Concerning a regulatory inquiry, your company’s top objective is to address the underlying issues and come to an agreement when necessary. However, businesses may confront short schedules and an urgent need to identify a regulator that suits their requirements after having approvals in regulations.
This article serves as a guide if you want to fully understand government regulation of business.
What is government regulation of business?
Government regulation of business is an official rule for companies to follow. The U.S. government has enacted various business rules to protect workers’ rights, the environment, and businesses’ power in a business-driven society.
Government regulation of business governs the formation of companies and their sale. This practice field includes assigning rights, drafting and delegating responsibilities, violation of contracts, transactions, and contract penalties.
When it comes to restrictions enforced by governments, employees, taxes, bureaucracy, and international trade are the four primary areas. However, some administrative agencies have limited power to control behavior within their areas of responsibility.
Federal agencies that will help you with government regulations
Aside from understanding the government regulation of business, it is essential to be familiar with several government agencies. Here are the vital government agencies that will help you fully understand the business regulations:
The Federal Trade Commission (FTC)
The FTC’s goal is to protect consumers and competition by stopping unfair, misleading, and anti-competitive business practices through law enforcement, advocacy, and education, without making it too hard for legitimate businesses to do their jobs.
FTC was made in 1914 to protect consumers from business practices that were dishonest or hurt competition. These are setting prices, creating monopolies, and lying on ads.
The Environmental Protection Agency (EPA)
Since 1970, EPA has been responsible for environmental protection as an independent executive agency under the United States Federal Government (USG).
The EPA sets limits on how much greenhouse gas emissions are allowed and other contaminants. Companies that follow these rules have said that the restrictions are costly and hurt profits.
The Securities and Exchange Commission (SEC)
Created in the wake of the Wall Street Crash of 1929, the U.S. Securities and Exchange Commission (SEC) is an independent federal agency. Market manipulation is a significant concern of the SEC, and it works tirelessly to combat it.
The SEC regulates initial public offerings (IPOs), complete disclosure, and stock trading restrictions.
The Food and Drug Administration (FDA)
The United States Food and Drug Administration (FDA) is a federal department under the Department of Health and Human Services. Companies in the pharmaceutical industry frequently claim that the FDA delays the approval and commercialization of certain drugs. Even if a medicine has been demonstrated to be beneficial, they typically necessitate additional or more comprehensive clinical trials.
10 Business Regulations to Know
All levels of government regulate firms. Governments regulate environmental, employee, and advertising policies. Here are the ten business regulations you have to understand to avoid fines and penalties from the government.
1. Tax code
The Internal Revenue Service (IRS) has issued comprehensive information about small business owners’ federal tax obligations. Small business owners should be aware that taxation is a major priority for government regulation.
As a result, familiarize yourself with your company’s specific tax obligations, payment deadlines, and the best way to set up your firm for future tax payments.
You are obligated to pay a specific type of tax depending on the nature of your business.
Business tax restrictions come in many forms:
- Taxes on the Earnings: Businesses must pay their income taxes on a pro-rata basis. Each year, they are also required to submit a tax return.
- Estimated Income Tax: The Internal Revenue Service defines a regular tax payment as a combination of income tax, self-employment tax, and the alternative minimum tax.
- Employment tax: Companies with employees are required to pay employment taxes. You must pay Social Security, Medicare, income tax withholding, federal income tax withholding, and federal unemployment tax if you have employees.
- Excise Tax: The IRS is responsible for deciding excise tax on a wide range of products, services, and activities. Companies acquire things and pay excise taxes to the government.
2. Test for self-employment by independent contractors
Companies may find it more challenging to designate employees as independent contractors in light of new Department of Labor guidance. Whether you’re an employee or an independent contractor, there’s much at stake.
Independent contractors do not have the same legal protections that employees enjoy at work, such as the right to a minimum wage and overtime pay, unemployment insurance, and workers’ compensation insurance.
According to Wage and Hour Division guidance published last summer, workers who depend financially on their employer are employees. Instead of emphasizing a company’s ability to manage things like hours worked by employees, this advice emphasizes the economic relationship between a worker and a company.
3. Antitrust laws
Antitrust laws aim to prohibit exploitative commercial activities and ensure fair competition. It prohibits conspiracy against third-party providers or competitors. This regulation encompasses questionable corporate practices, such as market allocation, bidding wars, price-fixing, and monopolies.
Federal antitrust laws have two primary goals:
- Stop unethical things that are against the law in the United States
- Prevent the extinction of competition in the market
If there is no competition, a single company will take over the market, forcing weaker competitors out of business.
According to federal statutes, states can impose new antitrust regulations if necessary.
4. Advertising laws
In advertising standards in the United States, businesses must tell the truth in their commercials and refrain from using misleading or deceptive tactics. Every U.S. business must comply with Federal Trade Commission (FTC) truth-in-advertising standards and the Fair Packaging and Labeling Act of 1966.
For example, when using testimonials in your adverts, you must adhere to additional restrictions, such as ensuring that the testimonials are authentic. Not following these guidelines will leads to consequences or penalties.
Advertising rules regulate the following areas of marketing:
- Indications of good health: Advertisements for nutritional supplements, food, over-the-counter medications, and other health-related products must only indicate facts.
- Ads that promote environmental awareness: Scientific evidence is required to back up statements like “Green Products” made by companies.
- Made in the United States of America: Companies must show how many of their products came from the United States.
- Promoting products online: Online advertising is very in demand today. However, the regulations require organizations to adhere to transparent and honest standards.
- Telemarketing: By law, telemarketing calls without permission are illegal.
5. Labor law and overtime rules
The U.S. Department of Labor adopted a final regulation that will allow many employees to be eligible for overtime compensation. That’s because the proposed rule almost raises the wage threshold at which overtime pay is mandated.
