Regulatory Compliance: Federal, State, and Industry-Specific

The Regulatory Landscape for Small Business

Running a small business means complying with regulations at the federal, state, and sometimes local level. The volume of rules can feel overwhelming, but most fall into predictable categories. Understanding these categories and knowing where to look for requirements specific to your industry is the foundation of staying compliant.

Non-compliance is not just a financial risk. It can result in lawsuits, criminal charges, loss of business licenses, and reputational damage that takes years to recover from.

Federal Regulations That Apply to Most Businesses

Employment and Labor Laws

If you have employees, federal labor laws apply from day one. Key statutes include:

Fair Labor Standards Act (FLSA): Sets minimum wage, overtime pay requirements, recordkeeping standards, and child labor restrictions. You must pay non-exempt employees at least federal minimum wage and overtime for hours worked beyond 40 in a workweek.
Occupational Safety and Health Act (OSHA): Requires you to provide a workplace free from recognized hazards. OSHA standards vary by industry. Businesses with 10 or more employees must maintain records of work-related injuries and illnesses.
Family and Medical Leave Act (FMLA): If you have 50 or more employees, you must provide up to 12 weeks of unpaid, job-protected leave for qualifying family and medical reasons.
Americans with Disabilities Act (ADA): Prohibits discrimination against individuals with disabilities. Applies to employers with 15 or more employees and covers hiring, workplace accommodations, and public-facing facilities.
Equal Employment Opportunity (EEO) laws: Title VII, the Age Discrimination in Employment Act, and other statutes prohibit workplace discrimination based on race, color, religion, sex, national origin, age, and disability.

Tax Compliance

Federal income tax: Sole proprietors, partnerships, S corps, and C corps each have specific filing requirements.
Employment taxes: Withhold federal income tax, Social Security, and Medicare from employee wages. File quarterly with Form 941.
Self-employment tax: If you are self-employed, you owe Social Security and Medicare taxes on your net earnings.
Excise taxes: Apply to specific industries and products, including fuel, tobacco, and alcohol.

Consumer Protection

The FTC enforces rules against deceptive advertising, unfair business practices, and privacy violations. Key requirements include:

Truth in advertising: All claims must be truthful, not misleading, and substantiated.
Endorsement disclosures: Paid endorsements and influencer partnerships must be clearly disclosed.
Pricing transparency: Bait-and-switch tactics and hidden fees violate FTC rules.

State-Level Regulations

State regulations add to and sometimes exceed federal requirements. Common areas include:

State Employment Laws

Many states set minimum wages higher than the federal rate. States also have their own overtime rules, paid leave requirements, and anti-discrimination statutes. California, New York, and several other states have significantly more employee-friendly regulations than federal law requires.

State Tax Obligations

Sales tax: Most states require you to collect and remit sales tax on taxable goods and services. Rates, exemptions, and filing frequencies vary.
State income tax: Most states impose an income tax on businesses. Some states have no income tax, while others have rates exceeding 10%.
Payroll taxes: States may require additional withholdings for unemployment insurance, disability insurance, or paid family leave.

Business Registration and Reporting

Annual reports: Most states require businesses to file annual or biennial reports with the Secretary of State.
Foreign qualification: If you operate in a state other than where you were formed, you may need to register as a foreign entity.
Beneficial ownership: Some states require disclosures about business ownership.

Industry-Specific Regulations

Certain industries face additional regulatory burdens. Here are the most common:

Construction and Contracting

Contractor licensing at the state and sometimes local level
OSHA construction standards (29 CFR 1926)
Prevailing wage requirements on government projects (Davis-Bacon Act)
Lien laws that vary by state

Food Service and Retail

Health department inspections and permits
FDA food safety regulations for manufacturers and distributors
Liquor licensing (state Alcohol Beverage Control boards)
Weights and measures compliance

Healthcare

HIPAA privacy and security rules for protected health information
State medical licensing boards
Medicare and Medicaid compliance for participating providers
Clinical Laboratory Improvement Amendments (CLIA) for labs

Financial Services

State money transmitter licenses
SEC and FINRA regulations for securities-related activities
Bank Secrecy Act and anti-money laundering (AML) requirements
State consumer lending regulations

Transportation

DOT registration and operating authority
Hours-of-service regulations for commercial drivers
Vehicle maintenance and inspection requirements
Hazardous materials transportation rules

Building a Compliance Program

You do not need a full compliance department to stay on the right side of regulations. Follow this framework:

Step 1: Identify Applicable Regulations

Make a list of every regulation that applies to your business. Start with federal requirements, then state, then local. Group them by category: employment, tax, safety, industry-specific, and environmental.

Step 2: Assign Responsibility

Someone in your organization must own compliance for each area. In a small business, this might be you. As you grow, delegate specific areas to managers or department heads.

Step 3: Create Policies and Procedures

Document how your business complies with each regulation. Written policies serve two purposes: they guide your team's behavior and they demonstrate good faith if regulators come calling.

Step 4: Train Your Team

Employees cannot follow rules they do not know about. Provide training on workplace safety, anti-discrimination, data handling, and any industry-specific requirements relevant to their roles.

Step 5: Monitor and Audit

Review your compliance status regularly. Conduct internal audits at least annually. Laws change, and your business evolves. What was compliant last year might not be compliant today.

Step 6: Respond Quickly to Issues

If you discover a compliance gap, fix it immediately. Document the issue, the corrective action, and the steps taken to prevent recurrence. Regulators look more favorably on businesses that self-identify and correct problems.

Resources for Staying Current

SBA.gov: Maintains compliance guides organized by business type and state.
DOL.gov: Provides compliance assistance tools for employment law.
FTC.gov: Publishes business guidance on advertising, privacy, and consumer protection.
State business portals: Most states have online tools to help businesses identify applicable regulations.
Industry associations: Trade groups track regulatory changes and often provide compliance toolkits.

What Happens When You Fall Out of Compliance

Consequences vary by the regulation violated and the severity of the violation:

Civil penalties: Fines that can range from hundreds to millions of dollars
Criminal penalties: Willful violations of certain regulations can result in criminal charges
License revocation: Regulators can suspend or revoke your business license
Lawsuits: Non-compliance can expose you to private lawsuits from employees, customers, or competitors
Reputational damage: Regulatory actions are often public record

Prevention is always cheaper than the cure. Invest in compliance upfront and maintain it consistently.