Starting a business today is more accessible than ever. With an abundance of online information, step-by-step guides, and AI tools, entrepreneurs have more support at their fingertips than previous generations could imagine. These resources make it easier to turn an idea into a registered business and begin operating quickly.
But one significant obstacle remains: business compliance.
To better understand the challenges small businesses face, BizFilings surveyed owners across various industries who had registered their business within the past 18 months.
An external agency was used to recruit and interview the participants. BizFilings was not disclosed as the survey sponsor during the interviews.
The survey revealed that even prepared, knowledgeable business owners struggle with compliance, and that while they may initially feel knowledgeable about it, they soon realize it is more complicated than expected.
Key takeaways:
- Compliance is more complex than expected: Many small business owners start out confident, only to discover that compliance quickly becomes complicated. Requirements vary by business structure, industry, and location, and ongoing obligations demand consistent time and attention.
- The right support makes a real difference: Trusted service providers can simplify compliance and registration by handling filings accurately and helping businesses stay on track, freeing owners to focus on growth instead of paperwork.
What is compliance in business?
Compliance in business means following all local, state, and federal rules that apply to your operations. All businesses, whether small micro businesses or large multinational corporations, have compliance requirements.
Staying compliant ensures your business operates legally, supports healthy growth, and reduces the risk of fines and penalties. Compliance also helps you retain the benefits of your business structure, such as an LLC or an S corporation.
Many small business owners form an LLC or an S corporation for benefits such as protection from personal liability, pass-through taxation, and enhanced credibility. Staying compliant helps maintain these benefits. For example, compliance allows you to expand into other states and quickly get a “Certificate of Good Standing” if lenders require it.
Early confidence in compliance knowledge
More than two-thirds of the BizFilings survey participants feel highly knowledgeable about compliance, with 40% stating they were very knowledgeable and 28% that they were extremely knowledgeable.
The survey also revealed that business owners go online for guidance on operating a business or compliance requirements.
When researching* business compliance, the survey revealed that:
- 57% used online searches (e.g., Google or Bing) or visited Secretary of State websites.
- 54% used social platforms such as LinkedIn and Instagram.
- 48% relied on advisors, such as lawyers, mentors, or other business owners.
- Only 7% did not conduct any compliance research.
Business owners struggle with compliance reality
Despite extensive research, most participants (63%) still feel overwhelmed by compliance requirements, and 74% want more resources to help them understand them.
When researching compliance, business owners focus on the following:
- Type of business entity to form.
- Costs to form a business.
- How long does it take to form a business after forms are submitted?
Compliance is complex for several reasons. A common challenge is that compliance requirements vary by business structure, industry, location, and other factors. For example, most states require LLCs and corporations to obtain a registered agent at the time of registration.
There are also various post-formation requirements to consider, including obtaining a federal EIN, state tax registration, payroll tax registration, and all required licenses and permits.
Another factor is that compliance is ongoing, not a one-time exercise. Requirements continue after formation. If you operate an LLC or corporation, you must maintain the registered agent and keep up with annual report filings and franchise tax payments, when required.
Because regulations are always changing, business owners must stay informed.
The reality is that managing compliance takes time away from running and growing the business.
But it can’t be ignored. The consequences of non-compliance (fines, loss of protection) create additional pressure on the business owner.
How a service provider can help
A service provider can help business owners start their business on the right foot by ensuring timely, accurate business filings so owners can focus on building their business.
Among survey participants who used a service provider to assist with business formation, the top reason cited was to ensure that business registration was completed correctly.
Service providers can also provide ongoing compliance support as your business grows.
Here are a few tips for choosing a service provider:
- Choose a provider you trust: Trustworthiness and credibility are key. Look for sites with strong reputations and positive reviews.
- Look for transparent pricing: Make sure you understand all costs upfront; try to avoid hidden fees.
- Prioritize ease of use: Select a website that makes the registration process simple and straightforward.
- Consider recommendations: Ask for referrals from other business owners or professionals you trust.
- Don’t be swayed by celebrity endorsements: These are much less important than the actual reliability and transparency of the service.
- Additional services can be valuable: Many owners purchase extra compliance services during registration. Consider what you might need based on your business's legal requirements.
Conclusion
If compliance seems overwhelming, you're not alone. Many business owners, even those with experience, feel buried by rules and requirements. It's normal to look for more help and resources.
Preparation is important. Successful business owners often spend time researching compliance and operational requirements before they register their business.
Knowledge is valuable, but support is also crucial. Even if you feel ready, seeking extra resources and support can help you stay compliant and confident.
Starting a business and not sure which business type is for you? Use our Incorporation Wizard Tool to help you determine the right type for your business.
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