As if it’s not complicated enough to run a business today, tax regulations and laws are always evolving. It’s vital that businesses of any size properly understand the tax environment they’re operating within. In particular, small businesses – called “the lifeblood of the American economy” 1 – need to pay attention because the implications of any law are more likely to affect them. Since small businesses comprise 44% of U.S. economic activity, we can’t overlook the importance of regulations that affect them. Below is a quick summary of regulations that are likely to impact companies from small to large.
Increased minimum wages
The minimum wage is higher in 13 states as of Jan. 1. Some of the states with higher minimum wages are New York, California, Illinois, Maryland, Massachusetts, New Jersey. These areas are taking steps toward an eventual $15 per hour minimum wage. States like Connecticut, New York, Oregon, and Washington, D.C. are planning increases later in the year. Wage increases are important because many companies also raise the wages of current employees, and need to address salaries overall to keep up with a more competitive labor market.
New overtime rules
The Labor Department has been working on new overtime rules for a long time and finalized the latest items. Doing so essentially gave about 1.3 million workers a raise. New regulations state that workers earning under $684 per week or $35,568 must now earn overtime, up from the previous threshold of $455 per week or $23,660 annually. Businesses with shift workers, such as factories and restaurants, are most likely to be affected. Positions like shift workers and assistant managers will likely see the most significant bump in pay. This could present a challenge for many small businesses who don’t have a revenue cushion to increase labor costs this substantially. However – similar to the minimum wage increase – this change will help to drive a more competitive labor market overall.
Plastic bag bans
This might seem like less of financial regulation and more about going green, but small retailers could see some cost savings. By not having to purchase and stock plastic bags, some stores could reduce supply expenses. A growing number of cities and states have passed new laws banning single-use plastic bags for purchases. Though there are some variations (for example, in New York, pharmacies are exempt if the purchase is for a prescription drug), in general, the regulations are favorable to businesses and met with little resistance from customers. Stores that stock reusable tote bags might even see a small uptick in revenue!
More privacy measures
Right now, each state has its laws regarding privacy and security. That can make things difficult for large companies managing data that spans the country or even the globe. New bills will create a comprehensive federal consumer privacy and data protection law to address compliance issues. More prominent firms can expect to implement infrastructure initiatives to meet this new challenge.
5G adoption concerns
While consumers will enjoy the faster speeds provided by 5G, companies need to implement 5G as a strategic part of their portfolio. Many municipalities are battling over the placement of towers and signal usage. Expect more political activity to guide the usage of 5G on an ongoing basis, which is likely to impact companies who are reliant on the new technology.
Laws and regulations are ever-changing, and not all of the changes are noteworthy. In some cases, what’s happening politically can have a severe impact on your bottom line. In those instances, it’s important to be informed and educated so that you can minimize negative effects and capitalize on new opportunities.
1 Small Businesses Generate 44 Percent Of U.S. Economic Activity by Office of Advocacy