Small Businesses Are Facing a Crippling Paperwork Burden. It’s Likely to Get Worse

If you think you are pushing more paperwork than ever, you’re not alone. According to a new Small Business Index report released this week from MetLife and the U.S. Chamber of Commerce, 37 percent of business owners say they are spending more time on licensing, compliance, or other government requirements, compared with 29 percent last quarter. 

The papers started piling up during the pandemic, as businesses started applying for funds through government relief programs such as the Paycheck Protection Program and employees starting requesting more sick leave because of Covid. While that seems reasonable enough, the time businesses are spending on forms and compliance is likely to increase in the months ahead as federal agencies seek to implement more rules and enforce those already in effect.

In March, the Securities and Exchange Commission proposed rule changes that will require registrants to include certain climate-related disclosures in their registration statements and quarterly reports, including information about climate-related risks. Small businesses say the regulator’s proposal on climate disclosures will saddle them with a compliance burden they won’t be able to handle, according to the Wall Street Journal. While small companies normally don’t fall within the SEC’s purview, they fear that they will be forced to cough up heaps of information on their roles, however small, in emitting carbon, because the SEC wants large public companies to catalog emissions in their entire supply chains.

“Small and independent businesses cannot afford the experts, accountants, and lawyers needed to comply with complex government reporting regimes,” the National Federation of Independent Business said in a comment letter filed with the SEC.

Additionally, the Federal Trade Commission and the Consumer Financial Protection Bureau are creating more rules and regulations. In April, director Rohit Chopra told the Senate Committee on Banking, Housing, and Urban Affairs that the CFPB will “dramatically increase its issuance of guidance documents, such as advisory opinions, compliance bulletins, policy statements, and other publications,” to ensure businesses follow regulations. For small businesses without full HR staffs or legal teams to keep up with the added paperwork and unnecessary red tape and regulations, these changes can come as a harsh reality.

“[Small businesses] are wading through a seemingly never-ending debate of rule changes and shifting incentives that threaten their fundamental abilities to create, build, and grow the enterprises that will power our economy forward,” said Joe Shamess, general partner at Flintlock Capital, during testimony before the House Small Business Committee in a hearing on veteran entrepreneurship in June 2022.

Meanwhile, a rare opportunity to overturn the federal government’s ability to police corporations is starting to materialize. Some regulations watchers suggest that the recent Supreme Court decision in which the Environmental Protection Agency was ruled to have overstepped its authority to curb power plants’ carbon emissions could fuel an easing of red tape in other instances. Similar cases involving the Clean Water Act, among others, may follow similar precedent.