible for finding and fixing health hazards that could result in workplace injuries or illnesses. Small businesses could receive guidance in this matter from Occupational Safety and Health Administration – OSHA – under Department of Labor. OSHA administers the US government regulations for business relating to occupational safety and health.
Occupational Safety and Health Act of 1970 is the main piece of legislation in this matter. The law requires that workplaces must be inspected to identify hazards, employees must be informed of the dangers they are exposed to, safeguards must be put in place to minimize the dangers and employees must be trained in safe working practices.
Occupational safety and health requires joint effort on the part of employers and employees. Employees must be involved in identifying hazards and the employers must be committed to the objective of preventing injuries and illnesses. Where hazards cannot be eliminated, systems that help prevent and minimize the dangers must be in place.
Accidents and illnesses must be documented and reported.
Fair Trading Practices
Under US government regulations for business, fair-trading means mainly two things: Consumer protection and allowing competition. Federal Trade Commission – FTC – is the agency responsible for fair trading issues.
FTC has issued a number of policy statements on advertisements. Deceptive advertising, misleading use of the word Free, bait advertising, comparative advertising and deceptive pricing are some of the issues covered by these statements. The organization recently cracked down on bogus “business opportunity” advertisers for making deceptive earnings claims.
The Fair Packaging & Labeling Act seeks to extend fairness to the contents and labeling of products.
While antitrust laws target mainly larger organizations, even small businesses could be charged for seeking to unfairly dominate niche industries, or geographically limited areas. Examples of actions targeted by antitrust laws:
- Discussing prices with competitors,
- Using industry dominant position to secure favorable product prices from buyers,
- Conspiring with other businesses to boycott a competitor or supplier,
- Agreement among competitors to divide up customers or markets, and
- Preserving monopoly power by acquiring competitors, controlling prices or excluding competitors from a market.
FTC provides a range of information to help you avoid unfair practices that might bring results in the short term, but could cause shutdown of your business in the longer term. Go to the FTC Web site mentioned above to review these.
Business contracts are the essence of business. Contracts are mutual promises that would be enforceable under the law. US government regulations for business recognizes three kinds of laws: Statutory law made by the state, Common law made by judges while deciding cases and Private law of the terms agreed between parties to a contract.
Essentially, a business contract is a promise by one party to do something, in return for adequate compensation from the other party. The contract need not be in writing (except when specifically required by statutory law). However, the agreed terms and conditions would have to be proved with satisfactory evidence if the matter goes to a court.
Other US Government Regulations for Business
Patent and Copyright laws seek to protect your intellectual property i.e. products, processes, designs and creative works that you had developed at considerable cost and effort. If competitors copy these, you could proceed against them.
Privacy laws seek to protect information about individuals that come into the possession of businesses. Businesses are obliged to use this information responsibly and fairly. Spam and other legislation seek to protect the individual against invasion of privacy by businesses.
Comply with the Law
If you are doing business in the US, and fail to comply with US government regulations for business that apply to you, serious and unpleasant consequences could result. These could include penalties, closing down your business, losing the protection of law, and even prison sentences. Compared to these, the bother involved in finding about US government regulations for businesses, and complying with them, is insignificant.