How to Stay Compliant as an SMB — A Comprehensive Checklist

Staying compliant suddenly becomes difficult as your business starts to grow. Each state has its own set of regulations to adhere to, and then there are federal and internal regulations to consider as well. 

As anyone who’s struggled with compliance will tell you, falling behind happens slowly — and then all at once. One task falls through the cracks, then two, then more… and, before you know it, you’re facing some dire consequences. Failure to adhere to state and federal regulations can land your company with heavy penalties. And that can tank your business before it reaches its true potential.

That’s why it’s smart to plan ahead with small business compliance. Don’t wait until it’s too late and your standards are already starting to slip. A PEO partner can help your SMB stay compliant, no matter how complex the tasks. In fact, the more complex the better — that way you get a huge weight taken off your shoulders, while the PEO ties up all loose ends.

What do we mean by SMB compliance?

SMBs have both internal and external compliance regulations to manage. Let’s kick things off by explaining the differences between internal and external compliance rules, plus the need-to-know examples.

External requirements

External requirements are the regulations your company has no control over. This can be dictated by the industry you operate in as well as federal, state or local laws. Some of the regulations may come with fees, while failure to adhere to external requirements can result in large financial penalties. 

Examples of external requirements include: 

 

  • The Fair Labor Standards Act – This one is mandatory for all businesses, big and small. The FLSA outlines the US minimum wage, overtime pay, and recordkeeping standards for full- and part-time workers. It’s a nationwide act, but the exact requirements can vary by state — so do your homework!

 

  • OSH Act of 1970 – The Occupational Safety and Health Act is a law passed by the U.S. Congress to ensure safe workplace conditions around the country. This is a federal regulation with major penalties if not adhered to

 

  • Antitrust laws – Antitrust laws, also referred to as competition laws, are statutes developed by the U.S. government to protect consumers from predatory business practices. This is another federal regulation with strict requirements and heavy fines

 

  • California Family Rights Act (CFRA) – CFRA authorizes eligible employees to take up to a total of 12 weeks paid or unpaid job-protected leave during a 12-month period. This only applies in the state of California

Local legislation can be tricky to navigate and can change often. Make sure to keep in contact with local offices to ensure you stay compliant. 

Internal requirements

Internal requirements vary depending on the size and structure of your business and how it operates. They are designed to provide transparency for your organization; demonstrating to others that it operates with integrity. 

These regulations can also be put into place to ensure business-wide compliance with external requirements, offering strict structures that provide little opportunity for accidental slip-ups. For example:

  • Corporations – Corporations have the strictest internal requirements. They are required to hold initial and annual meetings with shareholders and directors, record minutes from each meeting, adhere to bylaws and control stock in line with stock trading regulations

 

  • LLCs – An LLC can have lighter internal requirements, but these businesses are advised to keep accurate records and hold annual shareholder meetings

There are smaller business structures that have little to no internal requirements, such as Sole Proprietorship. However, for these businesses, it’s still good practice to keep accurate records to fall back on in the event of legal proceedings. 

How to stay compliant as an SMB

Trying to stay compliant can be a minefield — take too many wrong steps and you’ll be hit with hefty fines. But, don’t worry, we’ve put together a handy checklist to keep you on the right path.

Please note that this is not an exhaustive list of external requirements. You should always keep updated by checking in with local authorities and the U.S Department of Labor, or asking your PEO.

Payroll

Payroll is one of the most important areas of compliance for your employees and your business. Make sure you’re up to date on regulation such as:

  • Wage and hour laws, which govern minimum wage, overtime pay, and recordkeeping practices, etc. 
  • Equal pay laws
  • Regulations governing how employees are paid

Tax

Just because you’re running an SMB doesn’t mean that your tax requirements are lessened. All businesses must adhere to:

  • Income taxes
  • Employment taxes
  • State taxes
  • Sales tax
  • Franchise tax
  • Gross receipts tax

Benefits

SMBs are required to offer certain employee benefits, depending on the size of the business.

  • Unemployment insurance – The Federal Unemployment Tax Act (FUTA) requires you to pay taxes toward both federal and state unemployment funds
  • Health insurance – If you have more than 50 full-time employees, the Affordable Care Act (ACA) requires you to provide health insurance to your employees
  • COBRA benefits – If you offer health insurance and have 20 or more employees, you are required by Consolidated Omnibus Budget Reconciliation Act (COBRA) to offer former employees the health insurance coverage they had for 18 months after discontinuation of employment
  • Leaves of absence – Be aware of state and federal laws that require you to offer employees certain types of paid and unpaid leave
  • Workers’ compensation – Employers in most states must provide workers’ compensation. This provides certain benefits to employees who are injured or become ill on the job. Workers’ comp is regulated state by state, so be sure to find out the requirements for your business to avoid unexpected penalties
  • Disability insurance – Certain states require you to provide disability insurance for employees who get injured or become ill in a non-work-related incident

Recordkeeping

The federal Fair Labor Standards Act (FLSA), mentioned above, requires employers to keep certain employee payroll records. You are responsible for keeping records confidential and in a secure location for at least three years. Some states have additional requirements, too.

Employee payroll records must include:

  • Employee’s full name and Social Security Number
  • Total hours worked each week
  • The basis on which an employee’s wages are paid
  • The employee’s regular hourly pay rate
  • Total daily or weekly straight-time earnings
  • Total overtime earnings for each week

Hiring 

Recruitment for SMBs may be a little less demanding than in large corporations (in that there are fewer spots to fill). That said, you must still adhere to regulations. These include, but are not limited to: 

Trust MartinoWest to keep your SMB compliant

We said it once and we’ll say it again: employment law is a minefield to navigate. 

Staying compliant can take a lot of time and effort that could be better used elsewhere in your business. And with a third of US small businesses fined every year, it’s no surprise that more and more business owners are choosing to outsource their compliance responsibilities to a trusted PEO. 

 

A PEO offers expert advice and guidance from HR professionals to help you stay on the right side of regulations. With a program from MartinoWest, you don’t have to take on these stressful tasks alone. Let the PEO professionals handle the paperwork, while you focus on the important tasks that only you know how to do.

Stay in the loop with developments and stay compliant with MartinoWest. Get a quote today!

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