Small businesses are the backbone of U.S. economic growth; They pay taxes, create jobs and support local communities. However, when it comes to complying with the laws and regulations that govern their operations, they typically face these and other legal hurdles: Despite the prevalence of small businesses, the Chamber Foundation`s literature review notes that federal regulations and their infrastructure are growing and disproportionately impacting small businesses and free enterprise in America. It is estimated that federal regulations alone cost the U.S. economy up to $1.9 trillion annually in direct costs, lost productivity, and higher prices. The cost of small businesses with 50 or fewer employees is almost 20% higher than the average for all businesses. Last year, the U.S. Chamber of Commerce Foundation conducted an extensive literature review to understand the full impact of federal, state, and local regulations on small businesses. We complemented these efforts by speaking with small business owners and regulatory experts, as well as approximately 64 representatives from chambers of commerce across the country. The best way to deal with federal regulation is through trial and error. That is, if a new policy is to be implemented, it can be changed if there are problems. The policy should also be implemented in small increments so that if it doesn`t work well, it can be easily reversed. “We`ve seen a number of states adopt or consider additional targeted regulatory requirements that are very specific related to [sexual harassment],” Trafold said.
“It`s a trend that has grown a bit and is having a direct impact on businesses.” A new startup owner also needs to be aware of the complex labor laws that affect wages and schedules. They must also comply with other legal requirements affecting OSHA workplace safety standards, unions, and antitrust laws. If the company hires 15 employees, it must comply with regulations overseen by the Equal Employment Opportunity Commission (EEOC). In addition, the Federal Trade Commission`s goal is to keep an eye on online commercial advertisements with specific regulations to prevent sensitive consumer information in electronic transactions. Finally, the Fair Trade Packaging and Labelling Act ensures that all companies honestly adhere to their product`s ingredients, list them in the right order, and provide accurate nutritional information. Labor laws and other employment-related trade laws and regulations are also crucial for small businesses. The Fair Labour Standards Act defines how contractors must treat employees by establishing minimum wage and overtime guidelines. However, minimum wage requirements can also vary from state to state. Therefore, overtime pay must be at least one and a half times higher than the standard wage rate.
The extension of jurisdiction by the EPA was originally adopted in 1948. It regulates pollution control in America`s rivers, lakes, and streams. The law was expanded in 1972. That means many more small businesses will have to obtain federal permits that could amount to thousands of dollars for construction or development projects near these waters. Government trade regulations help reduce costs for some businesses by avoiding unnecessary expenses on frivolous lawsuits, fines, and fees. Let`s say a company has a good compliance record. In this case, it can avoid costly lawsuits from disgruntled customers seeking compensation for damage caused by the product or service they purchased. A report for the U.S.
Chamber of Commerce Foundation, “The Regulatory Impact on Small Business: Complex. Laborious. Costy” examines how regulations throw sand into the gears of this engine. Some companies relocate their production facilities to other countries with fewer regulations or do not regulate certain products. For example, many technology product companies have moved their manufacturing facilities to other countries with low labor costs, cheaper labor, and less regulated, such as China, India, Malaysia, India, and Mexico. It is difficult for a new company to make a profit if it must first spend money on equipment for means of production and regulatory fees. Federal, state, and local regulations can create barriers to entry for new businesses that might otherwise get off to a good start. It`s important to understand the impact of government regulations on small businesses before creating one. More than 45% of U.S. GDP is a direct result of the output of small businesses. Companies with fewer than 100 employees employ half of the U.S.
workforce. Marketing is important to expand a company`s network. However, the government has enacted laws regarding advertising. It`s about making sure companies stay honest in their marketing campaigns. Once it is determined that a company has modified, omitted or added information, it can be penalized. Small businesses are more affected than large companies because they often don`t have the resources to hire attorneys and other professionals to help them meet the requirements of federal, state, and local regulations. The impact of government regulations on small business owners is felt daily, and these regulations are constantly changing, making it difficult for them to keep pace. Let`s take a look at some of the most common government regulations and see how they can affect them.
For more information on applicable environmental regulations, visit the EPA website. The cost of regulatory compliance can be an issue for small businesses, as most don`t have enough capital to pay for all necessary compliance-related expenses, such as equipment upgrades, additional training, and employee salaries. Therefore, they may need to absorb these costs by reducing other expenses such as recruiting and hiring new employees. “The conversation about pensions has slowed down a bit because there has been some movement at the federal level about potential legislation that would make it easier for small businesses to launch pension plans,” Trabold added. “There could be an agreement on this in Washington, so some states could take a wait-and-see attitude. So there`s a temporary pause, but it`s definitely worth a look. Employers must comply with federal laws that cover everything from worker safety and discrimination to payroll taxes, health benefits, unemployment insurance and workers` compensation premiums. Here are some ways small businesses can deal with these regulations: In the digital age, advertising is not limited to TV commercials and billboards.
As advertising has spread to the web, so has the reach of these government regulations. Keep a close eye on your advertising in the following digital marketing media: Small businesses are more vulnerable to economic downturns because they lack employees to support themselves during difficult times. Federal regulations can also make things more difficult for small business owners because they have less capital available for costs such as building permits and royalties, resulting in lost productivity and fewer start-ups. The Federal Tax Code is the most important regulation because it consists of thousands of pages, some of which are difficult to decipher. Tax laws and regulations can also affect your personal finances and financial health. If you don`t know how to interpret these rules, you can lose valuable deductions and credits. According to a 2015 NBA survey, 60% of administrative burdens come from corporate taxes. Small business advocates are at stake for small business success.
Some rules should be removed if they prove to be unnecessary or outdated. This can be achieved by analysing the impact of current regulations on business and the economy. For example, OSHA has removed some regulations that do not contribute to the health and safety of employees. In addition, 469 other proposed rules have been withdrawn. The first step is to collect the data needed to show policymakers how small businesses are being held back. This report marks the beginning of that process. Overall, businesses need more government encouragement than more regulations to contribute to a strong economy. As the impact of government regulations on small businesses reduces opportunities, business advocates need to build new arguments that are not unaware of why regulations are being implemented. Many regulations are the result of public complaints about large companies defrauding consumers.
Government leaders then create new laws to eradicate fraudulent business practices, only to deter small businesses that can`t afford legal fees from understanding the rules. In the wake of the #MeToo movement, states and cities are rapidly expanding training regulations and sexual harassment policies. New York and Delaware are among the states that have passed laws with specific training requirements, while New York City and other cities have tightened policies on issues such as disclosure, complaint escalation channels, and tougher penalties for violations of sexual harassment policies. Many government agencies regulate various aspects of small business management, including labour, tax and environmental protection agencies.