Even if you’re running a small business or a sole proprietorship, there are steps you’ll need to take to ensure your business is legally compliant. There are some basic measures that every business will need to follow, and businesses in some industries will need to go further; for example, businesses in the financial industry may be responsible for anti-money laundering compliance, adhering to the tenets of the Bank Secrecy Act.
So how can you tell if your business is legally compliant?
Do Your Research
Your first step is to do your research. There are some basic moves that every new business will need to make to remain legally compliant; for example, you’ll need to choose an organizational structure and register your business with the state. However, requirements vary significantly depending on the industry in which you operate, the size of your business, and other factors. If you’re not familiar with these requirements, you need to review them proactively.
If you’re completely new to the industry, consider talking to someone more experienced. You can have a conversation with a fellow business owner and figure out what steps they had to take when starting their business. You may also be able to find a mentor and get some insights from them.
In some industries, compliance becomes highly complex. For example, businesses in the financial industry must adhere to numerous laws and regulations concerning data security, financial crimes, and other considerations. In the medical world, businesses must collect and store patient information responsibly, on top of ensuring patients receive adequate treatment. In these industries, a simple round of online research and direct conversation won’t be enough to help you understand the law.
Hire a Lawyer (or a Compliance Partner)
If you want to go a step further, you’ll want to hire a lawyer for your business. A lawyer will have a much better understanding of the laws that apply to your business and the responsibilities that will keep you in compliance with them. Hiring a lawyer isn’t cheap—especially if you’re a new business owner on a tight budget—but it can help your business build a strong foundation and avoid breaking the law, so it’s well worth the money.
If you’re planning on running a larger business, or if legal compliance in your industry is too complicated for any individual to handle, you may consider hiring a compliance partner. In this scenario, you may enlist the help of an agency or another independent team who specializes in ensuring compliance for businesses like yours. It’s a great way to delegate the responsibility and ensure that someone trained and educated in this area is handling your needs.
Practice Good Record Keeping
No matter what, if you want to remain compliant, it’s important to practice good record keeping. Your business should have formal internal rules and requirements in place to ensure that your employees are keeping track of all company transactions and activities. Depending on your business’s structure, you may be responsible for conducting director and shareholder meetings, updating operating agreements, or holding annual meetings for partners.
At minimum, you’ll need to keep track of your business’s finances in great detail. You’ll also want to officially record all your business’s major decisions.
Beyond that, you’ll need to ensure you’re meeting ongoing state filing requirements. These include things like annual reports, franchise taxes, statement filing fees, and articles of amendment (if you make significant changes to your company).
Ensure Your Licenses, Permits, and Certifications Are Up to Date
It’s easy to forget, so you’ll have to make sure to have good practice in place to keep your licenses, permits, and certifications up to date. These are commonly issued at the state, city, or county level, and requirements vary drastically from document to document and from area to area. Remain proactive and set reminders to renew these in a timely fashion.
Obtain a Certificate of Good Standing
If you believe you’ve done everything necessary to get your company properly registered, consider obtaining a certificate of good standing from your state. This certificate will verify that your business is registered formally and up to date on all fees and filings. It’s proof that your business is legally compliant (at least in these areas) and can make you feel confident that you’ve taken care of all business requirements. You may need a certificate of good standing to apply for certain loans or to do business with other partners.
There are many laws and rules you’ll have to follow if you want your business to remain legally compliant. And if you’re in an industry with even stricter requirements, like the financial industry, you’ll need to pay even closer attention to your ongoing efforts. Work with a lawyer and invest in the right platforms to make your life even easier.