Why Staying Legally Compliant Should Be Every Business Owner’s Top Priority

photograph of two business colleagues high-fiving to celebrate success at staying legally compliant
As a business owner, staying legally compliant should be right up at the top of your biggest priorities. Here are some pointers to help you achieve that:

Share This Post

Legal compliance plays a huge factor in achieving business success. Whether you’re running a new startup or an established company, staying legally compliant contributes to smooth business operations and overall efficiency. 

You also get to avoid serious consequences that commonly come with negligence – including penalties, lawsuits, and damaged reputation. Needless to say, all of these can become a PR nightmare for your company.

As such, you want to make compliance an important priority. You need to implement safety regulations, observe ethical practices, and, of course, meet legal requirements in a timely manner.

According to the US Small Business Administration:

“Your legal responsibilities will depend on your business and location.”

Requirements may differ by state and by business structure. You definitely need to do some research to find out which local, state, and federal laws specifically apply to your business. That way, you won’t lose your company’s ‘good standing’.

Why your business needs to be ‘in good standing’

Having a Certificate of Good Standing serves as your proof that your business was formed legally, is staying legally compliant, and is still active. This certificate is issued by the Secretary of State and is usually necessary for different business transactions such as:

  • Creating a bank account for your business
  • Qualifying for a business loan
  • Securing funding from investors
  • Applying for business license
  • Registering your company in another state
  • Selling your business

In most cases, a business only needs this certificate when they’re asked for one – such as for the above-mentioned reasons. However, it should likewise be noted that losing good standing for a period of time may lead to administrative dissolution. This means the entity no longer has authority to conduct business. Also, the owner becomes personally liable for company debts. 

Again, staying legally compliant is key to avoiding all those hassles in the first place. You will be able to request and obtain your Certificate of Good Standing without any problem at all

Compliance 101: internal and external requirements

Staying legally compliant can fall under two categories: internal and external.

First, internal compliance is all about implementing regulations and policies within the organization. Of course, the goal is to ensure fairness, efficiency, and safety in the workplace. This includes monitoring employee activities, observing operational standards, keeping accurate records, and others.  

“It’s also your responsibility to develop a plan for addressing [potential] violations and remediating the problem,” according to Entrepreneur. “In the event that your company is tagged for an investigation, having these policies and procedures in place can go a long way toward limiting your liability and potential losses.”

As for external compliance, following legal standards in your industry is a must. For example, you need to follow requirements including:

  • Registering your business under the correct entity type
  • Filing annual reports (or biennial statements)
  • Paying taxes
  • Properly compensating your workers
  • Registering your business under the correct entity type
  • Filing annual reports (or biennial statements)
  • Paying taxes
  • Properly compensating your workers

photograph of a notary applying a legal seal to a business document in order to assist legal compliance
A notary applies a legal seal to a business document necessary for staying legally compliant

Some basic tips for staying legally compliant

Now here are some simple practices you can apply in your business:

Keep up-to-date on new laws and regulations

As a business owner, you need to keep abreast of any new policies or changes that are introduced in your industry. This eliminates the risk of unintentional breaches. Follow pages and accounts on social media where you can read industry news or check with legal experts.   

Regularly conduct internal audits and employee training

You don’t have to wait for tax season to do this. Scheduling regular audits within your business makes it possible for you to identify potential lapses. You can then work on them immediately to reduce the number of issues that may surface.  

Of course, leading your team means frequently reminding them about the importance of compliance requirements. Make sure they understand their responsibilities and the consequences of non-observance.

Use automation software

In case you’re having a hard time keeping up, here’s the good news: technology can be your friend in staying legally compliant. For example, tax and accounting tasks do not have to be complicated. You can consider using automation to, say, simplify the entire process and reduce unintentional human error.

In an interview with Forbes , Scott Amyx of Amyx Ventures shared:

“Small businesses may not have the know-how or the resources to stay up-to-date with changing laws… TurboTax, QuickBooks and other tools regularly update their software to reflect changes in accounting and tax laws.”

Hire a registered agent

Not all states require businesses to have their own registered agents but hiring one can be for your advantage.

A registered agent helps you protect your privacy as they act as your business’ representative. Their name and contact information will be listed in public documents and databases, instead of yours. Moreover, they will be receiving business and legal papers on your behalf. So if, for example, you’re served a lawsuit, you won’t receive anything at your address. Your registered agent will get it and notify you privately about the matter.  

Most importantly, staying legally compliant will be so much easier with a registered agent working for you. Besides, they’re experts when it comes to handling paperwork. They can help you out since they know their way around official forms and legal requirements. Plus they’ll constantly remind you about upcoming dues to ensure that you don’t miss any.  

Simply put, investing in a registered agent service is a smart move. With it, you can save time and resources, and focus on growing your company.  

Conclusion

Staying legally compliant should definitely be a primary concern for all business owners. There are costs involved but legal compliance will certainly pay off in the long run and is definitely in the best interests of your business.

As former US Deputy Attorney General Paul McNulty famously said:

“If you think that compliance is expensive, try non-compliance.”

Featured Image: Photo by Stephen Goldberg on Unsplash

More To Explore

© 2021 Registate All rights reserved