A small business owner has enough to do to start and grow a business. What most owners fail to realize is that some of the most common financial business decisions can also come with legal obligations. Ignorance of the law is not an excuse. Learn about the legal implications of five standard business practices to avoid accidentally breaking the law.
1. Refuse cash payments
Not accepting cash sounds like a prudent idea. There are many great ways to make customer and customer payments really convenient, and you will reduce the possibility of employee theft and acceptance of fake invoices. It also saves you a trip to the bank to deposit the funds as well as some of those funds, as many banks charge business fees after a certain down payment of cash deposits per month.
The problem with a cashless business model is that wherever you operate it may be illegal. Some cities and states are pushing against businesses that refuse cash payments. So far, Philadelphia, San Francisco, New Jersey, Massachusetts and Connecticut have banned cashless retail stores.
If you are concerned about fake invoices or employee theft, there are several things you can do about it. Training of employees to recognize a forged invoice. Keep a counterfeit detection marker on all cash registers. Install a camera over the registration area of your store to monitor employee activity around the cash register. Also, make sure you are using a point of sale system with a lockable cash drawer that opens and closes automatically after each transaction.
2. Increase the prices you charge for your goods and services
Antitrust laws are designed to protect consumers by promoting competition between sellers. Monopolies are forbidden. You might think that terms like monopolies and antitrust laws apply to large companies, but the laws apply to small businesses too.
Regardless of your industry, you should be careful when considering a price hike. Price increases should be gradual – price increases for just one or two products at a time. Let your customers know in advance and make sure you don’t get greedy. Avoid partnering with competitors to raise prices across the board. Drastic increases can shock your customer base and cause your customers to report you for price fixing or antitrust violations, which triggers an investigation.
3. Fibbing on your commercial loan application
You might be tempted to fumble your books a little to make your business or corporate loan application look more attractive. Lenders have methods of fraud detection. At best, your loan application will be rejected. At worst, you can get in legal hot water.
Be upfront with your loan application and expect all of the information to be verified. If you are unsure how to answer specific application questions, contact an accountant or lawyer.
4. Avoid filing your tax return
If you’ve had a bad year or don’t have the funds to pay your tax bill, don’t avoid filing your taxes. This will make matters worse – the IRS will charge higher penalties for not filing your tax return at all. Here are the penalties you will be liable for if you fail to file documentation:
- Failure to submit: 5% of the unpaid tax must be reported.
- Failure to pay: Up to 25% penalty on the balance.
It’s best to file a tax extension to buy you more time, or file your taxes and work out an installment repayment plan with the IRS. Note that filing a tax extension does not put off your tax liability. You still owe the taxes back even if you haven’t filed. When filing a tax extension, you should make a payment with the extension. Otherwise, you will have to pay penalties and late fees for your taxes.
If you postpone filing taxes because you can’t afford the tax bill, stay on the right side of the IRS by reaching out to them to arrange an installment payment plan. You get a longer period of time to repay your taxes without worrying about your wages being garnished or your accounts frozen.
5. Retention of the customer’s credit card information
If you have a merchant account to accept and process credit card transactions, you are legally responsible for protecting your customers’ credit card information. The abuse of customer financing known as Payment Card Industry (PCI) compliance is punishable by fines of up to $ 500,000.
The regulations prohibit the storage of credit card information, including the information on the magnetic stripe, the card number, and the small three digits on the back of the card called the card security number or CVV. Receipts should only show the last four digits of the credit card and the expiration date. If for any reason you have written down the credit card, the number needs to be edited by swiping it with a dark pen.
If you suspect that a customer’s credit card information has been compromised through improper handling or proper disposal of the information, you must notify the customer in writing so that they remain aware of any fraudulent allegations.
The legal side of business decisions
Small business owners focus primarily on the bottom line when making financial decisions. As these examples show, business decisions have more ramifications than the financial aspect. Working with an accountant or business lawyer to make changes or make important decisions can keep you and your company from dealing with legal issues.