Managing a business involves handling your day-to-day operations and complying with state and federal requirements. You have more freedom and flexibility in how you shape and grow your business, but compliance leaves little room for error.
Complying with state and local requirements is mandatory. Compliance allows your business to continue operating without interruption, and it’s important to stay on top of everything for a consistent flow.
As a business owner, here’s what you need to know about checking your compliance status and keeping your business in good standing.
What Is Business Compliance?
Every business is subject to compliance requirements dictated by local, state, and federal laws. Each type of business may have a slightly different compliance checklist, but the general idea is still the same. You must check every compliance item off your list to operate your business without roadblocks, fines, or penalties.
Compliance issues like taxes, payroll, employee benefits, overtime laws, workplace safety, and accurate record-keeping are important because compliance serves as proof that you’re running your business by the law.
Why Is Business Compliance Important?
Compliance keeps businesses in check. It’s designed to protect the public as well as employees of a business. Rules and regulations exist to ensure that businesses are abiding by the law and playing an appropriate role in their communities. Without compliance, there would be no way to hold businesses to a legal and ethical standard.
What Are the Consequences for Non-Compliance?
The consequences for non-compliance vary based on the type of non-compliance. The most common consequences for non-compliance are fees and fines scaled to the duration or level of an instance of non-compliance.
In some cases, a business may be ordered to stop operating until they’ve become fully compliant. A loss of income combined with outstanding fees or fines can be exceedingly difficult for a small business to overcome. This scenario may cause an insurmountable financial burden that your business may not recover from.
For issues of non-compliance where a crime may have been committed, such as certain tax compliance scenarios, it’s possible for business owners to face criminal penalties, including incarceration. This isn’t something you should worry about if you have a trusted accountant, you reliably report your income, you pay the proper amount in taxes, and all of the income into your business is legal money.
What Does Your Business Need in Order To Be Compliant?
Mosey’s compliance checker tool simplifies the process of checking business compliance in several key areas. The areas of payroll compliance, HR compliance, tax compliance, and registration compliance are among the most important areas of rules and requirements for business owners to familiarize themselves with.
Here’s a closer look at each type of compliance:
Payroll Compliance
Ensuring your business is sticking to all legal regulations regarding payroll processing is crucial for overall business compliance. For example, employers are required to establish a reemployment tax before they hire employees. In New York, employers pay .075% of their quarterly wages subject to contribution to this fund. After the initial setup process, employers are required to file quarterly reemployment tax forms.
Payroll compliance also involves withholding the proper amount of payroll taxes, as well as filing payroll tax returns.
You should also familiarize yourself with overtime pay laws and which types of employees may be eligible for overtime if they work more than 40 hours in a week. It’s important to check the Department of Labor’s employee classification guide, as the law dictates that their classifications supersede your internal employee classifications. In Massachusetts, for example, employees must be paid 1.5 times their regular hourly rate for any hours worked beyond 40 hours per work week.
HR Compliance
Employers must abide by human resources regulations even if they don’t have a formal HR department. HR compliance involves anything you do when you hire or terminate an employee.
Many states require employers to post specific employment-related notices or signs in areas where all employees can easily access them, like by a time clock or in a shared meeting space. You’ll only have to post these signs once unless they are formally updated with new versions.
You’re also responsible for a one-time workers’ compensation setup. You must have an established workers’ compensation registration even if your employees never utilize the program.
There are two compliance requirements you’ll need to consistently maintain at a minimum. The first is the proper onboarding of every person you hire, including all mandatory forms they must complete to verify their eligibility to work in the United States. The second is the employee’s final paycheck if they decide to leave the company or are terminated for any reason.
Tax Compliance
Many businesses are required to collect and remit sales tax to the state. Applying for a sales tax permit is mandatory in these situations. It’s also necessary to remit sales tax every quarter.
You must file an initial report for your estimated corporate income tax or franchise tax payment. You’ll make four payments annually and file your corporate tax return annually. As an example, in Delaware, all active Domestic Corporation Annual Reports and Franchise Taxes for the previous year are due on or before March 1st annually, and are required to be filed online. If you fail to file your report and pay the required franchise taxes, there is a penalty of $200.00 plus 1.5% interest per month on the tax and penalty.
Registration Compliance
Aside from sole proprietorship structures, business registration is necessary in almost all situations. You’re required to file an annual report with the state. You may also be subject to local tax requirements depending on the city in which your business is based. A business license, DBA, and employer identification number are typically a necessity.
If you intend to conduct business in multiple states, you may need to foreign qualify in those states. Most types of business transactions can only be conducted with a foreign qualification, aside from certain one-time transactions like the purchase of real estate or the process of opening a bank account.
It’s important to meet all foreign qualification compliance requirements before you conduct business in a new state to avoid late fees for filing after you’ve been found non-compliant.
The foreign qualification process often has sub-requirements, like designating a registered agent. Expanding your business into a new state may open the door to additional compliance requirements specific to the local area.
How Can You Check Your Business Compliance Status?
Mosey’s compliance check tool simplifies the process of checking your compliance status. Understand where your business falls at a quick glance by seeing all the requirements that apply to you. All you need to provide is your basic contact information, your business name, business structure, the state where your business is registered, and your payroll provider.
Mosey taps into a national database that includes every compliance requirement you may need to meet — compliance items are categorized by payroll, HR, tax, and registration. Select a subcategory to view every compliance matter within that category.
As part of our business compliance platform, Mosey will direct you to each necessary form and specifications for each requirement. We’ll also show you how often you need to complete each item, as some compliance processes are one-time only while others are quarterly, annual, or based on specific occurrences within your business.
Staying Compliant With Mosey
Compliance is important, but it doesn’t need to be stressful. As an entrepreneur or a small business owner, you have a lot on your plate — let Mosey take the stress out of compliance.
Between our compliance checker and our automated compliance dashboard, staying on top of state and local requirements has never been simpler.
Schedule a demo with Mosey to learn how we can help you automate your way to success.