They would be free from overtime compensation if they meet job duties that define them as an executive, administrative, or professional personnel. According to businesses, they’ll be obliged to decrease hours and hire more part-time workers due to the regulation’s costs.
The following are a some of the more common labor regulations:
- Hours worked and pay: The Fair Labor Standards Act (FLSA) sets overtime pay and earnings rules. The Department of Labor mandates that employees have the federal minimum wage and 1.5 times the regular pay rate for all hours worked over the 40-hour workweek.
- Employee health and safety: Under the Occupational Safety and Health Administration (OSHA), businesses must provide work and a workplace free from recognized, significant dangers. Inspections and investigations in the workplace are used to enforce the OSH Act.
- Equality of access: The Equal Employment Opportunity Commission (EEOC) asserts that employers with more than 15 workers must follow equal opportunity laws. For example, the Equal Employment Opportunity Commission (EEOC) prohibits some employment practices from influencing hiring decisions based on a person’s gender, color, religion, age, or handicap.
- Employees who are not citizens of the United States: Employers require to check that their employees are legally permitted to work in the United States of America. Numerous job opportunities exist, with requirements, restrictions, and time limits for work authorization for employees who are not legal citizens.
- Ensuring the well-being of workers: The Employee Retirement Income Security Act (ERISA) imposes numerous fiduciary, transparency, and reporting obligations on employers which offer pension and welfare benefit programs.
- Unions: If your company employs unionized workers, you may be required to file specific reports and conduct union relations in specified ways. Find out more on the website of the Office for Labor-Management Standards.
- Allowances for medical and family reasons: As part of the Family and Medical Leave Act, firms with 50 or more employees must give qualified workers 12 weeks of unpaid, job-protected time off to take care of a family member who is very ill.
- Posters: There are several jurisdictions where the Department of Labor has mandated that alerts for employees’ viewing be disseminated or placed in the workplace.
6. Email Marketing and the Can-Spam Act
The Can-Spam Act empowers the intended recipients to cease receiving your business emails if you use commercial emails to sell your products or services. Violations of the law might result in severe punishments.
As a result, the law’s primary goal is to ensure that recipients have the ability to opt-out of receiving your commercial emails.
Can-Spam Act strongly suggested these guidelines:
- Companies must refrain from using misleading header information in their emails.
- Commercial messages must include a physical address that is correct and valid.
- Make it clear to your customers that they can opt-out of getting future emails from you, and provide them with simple instructions on how to do so.
- The recipient’s opt-out request should be handled within ten business days without charging or requiring personal information.
- Even if you hire a company to do email marketing for you, the law says you must still keep an eye on them.
7. Privacy
Businesses with workers and staff collect much personal information about those people. As a result, several rules and regulations govern how businesses must save and secure confidential information.
A business is illegal to release an employee’s personal information, such as their Social Security number or name, address, and health conditions. Employees have the right to file a lawsuit against a corporation for releasing their personal information.
Understanding your company’s rights to monitor employees is critical, as is communicating those rights to your employees in a way they can understand. However, the management must draw a line between them and their employees’ privacy.
8. License and permit
For businesses, understanding state and local government regulations are equally as critical as understanding federal ones because many states and municipalities have their standards.
Every business requires a company license and complies with state and municipality business regulations. It can be particularly critical for enterprises in highly regulated industries, such as healthcare. States can take away your right to operate when you don’t have the required permits.
9. Employee insurance
Workers’ compensation insurance must be available as soon as you recruit your first employee. Compensation insurance is a vital requirement by law in all states.
Workers’ compensation insurance protects the company and employees in the event of an on-the-job injury. While the wounded worker receives medical care and compensation for part of the lost wages, their insurer will cover some of the costs of a potential lawsuit.
Although it isn’t necessary, getting additional insurance is best in case of an accident or injury. Your company may be required to show proof of certain business insurance forms if it contracts with the federal government or receives a government-guaranteed loan.
10. Environmental regulations
Depending on your line of work, you may have to get familiar with various environmental protection business regulations. Consider this if you’re in the business of selling eco-friendly products such as cleaning supplies or food.
You can use the EPA Small Business Gateway to ensure your company follows environmental business regulations. Check with the state’s environmental protection agency to see if there are any other rules you might need to comply with.
If your company sells products that claim to be natural, organic, or eco-friendly, this regulation is critical. Your business may be subject to a variety of federal and state standards relating to environmental safety.
Also, pollution and waste management standards are vital for every business.
Reason business needs government regulations.
Companies’ organizational structures, geographic locations, personnel classifications, and many other aspects are all impacted by government restrictions. Employers and employees may be more concerned about specific rules than others.
Many regulations exist on how much and what kind of rules are beneficial to the company. Businesses and customers are impacted by complex business regulations and codes, which can positively and negatively affect both parties.
Why you should follow government regulations
When it comes to government business regulations, you should not ignore them. To begin a business, obtain a business or occupational license, recruit personnel, pay taxes, enforce contracts, or even close a company because of excessive federal laws and policies, small enterprises must deal with the tight constraints imposed by state and local governments. Small enterprises in the United States are challenged by several regulations, one at a time.
However, some business regulations are more onerous than others. Some restrictions, on the other hand, apply to almost every firm, even if they aren’t directly related to yours. Some instances of rules and policies currently influencing or will impact small enterprises in the United States are outlined below.
Government regulations takeaways
- Companies must observe government restrictions or risk penalties.
- Small business owners may find small business regulations burdensome, but they have benefits. It protects enterprises in tough times by offering loans, information, and services in good times and bad.
- It isn’t easy to know all the requirements for your firm, so you should hire a professional, or you may try a consultant. A company lawyer can help you succeed and earn without breaching the law.