What is Regulatory Compliance and Why Does It Matter?

November 13, 2020November 13, 2020
What is Regulatory Compliance and Why Does It Matter?

Businesses, much like citizens, have to abide by certain laws and regulations. Where citizens can look to law enforcement and the judicial system for guidance for enforcing laws, businesses have different governing bodies in addition to the judicial system that ensure they are in check.

Because businesses are extremely diverse in function and are present in virtually all aspects of people's lives, no one governing body could ensure compliance for all businesses. 

For example, an eCommerce business has a very different set of regulations imposed compared to a business that is based in healthcare. In the U.S., there are a slew of governing bodies that aim to keep the best interest of the people in the forefront.

It is easy for a business owner to get overwhelmed with the constantly changing rules and regulations imposed by the government. 

For some business owners that are capable of hiring a full time legal team, they can ensure that they are always within compliance and have all the most up to date information. Other businesses wait until a legal issue presents itself, which can lead to unnecessary anxiety in finding a lawyer retroactively. 

The goldilocks solution to the need for legal advice is BizCounsel. Our services give businesses the legal expertise and know-how when they need it, without the hassle. 

Understanding what regulatory compliance is and why it matters is key in understanding why having timely legal counsel is worth it. 

What is Regulatory Compliance?

Regulatory compliance is a blanket term to describe a business that has met the regulatory guidelines imposed by the government. 

For a business, having regulatory compliance is how a business can steer clear of penalties and fines. While the term regulatory compliance may seem like it is talking about one specific item that a business needs to check off, in reality it is a much more complex task. The task is complex because of the sheer number of regulatory bodies that the government has. 

Business regulatory agencies include the following:

  • U.S. Federal Trade Commission (FTC)
  • U.S. Environmental Protection Agency (EPA)
  • U.S. Department of Commerce
  • U.S. Securities and Exchange Commission (SEC)
  • U.S. Patents and Trademarks Office
  • U.S. Office of Safety & Health Inspections (OSHA)

Many of these agencies fall under the executive branch of the United States government and act as a lookout for the judicial system in determining business compliance. The president is responsible for appointing leaders to these agencies, as the executive branch is responsible for the proper enforcement of laws. 

Each agency is tasked with ensuring that a different aspect of public and government interest is maintained. With a clear understanding of what regulatory compliance means, the question becomes: why does it matter to a business?

Corporate Filings

One of the most important aspects of compliance involves corporate filings, which includes the proper formation and submission of certain documents at the certain stages.

A critical example of corporate filings includes obtaining a business license during formation of the business. Especially depending on the industry, there can be a wide and varying range of requirements to obtain the documents needed to be considered a “registered” or “licensed” business in the eyes of your local, state, and federal government. For instance, a new bar and restaurant will have massively different licensing requirements compared to a classic car restoration shop. 

This is why hiring legal counsel even just for this stage of your business can help you save a lot of effort, trouble, and money by setting you up for success right from the start. 

Other examples of corporate filings throughout the lifetime of a business include:


  • Articles of Incorporation
  • Corporate Bylaws
  • Operating Agreement
  • Stock Certificate


  • Annual reports
  • Tax filings
  • Insurance filings (disability, unemployment, worker’s compensation)


  • Trademark, patent, and copyright filings
  • Dissolution

Registered Agents

In every state, every business is required to have a registered agent to receive documentation on behalf of the business, not only from local and state governments, but also from the entities mentioned above. 

Some of these documents include:

  • Tax notices and IRS documents
  • Lawsuits
  • Corporate filings notifications
  • Wage garnishment notices
  • Subpoenas/notices to appear in court

Registered agents are required for LLCs and corporations, and should be available during standard business hours at a location specified in the business’s operating documents. 

Why Does It Matter?

Regulatory compliance matters for two main reasons: avoiding fees, and maintaining a good public image. 

Since every business needs to follow the regulations, it means that every business has an equal obligation to meet or exceed requirements. When a business falls out of compliance, it can cost a business large sums of money and can lead to a tarnished public image. The best way to see the importance of regulatory compliance is to observe the failures of others and how it impacted them. 

The first reason being in compliance is important is that it can ensure that a business does not have to face harsh penalties when found out of compliance. 

One of the largest scandals concerning regulatory compliance within the past decade involved the automotive manufacturer Volkswagen and the EPA. The automotive manufacturer had advertised many of its diesel vehicles as a “green” solution to transportation. The company boasted low emissions and high mpg. The information was found to be falsified, and that VW had actually been cheating in gaining a better EPA rating as well as committing fraud through the U.S. Customs and Border Protection agency. 

As a result, the organization was charged and required to pay 2.8 billion dollars, in addition to creating plans to ensure the event never happens again and to rectify their fraudulent behavior. 

Had VW paid closer attention being in compliance rather than trying to cheat the system, they could have avoided the situation. While this situation is an exaggerated example of the fines associated with being out of compliance, it outlines the severity and standard that the governing bodies impose on businesses. 

Staying ahead of regulatory requirements truly requires the trained eye of a lawyer. The value in legal counsel for regulatory compliance cannot be understated. 

In addition to avoiding fines, maintaining regulatory compliance is needed to avoid the scrutiny of the public. 

Going back to the example, Volkswagen faced litigation after litigation from around the world and by many of the different U.S. agencies. While the saying any press is good press applies in some cases, in the case of press about being out of compliance, it was definitely not in favor of the automotive manufacturer. 

In the years surrounding the scandal, VW faced a downward trajectory in sales due to their declining public image. Being out of compliance not only cost the business 2.8 billion in fines, but also cost the company much more in missed opportunity cost. 

Rebuilding a positive business image is difficult after the scrutiny of being under government investigation and litigation. The example above is an over-exaggeration but adequately illustrates the effects of being out of compliance can have. 

Every business, no matter the business stage or size, is regulated in some capacity, and staying on the right side of the law is imperative and seeking counsel from a lawyer about regulatory compliance is always a good idea. 

Even if a business feels that they are in compliance, having an extra set of eyes can ensure that nothing slips through the cracks and causes regulatory missteps. 


To summarize: regulatory compliance is a term utilized to describe a business that conforms to the laws and regulations imposed by governing bodies. 

In the United States, these governing bodies include a large list of different agencies that all impose different regulatory requirements. The EPA, SEC, FTC, and many more make up this list and all act to preserve public and government interest. 

Every business is required to follow these regulations, and as such, need to be well-versed in the specifics of the law. Without outside legal assistance, businesses can be at the mercy of these regulatory bodies and their hefty penalties and fines. 

Getting legal services like what BizCounsel has to offer can keep a business out of the regulatory labrinth. Every business has legal needs, and regulatory compliance is one of those legal needs that are always needed regardless of the business type or how confident the business may be in their legal know-how. 

When the well-being of a business is at stake, doing everything to prevent violations in regulations is the duty of a business owner. Getting legal assistance is the only sure way of maintaining regulatory compliance, so what are you waiting for? It only takes two minutes to see how BizCounsel can help you and your business


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