As a Small Business Owner Do You Know the Laws that Apply to Your Business?
In the early stages of starting a business, entrepreneurs often face many problems, most of which require time and money to evaluate and resolve. That being said, there are certain investments a business owner can make that will save a lot of time and money in the long run – one of which is evaluating what laws are applicable to the business and how to best comply with such laws.
Failure to comply with applicable laws can lead to fines, penalties, corporate liability and even personal liability, depending on the facts and circumstances of each case. Noncompliance isn’t the only issue to think through – the interaction between these laws and the potential impacts on your business are also important considerations.
There is no one-size-fits-all answer to what laws apply to a particular business. In this blog post I attempt to give you a framework to begin to evaluate what laws may apply to your business. Of course, this list is not intended to be exhaustive or a replacement for consulting an experienced business attorney, but I hope that you will find it to be helpful.
Local laws, commonly referred to as ordinances, may be applicable to your business depending on what city, town or municipality it is located in. Ordinances may require certain licenses, permits and real estate requirements. For example, the City of Lancaster recently approved an ordinance which requires businesses with locations within the city limits to register by filling out a form and paying a business registration fee of $35.00. Ordinances can typically be found on a local website or by contacting the municipal office.
State Laws and Regulations
State laws are enacted by the state legislature and may apply to your business by virtue of being organized under the laws of a particular state, or if your business meets certain statutory criteria, such as having a physical location in the state, marketing or conducting other business operations within a state. State laws often point to regulatory bodies to develop specific regulations which further interpret and perhaps enforcement of the laws in a particular area. An example of such a regulatory agency would be the Pennsylvania Liquor Control Board, which issues regulations interpreting the Pennsylvania Liquor Code. The Bureau of Liquor Control and Enforcement within the Pennsylvania State Police then enforces the Liquor Code and PLCB regulations.
Federal laws generally apply to companies doing business in the United States or its territories. The federal system is very similar to what is described above for states – often times, federal law delegates authority to federal agencies which may issue regulations and enforce the law. For example, the Federal Alcohol Administration Act generally provides for regulation of businesses engaged in the alcoholic beverage industry, and delegates to the Alcohol and Tobacco Tax and Trade Bureau under the U.S. Department of the Treasury to regulate matters such as labeling and advertising of alcoholic beverages.
Applicable tax laws can be determined by many factors, including goods or services provided by the business, the entity structure you have chosen, whether the business has employees, where the business is physically located, whether it owns real estate and many other factors. Tax laws can be implemented from the federal, state or local government levels.
Applicable federal taxes may include income tax, self-employment tax, employment taxes such as social security and Medicare taxes, and excise tax. For most business structures you must apply for a federal Employer Identification Number (EIN) for tax administration purposes.
Pennsylvania businesses enterprises must file a Pennsylvania Enterprise Registration Form (commonly referred to as a PA-100) if they are subject to certain taxes and services administered by the Pennsylvania Department of Revenue and the Pennsylvania Department of Labor & Industry, including but not limited to corporate net income and capital stock franchise tax, employer withholding, sales and use tax, and workers’ compensation coverage. Local taxes commonly include property tax, earned income tax, local services tax and hotel tax and may be assessed by county, municipality, or both.
In a broad sense, international law does not have a defined area or central governing body like federal or state legislatures, rather it is defined by international customs, agreements, treaties, accords, charters, protocols and may be enforced by specific tribunals or the parties themselves by agreement.
More narrowly, if you are doing business with companies or customers from other nations, it is possible that the laws of that nation or political subdivision may apply.
As a business owner, the laws that apply to your business will vary depending on many factors such as the locations where you do business, your state of organization or contractual obligations. It can be difficult to make sure you haven’t missed an important law, regulation or ordinance that may apply to your business operations. Experienced accountants and lawyers can help you avoid future issues by making sure your business and business practices are structured properly under various laws.