What a small business owner is responsible for

A small business owner's responsibilities are the legal obligations of the business and its owner, plus the operating decisions and checks that nobody else in the business holds.

What is a small business owner responsible for?

Two kinds of things: the obligations the law puts on the business and on the owner personally, and the operating work nobody else will do unless the owner assigns it. The first kind cannot be delegated away, only delegated with oversight. The second kind should be delegated, and a business where the owner still does all of it is a business that cannot run without them.

This page separates the two, because owners tend to worry about the operating work and underestimate the legal obligations, which is the wrong way round. The Run guide covers how to build the operating systems; this page is the list those systems have to cover.

Which responsibilities stay with the owner personally?

Payroll taxes. A business that has employees withholds income and employment taxes from their pay and holds that money for the government. The IRS treats it as trust fund money. If it is not paid over, the IRS can hold the person responsible for collecting and paying it personally liable through the Trust Fund Recovery Penalty, and a responsible person can be an owner, an officer, or an employee with the authority to decide which bills get paid. Outsourcing payroll to a service does not remove the owner's responsibility to make sure the deposits are made. This is the one obligation an owner must check every pay period.

Records. The IRS requires a business to keep records that support the income and deductions on its tax returns, for as long as they may be needed to prove them. The law does not prescribe a system, but the burden of proof sits with the business. Supporting documents for purchases, sales, and payroll are the record; the accounting software is only the summary.

Licenses, permits, and registrations. Which ones apply depends on the industry and the location, and many must be renewed. The Small Business Administration's guidance on licenses and permits is the starting point for finding out which apply.

Employees. An employer is responsible under federal and state law for paying at least the required wages, keeping payroll records, and providing a safe workplace. The first question is classification. The SBA's guidance on hiring and managing employees warns that treating someone as a contractor when they meet the legal definition of an employee can mean back taxes, penalties, and wages owed under the Fair Labor Standards Act. State rules add to the federal ones.

Which responsibilities should the owner delegate?

Most of the rest. The daily operating work (taking orders, doing the jobs, invoicing, ordering supplies, answering customers) should belong to roles, each with a written procedure. The guide to standard operating procedures shows how to write them so the work survives the person who does it today.

Delegating is not the same as disappearing. The owner keeps 3 things: the decisions that set direction, the checks that prove the delegated work is being done, and the relationships that the business cannot yet afford to lose. A good operating system makes each of those smaller over time.

What should the owner check every week?

A short list, on the same day each week:

• Cash. Opening balance, what came in, what went out, and the next 13 weeks of expected payments. The operating guide explains why weekly and not monthly.
• Payroll deposits. Confirmed made, not assumed.
• Receivables. Who owes money and how long they have owed it.
• The exceptions log. Every place a procedure failed or someone had to call the owner. Each one is either a procedure to fix or a decision to delegate.

That review takes an hour when the systems work. When it takes a day, the systems are the project.

What happens when responsibilities are not assigned?

They land on the owner by default, usually at the worst time. A missed filing becomes a penalty, a missed payroll deposit becomes a personal liability, and a customer relationship that only the owner maintains becomes the reason the business cannot be sold. None of these announce themselves in advance.

Where should an owner start?

Write the list. Every legal obligation the business has, with the date it is due and the person who handles it. Every recurring operating job, with the role that owns it. The process inventory worksheet is built for the second half. Then give the legal list to an accountant and ask what is missing, because the list is only useful if it is complete.

The goal is not an owner who does less. It is an owner whose time goes to the work only an owner can do, with everything else written down, assigned, and checked.