The government is a big part of your financial picture. For example, we’ve talked a great deal about taxes, from politically-charged tax cuts to the best and worst states for small business taxes. However, just discussing taxes misses the other essential—and expensive—governmental influence on your balance sheet: small business government regulations and taxes.
In fact, according to a Gallup Small Business Index Poll, small businesses are most likely to cite government regulations as the most important problem today. To compare, 22 percent of small businesses were most concerned with government regulations, while 7 percent pointed to cash flow problems as the primary issue. While small business government regulations can clearly make life harder, the more you know, the easier it is to avoid any legal snafus. Here are four of the most important do’s and don’t’s when it comes to small business government regulations.
Small Business Government Regulations: The 4 Do’s and Don’ts
1) Don’t say your product will provide immortality, true love or magical powers - You’ll sell a lot more of your wares if you do, but this kind of false advertising could shut your business down. The primary regulation behind marketing is the FTC’s Truth in Advertising Act, although local and state laws may apply as well. You basically have to remember three big rules: don’t lie, don’t make claims without evidence and don’t make false promises. In short, don’t puff up your product. Just this year, reports ABC News, Nutella had to pay $3.5 million to customers for claiming their chocolate spread was a health food.
2) Don’t hire babies as CEOs - As regulated by the Fair Labor Standards Act, the minimum age of employment is 14 years old (for non-agricultural jobs, at least). Between this act and Equal Employment Opportunity Laws, we can break employment law into it’s own set of do’s and don’ts. Do: provide the legal minimum wage, warn your employees about job-related dangers, pay overtime and keep track of the hours worked. Don’t: harass your employees or pay employees less or fire them based race, color, religion, sex or national origin.
3) Do choose an identity and stick with it - When you first start your business, you will have to choose a particular type of business structure. Whether it’s a sole proprietorship, partnership or corporation, you will be subject to particular structure laws. To start with, different structures have to file different tax forms. Ultimately, these structures also have significant legal implications for the owner: the type of business will determine the owner’s personal liability. However, small business government regulations can be flexible at times. For example, if you business changes shape over time, you do have the option to change business structure.
4) Do get real about real estate - Every small business owner knows that location is central to success, and the government knows it too. Property is zoned for commercial and residential use, and each area has its own unique regulations. Even home-based businesses have zoning laws, according to the Small Business Administration. Laws typically cover every aspect of your small business location, including external appearance and traffic, possibly limiting the number of visitors you can have. Some areas may even prohibit certain types of business. This is why you must look into small business government regulations carefully: the last thing you want is to move just as you’re getting started.