ComplianceNovember 17, 2023

2024 small and mid-market business and legislative trends

[Key takeaways]

  • Generative AI and marketing strategies like hyperpersonalization will present opportunities and risks. SMBs must perform due diligence, establish data security and governance policies and guardrails prior to implementation.
  • In a tough labor market, skills-based hiring will continue to transform hiring and training and development practices.
  • SMBs cannot ignore ESG disclosures and frameworks, especially those who do business with larger enterprises.

Despite volatile market conditions, small and mid-market businesses (SMBs) are optimistic about the year ahead. However, headwinds, including high inflation, rising costs, labor shortages, and other factors will continue to impact revenues.

As we head into 2024, SMBs must also navigate emerging technologies, such as artificial intelligence (AI), regulatory, ESG, and other supply chain and operational issues.

Let’s take a deeper dive into these and other business trends that will influence 2024, plus tips for navigating them.

Generative AI: Opportunities and risks

Generative AI enables SMBs to leverage technology to enhance operations, improve customer experiences, and gain a competitive edge. Despite the excitement, businesses must perform due diligence and select tools that don’t put confidential data at risk. For instance, poor security controls can publicly expose company trade secrets, customer data, and more. Indeed, SMBs are known to be a lucrative target for threat actors since their organizations are less protected against advanced cyber threats than their larger counterparts.

Other business risks associated with generative AI are plagiarism, copyright infringement, misinformation, and harmful content. 

When assessing generative AI tools, IT and analytics leaders must perform security, data governance, privacy, and vendor compliance reviews. Prior to any implementation, they must also prioritize data strategy and data management policies and procedures, and establish robust cybersecurity guardrails 


SMBs are seeking ways to improve customer experiences and optimize their marketing strategies to be more targeted, digital, precise, and highly personalized.

Hyperpersonalization promises to meet these customer needs, operating at a scale and accuracy unmatched by traditional segmentation techniques.

Hyperpersonalization harnesses customer data and insights to deliver tailor-made interactions that align with individual preferences and interests. Thanks to machine learning and generative AI, it’s becoming easier to extract insights from vast data troves in any format, including social media, emails, chat transcripts, and more.

However, while customers desire personalized experiences, they simultaneously demand their data is kept private and secure. As data-driven engagements become essential for effective customer experiences, customers are growing increasingly wary of the use of their data. For this reason, providing personalized experiences mandates a delicate balance between using data to enhance the experience and not being overly intrusive.

Businesses must also be vigilant about new and existing laws governing data privacy and protection.

Skills-based hiring

The disconnect between the skills employers need and the skills that employees can provide has resulted in an increased focus on skills-based hiring. 

Skills-based hiring prioritizes a candidate’s competencies over more historically accepted qualifications, such as college degrees. When the labor market is historically tight and there are persistent talent shortages in numerous sectors of the economy, this hiring strategy can remove barriers that currently screen out qualified job candidates and bring a broader range of perspectives and skills into the workforce.

The importance of ensuring worker satisfaction beyond adequate remuneration is also being recognized by SMBs. Personal growth and development are included here, as well as work/life balance, wellness, and intellectual challenge.

The world of work has evolved rapidly over the last two years, and employers have had to constantly adapt to remain competitive. It has forced them to rethink HR fundamentals and overcome unexpected obstacles, including the effect of inflation on wages and hybrid workplaces. These trends look set to continue in 2024. 

Navigating ESG

ESG frameworks and disclosures are increasingly mandated by governments around the world.

This pressure is primarily felt by large companies, but it may also affect smaller companies that provide services and products to these corporations.

The reason for this is that large corporations covered by corporate reporting frameworks will necessitate data from the firms within their value chain to ensure compliance with current regulations. Consequently, although SMBs may not have a formal obligation to report data, they will be pressured to do so by large buyers of their products and services.

Furthermore, the integrity of a company's supply chain has never been more important. Governments, investors, and clients are increasingly requiring businesses to choose suppliers based on ESG criteria. Among these factors are avoiding suppliers who use unsustainable shipping methods, manufacture products in an environmentally destructive manner, and violate human rights. 

However, ESG has also been facing a growing backlash. Many businesses have been negatively affected by restrictive local and state laws, as well as a far-right consumer movement.

Despite this, there are still powerful business reasons to focus on ESG issues. In fact, companies cannot afford to ignore ESG issues, especially with the SEC's upcoming climate regulations and the EU's Corporate Sustainability Reporting Directive affecting 3,000 U.S. companies.

Next Steps for Your Business
Is your company required to file a beneficial ownership report?

Changing statutory and regulatory landscape in 2023

Every year there are amendments and changes to state and federal statutes and regulations that affect small and mid-size companies. And 2024 should be no different. Some of these changes are already known. Others will be enacted in 2024 and will require the owners and managers of these companies to act quickly and be nimble in order to deal with the consequences to their businesses.

  • Beneficial ownership information reporting. The federal Corporate Transparency Act will take effect on January 1, 2024, and will require, by the federal government’s own estimate, 32.6 million companies (mostly small to mid-size LLCs and corporations) to file a beneficial ownership information report with the federal agency called the Financial Crimes Enforcement Network sometime between January 1, 2024, and January 1, 2025. All SMBs need to determine if they have to file a report, obtain the required information if they do, decide if they want to file the report themselves or use a third party service provider, and come up with the policies and procedures to ensure continued compliance, as there are significant civil and criminal penalties if they do not comply.
  • Amendments to business entity statutes. SMBs that are legal entities such as corporations, LLCs, or limited partnerships, are formed under and governed by a state business entity statute. And the states continually amend and update these statutes. Some amendments are substantial.  Iowa, for example, has a new LLC law going into effect in 2024 that revises and reorganizes almost every provision of the LLC law. Many SMBs are formed under Delaware law. And Delaware amends its corporation, LLC, and limited partnership laws every year. It is imperative for every SMB to be aware of the amendments to their governing statutes as they can change compliance obligations and alter many default rules.
  • Cryptocurrency and digital assets laws. More and more SMBs are engaging in transactions using cryptocurrency. The federal and state governments already have some regulations and statutes regulating cryptocurrency and are sure to continue to address this controversial form of currency in 2024. Many SMBs also own digital assets that they might want to use as collateral for loans. They should pay attention to the growing number of states that are amending their state commercial (UCC) laws to clarify issues involving digital transactions and facilitate the perfection of security interests in digital assets.
  • Personal data laws. Many SMBs collect personal data. They should be prepared to comply with new state consumer data privacy laws that will go into effect in 2024 and beyond, as these laws place a number of compliance obligations on certain data collectors. 
  • Environmental, social, governance/diversity, equity, and inclusion concerns. As noted earlier in this article, ESG and DEI are issues of interest for the legislatures of many states. Some are encouraging ESG and DEI efforts and some doing the opposite. Texas, for example, fired a direct shot against ESG/DEI efforts by introducing a bill late in 2023 that would make it a breach of fiduciary duty for a director to prioritize another consideration over the maximization of the value of the corporation’s shares. Every SMB interested in promoting ESG/DEI efforts needs to pay attention to what their formation states are doing regarding this controversial issue.

Learn more

As you navigate 2024, CT Corporation is dedicated to helping your business stay compliant so you can focus on the year ahead. If you want to learn more, contact a CT Corporation representative or call us at (844) 878-1800.

The CT Corporation staff is comprised of experts, offering global, regional, and local expertise on registered agent, incorporation, and legal entity compliance.

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