How to Create, Establish, and Enforce Laws and Regulations in Your Business

by Francine Breckenridge, Compliance & Legal Officer, U.S. Money Reserve

It’s not enough to just make employees aware of the rules, regulations, and laws that govern your business. Here’s how to make the regulations work for you.

There are an incredible amount of laws, rules, and regulations that impact all kinds of businesses. The sheer volume is enough to make your head spin, yet knowing how to create, establish, and enforce the vast number of these ever-changing parameters is a vital part of running a successful business. Here’s what you need to know.

Before You Begin

Before you even start creating or establishing rules and enforcing any laws, you need to figure out which rules and regulations pertain to your business and which ones you need to comply with. It is essential to realize that it is not the responsibility of any outside legal enforcement agency to ensure that a business is adhering to specific local, state, and national laws and regulations. Responsible enforcement agencies have zero obligation to notify a company that it must comply with the law or how it could run afoul of it. It is up to the business and its leaders to discover the laws and regulations that apply to its specific activities and ensure that the entire company complies adequately.

While that can seem like a daunting project, there are a few places compliance officers or your legal counsel can look for the rules and regulations that might pertain to your business. It pays to start with the broad categories that apply to all businesses. These include:

● Tax Code: Every business must pay and manage its taxes. Different types of taxes apply to various types (and sizes) of businesses.

● Labor and Employment Law: Labor and employment laws are also important to investigate as some states and localities have different rules and regulations. You should also check federal labor and employment laws as to be sure that you are fully compliant.

● Advertising, Email Marketing, and Privacy Laws: These can also vary from locality to locality. They are also governed on state and national levels .

● Antitrust Laws: Ensuring that you aren’t conspiring with any competitors to fix the prices of your goods is vital to staying on the right side of the law when it comes to compliance.

● Environmental Regulations: Environmental regulations must also be on your radar to ensure that you are not polluting or damaging the ecosystem around your company.

● Insurance, Licensing, and Permits: Always have the right licensing and permits on hand when conducting business. Penalties for not having the proper insurance, licensing, or permits can ruin a business.

It pays to hire a well-qualified business lawyer who knows the ins and outs of your local and federal business rules and regulations to navigate these waters — especially if you’re new to a specific sector or business.

How to Create the Right Rules for Your Business

Once you figure out which rules and regulations apply to you, it’s time to begin implementing processes to ensure that your employees and business are compliant with those laws. When creating rules and regulations for your company, it’s vital to align the legal constrictions your business needs to adhere to with the practical ones that make your business work.

The first step to create the right rules for your business is to identify what the needs are. Do your employees have a hard time remaining compliant because there’s no formal process laid out? Do you need to have more oversight of specific areas within the business to show compliance? Depending on what the issue might be, you can choose the right rule, process, or regulation for your business.

One crucial point is that you shouldn’t feel the need to create a rule or regulation for every possible outcome or event at your business. That would be far too overwhelming, and it can significantly limit both employees’ understanding and eventual implementation of the rule. The idea is to create guidelines that help management ensure specific rules and regulations are being followed to the best of everyone’s ability.

Another essential consideration is to make sure the rules for your business make sense in real life. In order to create a usable guideline, you must have a comprehensive understanding of the problem you are solving by creating the regulation. If your rule complicates the process, then it needs to be refined. However, a rule that slows down a process isn’t necessarily bad since that could be part of the legal requirement or laws that you are working to meet.

How to Establish the Right Rules and Regulations for Your Business

Once you’ve chosen the right rules, consider how best to word and distribute them among your employees. You must clearly outline what the repercussions are should those rules be broken.

Do your best to clearly and simply state the rules and regulations using terms like “generally” or “usually.” Verbiage like this helps managers, who are responsible for ensuring that everyone is compliant, apply their critical discernment to determine the right path. As a business owner, you may find it difficult to let this happen, but it’s a vital part of making sure that your employees are compliant — you must hire good people and trust them to do the right thing.

Be precise in what you expect from your employees. You must be clear about specifications, requirements, and any organizational changes that are implemented. You should also include the date any change or update will take place so that people have time to adjust to the new rules of the road. Additionally, be precise in explaining who is responsible for enforcing the new rules and requirements. In some cases, you may need to implement an entirely new procedure to show authorities you are compliant.

Finally, include a glossary of terms that can be used to help explain business-specific terms you may use in your communications. Each business has its own specialized vocabulary, and offering clear explanations and descriptions of these terms can mean the difference between your business thriving or being dismantled.

How to Enforce the Rules and Regulations

There are a few different schools of thought on how best to enforce rules and regulations in business: Do you offer the carrot or the stick (or some blend of the two)? Most companies tend to err on the side of the stick, using harsh financial penalties or termination as punishment. This isn’t necessarily conducive to good employee morale or profitable business. Investigations into wrongdoing are disruptive, time-consuming, and stressful for everyone involved. When they result in missed deadlines and low employee morale, they can thwart the goals of every investor and employee at the company.

The alternative, or “carrot” method, instead turns this process on its head and can be used to highlight the benefits of complying with the rules and regulations you, your business lawyer, the compliance team, or HR have implemented. Generally, human psychology makes us all want to be part of the crowd that’s on the right side of the rules and regulations — so why not utilize that to improve business outcomes and make the overall work environment much better?

It is essential to ensure that everyone involved is on board with your compliance goals. While many often consider compliance to be a deterrent or blocker to business, it can, in fact, provide business opportunities. Part of making compliance work is ensuring that everyone in your leadership suite is on board with the plans and goals of a comprehensive compliance strategy. It’s also important that your leadership is on board with any changes your business needs to make to the rules and regulations.

The Bottom Line

No matter what line of business you are in, it’s vital that your company’s activities align with local and federal entities’ laws and regulations. The first step in determining what rules to implement inside your company is to get familiar with the rules and regulations in the areas where you do business. You might need to hire a good business lawyer or look to your compliance and HR teams to help lead the way. Next, you need to determine what process needs to be in compliance and what you need to change in order to get there. Then it’s time to write a clear, concise, and direct explanation of what needs to change so that your business is in compliance. Once you’ve created the right rules and regulations, you need to establish them within your company and finally choose your enforcement method — understanding the pros and cons of each approach. Creating, establishing, and enforcing new rules and regulations inside your company can appear to be a daunting task. If you break it down step by step, you can see to it that your entire company is safely and legally operating well into the future.