Are the SEC, FTD, EDD and IRS Giving Small Business Too Much Homework?

Do you remember those teachers in school who thought that the only homework you had was the stuff that they assigned? The only problem was that there were several of those type giving assignments. Then, there were the teachers who were sympathetic to your plight but, had to make sure that you were learning their subject as well.

The results were that you were inundated with homework. The same can be said of the regulating agencies. There are the issues involving understanding the rules and regulations being handed down, but let’s leave that discussion for another time. For now we will focus only on the quantity of regulations small business owners are required to comply with.

According to Seattle Post-Intelligencer, Andrea James writes

For small-business owners who want to follow the rules, knowing the tax code is just the beginning. A simple business such as an auto repair shop has 38 sets of regulations from 18 federal, state and local agencies, said Gary Smith, (now state representative), executive director of the Independent Business Association of Washington State. Adding just one employee makes that number jump to 58 sets of rules by 28 agencies.

"The irony of all of this is that there is no single person in any level of government that knows all of the regulations a small-business owner is expected to comply with," Smith said. "Yet, government officials somehow expect small businesses to know all of them and how to comply; and if they don't, they cite them, they penalize them and they fine them."

OSHA has no idea what homework the Employment Development Department has assigned, nor do they care. And neither do any attorneys suing because your business did not complete the requisite amount of Department of Labor obligations. The Federal Trade Commission may or may not understand that you have a lot on your regulations plate, but ultimately the work has to be done. And the Franchise Tax Board thinks they have the only regulations that matter at all. Any plaintiff lawyer with any knowledge of non-compliance will threaten to file a suit whether or not the company in question had done all of their other homework.

The shin bone may be connected to the ankle bone, but, no regulations are connected to anything else. What is the solution? Systems!

Take one agency at a time. I suggest you start with personnel systems. A small business is most likely to suffer from complaints from employees or ex-employees than any other source. Learn what is to be expected, develop systems and implement those procedures. A little prevention goes a long way. The bureaucrats are much more likely to work with you on any unresolved issues, if you are making an attempt to comply with their rules.

As with the unreasonable teachers, if you only had that one class to satisfy, it would have been easy. Your only chance was to take one class at a time, do the work and move on to the next class.

Regulations are the same. Figure out the plan and take one step at a time. When you have those systems in place (assuming they haven’t changed all of the rules in the mean time) go on to the next agency.

Having the systems to implement is the key. The EDD and DOL (federal Department of Labor) have resources available to you. So do the IRS and SEC and FTC. They have web help and they have agency personnel to answer questions. As Rep. Smith explains, the bureaucrats don’t have all of the answers, but they have many. It is a good start.

Ultimately, it comes down to time as a function of money. You can do all of the groundwork yourself or have an employee do it. The question is, “is it profitable?” A major violation or lawsuit will shut down your operation. Either the time or the money to comply is required. Do you want to do all of the preparation work yourself or does it make sense to have someone else give you the answers that you need.

Experts in compliance law lay system foundations every day. Unfortunately, it is often after a lack of systems becomes a problem. They know what systems need to be implemented and the best methods for doing so. They generally charge a fraction of the money you would have to pay yourself to do the same amount of work. They have already done it.

The challenge comes, again, in quantity. 28 different agencies require a minimum of 28 different experts. Now the charges start adding up. Still, not as fast as they do being involved in a lawsuit or regulatory investigation.

You cannot possibly finish all of the homework of all of the teachers at the same time. Just grab one subject and dig in.