Expanding your business to the United States can be daunting for any business owner. The American market is a notoriously tough nut to crack, and many businesses feel US success can make or break them.

You need to be well-prepared to enter the market. One area business owners and HR managers sometimes overlook, though, is their legal obligations. The US presents a tangled framework of federal, state, and local law. There are thousands of rules in the tax code alone, let alone every other area of your operations.

In this environment, noncompliance is a very real danger. Just how important is it to make sure you’re in compliance? While the cost of compliance programs may seem high, it pales in comparison to the cost of noncompliance.

Tax Noncompliance Costs Businesses

The IRS issues billions of dollars’ worth of penalties to businesses every year. In fact, by some estimates, the average small business pays $845 per year in penalties to the IRS.

Most of those fines are for relatively innocuous missteps, such as not remitting payroll taxes on time. For more serious infractions, the penalties are much higher.

Payroll noncompliance could also trigger an audit, which will cost you additional time and money.

Worker Misclassification Is a Serious Issue

More recently, the IRS and a number of states have teamed up to combat worker misclassification. This situation arises when a business classifies their employees as contractors for tax purposes.

Businesses have different obligations to employees than they do to contractors. You may not have to withhold taxes for a contractor, for example. If you don’t withhold for an employee, though, you’re leaving them on the hook for penalties from the IRS.

Worker misclassification is sometimes done on purpose, but it’s also an easy mistake to make. You should carefully review the criteria for contractors and employees. If you’re not sure where one of your workers falls, you can ask for expert advice.

The IRS and various states have the power to levy fines and other penalties for worker misclassification.

A Lawsuit Might Be Waiting

Another issue you may face for noncompliance comes not from the IRS or state governments but from your employees themselves. Noncompliance with various US employment laws could put your business on the wrong end of a lawsuit.

These suits can be quite costly to fight or settle. You could face a suit from an individual employee who feels you didn’t make every effort to accommodate them, or there might be a class action suit against you for discrimination.

Your best bet is to avoid these legal situations entirely. A compliance program could help you make sure you’re following the letter of the law. Then it’s less likely you’ll face legal action. If someone does try to launch a suit, you have a much stronger position to fight it if you’ve followed the law.

Data Compliance Is More Important

A hot topic in the world of compliance right now is data security and monitoring. You collect data from your employees, and you’re expected to keep it on file for so long.

Making sure you store that data securely is more important than ever. A string of high-profile data breaches has only highlighted that businesses must do more to keep their data safe.

As a result, rules are being created to improve regulatory compliance programs. While mere compliance isn’t enough to keep your data secure, it could help you avoid fines and penalties. The average cost of a breach for a small business is around $120,000, not including fees for being in violation of various data protection laws.

These are just a few of the compliance aspects you’ll have to consider as you expand to the US. As you can see, noncompliance can cost far too much.

If you need help with your compliance, get in touch with the experts today.