The Impact of Government Regulations on Small Business

By Berkery, Peter M., Jr. | The National Public Accountant, June 1992 | Go to article overview

The Impact of Government Regulations on Small Business


Berkery, Peter M., Jr., The National Public Accountant


The National Society of Public Accountants consists of 21,000 individual members, most of whom are sole practitioners or partners in small-sized public accounting firms. NSPA members provide accounting, auditing, tax return preparation, representation before the Internal Revenue Service, tax planning, financial planning and managerial advisory services to an estimated six million individual and small business clients nationwide.

Because of the type of clients its members serve, NSPA is in a unique position to address the impact of federal regulations on small businesses. Our members do not audit Fortune 500 companies; they do not prepare taxes for Wall Street brokerage houses. Rather, our members serve Main Street, U.S.A. - its farmers and small businesses, struggling to make ends meet. As small business advisors, NSPA members are the first to see the impact of federal regulations on America's entrepreneurs.

We therefore greatly appreciate the opportunity to share with you our experiences as they relate to the impact of government regulation on small business.

General Observations

NSPA would like to observe initially that its concern in the matter at hand is not related to any specific government regulation or set of government regulations. In fact, taken in isolation, the majority of government regulations would appear to serve valid purposes; from protecting the environment to ensuring workplace safety, most federal regulations seem to espouse laudable goals.

In application, however, the cumulative burden of federal regulations can quickly overwhelm small business owners. Large organizations can afford to hire or retain the expertise necessary to effect compliance with such complex enactments as classifying workers as employees or independent contractors, or satisfying the Hazard Communications Standard under the Occupational Safety and Health Act. In comparison, small businesses by necessity (if not by definition) can seldom afford such luxuries.

Instead, small businesses must rely on the assistance of others in order to comply with the myriad regulations propounded by a host of government agencies. Unfortunately, from taxes to labor standards, leaky underground storage tanks to antitrust activities, such assistance too often is only forthcoming from the federal government in the form of after-the-fact compliance actions. It is NSPA's observation that, were the government to devote more of its resources to assisting small business in complying beforehand with an overwhelming panoply of rules and regulations covering virtually every facet of how a business operates, fewer businesses would have to suffer the devastating consequences of enforcement action after the damage has been done. Whether the issue is tax liens from the Internal Revenue Service or fines from the Environmental Protection Agency, NSPA believes that federal agencies have a moral obligation to be more pro-active in assisting small business.

If moral persuasion is inadequate to prompt improved assistance of small business by federal agencies, NSPA would also point out that there is a federal law requiring them to consider small businesses when they promulgate rules. The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires all government agencies to analyze the impact their proposed regulations will have on the activities of America's small businesses. It is NSPA's unfortunate observation that the requirements of the Regulatory Flexibility Act are all too often ignored by agencies when notices of proposed rulemaking are issued. If the small business impact is so patently clear that mention of the Act is unavoidable, agencies usually dismiss the potential impact of their proposals with perfunctory dispatch in the preamble to a proposed rule. Meaningful analysis is the rare exception in this area; lip service is too often the rule.

The National Society would respectfully suggest that the Regulatory Flexibility Act needs more teeth. …

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