The more common types of laws and regulations are reviewed briefly here
but this section is not intended to substitute for legal advice. The
services of a competent attorney when you require legal assistance is a
business expense which will pay for itself.
Licensing
Licensing controls directly affect many small businesses. The degree of
regulation will vary, depending upon the type and location of the
enterprise. If your operations are intrastate you will be concerned
primarily with State and local rather than Federal licensing. Businesses
frequently subject to State or local control are retail food
establishments, drinking places, barber shops, beauty shops, plumbing
firms and taxi companies. These are primarily service businesses, subject
to regulations for the protection of public health and morals.
Retail stores, devoted exclusively to handling merchandise, may not be
required to have a license but are subject to regulations dealing with
fire, safety, and zoning restrictions.
Most licenses require payments of fees and are usually issued on an
annual basis. Ordinarily, as a prerequisite to the issuance of a license,
a written application is required. State, municipal and county authorities
should be contacted for complete information regarding licensing.
Regulations for Consumer Protection
In addition to the licenses referred to above, laws and regulations are
also designed for consumer protection. Some may directly affect your
business practices.
For example, the Consumer Credit Protection Act became the law of the
land on July 1,1969. This is commonly known as the "Truth-in-Lending Act".
If you extend credit to your customers, you must make a meaningful
disclosure of credit terms in prescribed standard terminology so consumers
may compare more readily the various credit terms available to them.
"Truth in Fabrics" legislation also has been enacted for consumer
protection. This legislation requires informative labeling and advertising
of textile fiber products. If you sell or advertise textile products
either as a retailer or wholesaler, you share the manufacturers'
responsibility for seeing that they are properly labeled and advertised
for fiber content. If you advertise wearing apparel or household fabric
products in newspapers having interstate circulation or offer for sale
cloth items previously shipped in interstate commerce, the Federal
legislation applies to you whether you actually market goods across state
lines or not. This means the vast majority of retailers handling textiles
have definite responsibilities under labeling law.
Other laws are designed to protect the consumer directly, such as the
Food, Drug and Cosmetic Act and the Flammable Fabric Act. The consumer
benefits too from laws which provide freedom of competition as discussed
below.
Laws Protecting the Environment
In recent years, concern about protecting the environment has produced
regulations to decrease pollution to air, water, and other parts of the
environment. Determine what pollution laws and regulations, if any, apply
to your prospective business. Good starting points for this check are the
trade association for business or your local Chamber of Commerce.
Laws Encouraging Competition
Some business practices are prohibited or restricted by legislation to
encourage competition. Federal laws govern interstate commerce, while
State legislation regulates intrastate transactions. The broad body of
Federal legislation encouraging free private enterprise includes the
Sherman, Clayton, and Federal Trade Commission Acts. Comparable State laws
have also been passed. The purpose of these laws is to encourage
competition by prohibiting or restricting certain types of business
activities such as: contracts, combinations, and conspiracies in restraint
of trade; price discrimination between purchasers of commodities of like
grade and quality; false advertising, disparagement of competitors and
misrepresentation.
From time to time these statutes are amended, and new interpretations
are made by the courts. Your lawyer, Chamber of Commerce or business
association can tell you how such laws or proposed laws may affect you.
Labor Relations
Federal and State employer-employee relations legislation deals with
settlement of labor disputes; wages, hours and working conditions;
fair-employment practices; and economic security.
The National Labor Relations Act, the Taft-Hartley Act and the Labor
Management Reporting and Disclosure Act are three major Federal acts
dealing with settlement of labor disputes. They guarantee the right of
employees engaged in interstate commerce to organize and bargain
collectively with their employers, or to refrain from such activities.
States also have enacted laws to uphold collective bargaining and to
define unfair labor practices.
Fair Labor Standards
Wages, hours and working conditions are regulated by the Fair Labor
Standards Act. The act provides for minimum wages, maximum hours, overtime
pay, equal pay, recordkeeping and child labor limitations. In addition to
this Act the Walsh-Healey Public Contracts Act, the Davis-Bacon Act, and
other related acts establish wages, hours, and working conditions
applicable to Government contractors. Whether your employees will be
covered depends on your individual situation. Obtain specific information
from your nearest office of the Wage, Hour and Public Contracts Division,
Department of Labor.
OSHA
Be aware also, of the Occupational Safety and Health Act (OSHA) of
1970. This law makes each employer responsible for furnishing employees
places of employment free from recognized hazards causing, or likely to
cause, death or serious physical harm. The employer must comply with
safety and health standards promulgated under the Act. It is every
employee's duty to comply with these safety and health standards and all
rules, regulations, and orders issued pursuant to the Act which are
applicable to their own actions and conduct. Specific information can be
obtained from your nearest office of the Occupational Safety and Health
Administration.
Fair Employment Practices
Fair employment practices are established by the Federal Civil Rights
Act of 1964 which makes it unlawful to discriminate on the basis of race,
religion, age, or sex as a condition of employment. Many states have
enacted fair employment practice laws. As a small business owner
soliciting and selecting employees, you must abide by the standards
established by such laws.
Economic Security
Legislation dealing with economic security is designed to:
(1) Minimize an employee's losses from industrial accidents
occupational diseases and involuntary unemployment; (2) provide hospital
and medical care for the employee; and (3) furnish some income to the
employee after his retirement.
Protection from income loss due to industrial accidents and
occupational diseases is assured by workers' compensation laws. Because
provisions of these laws vary from state to state, consult your local
sources. Involuntary unemployment benefits are required by both State and
Federal legislation. The Federal Social Security Act requires a separate
payroll calculation to finance hospital and medical care for people 65
years of age and older, and provides for income to be paid to an employee
who reaches the legal retirement age.
Taxes
Be sure you are aware of the tax implications in starting a business.
Your business will be subject to Federal, State, and local taxes. You may
be liable for such Federal taxes as social security (referred to above and
shared by you as employer with your employees), excise taxes and, if your
business is incorporated, the corporate income tax. From your employees'
wages you must deduct their share of the old-age survivor's, hospital and
medical insurance taxes as well as their unemployment compensation
contributions. From such employees' paychecks, you must withhold the
current share of their individual Federal and, where required, State and
local income taxes. If you are an employee of your own corporation, the
withholding provisions of the social security and individual income taxes
apply to you, too.
If you are a sole proprietor or partner, your personal income tax
payments must be prepared and submitted on a quarterly basis.
Under the Self-Employed Individual Tax Retirement Act you may take an
income tax deduction if you set up retirement plans for yourself and
employees. Go to the local office of the Director of Internal Revenue for
information about your Federal tax obligations. An excellent booklet
[revised from year to year) on this subject is Tax Guide for Small
Business, prepared by the Internal Revenue Service.
You will have other State and local taxes. The more common types levied
by states are income, property, sales, occupation or business license, and
unemployment compensation taxes. Information concerning State and local
taxes and fees which apply to your particular business can be obtained
from your state and municipality. After you have information on the
various kinds of taxes for which you will be responsible you will find it
helpful to set up a time table for meeting these obligations.
