Understanding business law can seem daunting for a fledgling or small business owner. However, business owners who burry their heads in the sand risk legal violations that can have devastating consequences for their companies’ long-term viability.
Business owners are a simple bunch; they want more for their money. Here are areas that every business owner should familiarize themselves with to ensure their company is primed for growth.
Contracts
Whether you are collaborating with other organizations, hiring consultants, or contracting with suppliers to produce goods and services, it’s important for business owners to understand contracts and memoranda of agreement so they can get things in writing. This will eliminate misunderstandings, clarify expectations, and protect your company from liability. Thus, it is important to streamline project management.
Legal disputes that involve contracts can cost millions and derail the operations of a small business. This is why it’s vital for all businesses to learn how to read and interpret contracts. It will also help to avoid last-minute revisions from partners that could alter ownership percentages, change payment arrangements or include clauses that can violate confidentiality or privacy policies.
The law of contracts consists of written agreements between two parties that are legally binding and enforceable in court. Businesses use contracts all the time, including when they are hiring employees, entering a business deal with customers, engaging contractors, purchasing products and services, or leasing office space.
When a party fails to meet its obligations under a contract, there are typically a number of remedies available to the other party — from unpleasant email exchanges to litigation in court. This is why it’s important for all businesses to become fluent in contract language so they can identify the legalities of the various types of contracts they use and ensure that their company is protected.
Licensing
A business license or permit is a government approval that allows you to work in a specific industry. These permits are governed by federal, state and local government agencies. It’s important to determine the type of licensing your business requires before starting operations. Otherwise, you could face fines and penalties from the city or state if your company violates local regulations.
Most states have websites that help entrepreneurs determine what types of state-specific business permits and licenses they may need. For example, New York’s Business Wizard offers an online tool that can help you find out what permits and licenses are required for your business. It’s also worth contacting your local Small Business Development Center to get more information.
Licensing is necessary to ensure that businesses operate safely and ethically. For example, restaurants need to be licensed to sell food. Likewise, barbershops and construction firms need to be licensed to operate their businesses. Some specialized professions, such as doctors and lawyers, must register for specific operational licenses. And other businesses, such as those that produce and transport nuclear waste or operate commercial airlines, must obtain federal approval before operating.
Additionally, many states require businesses to register for a seller’s permit, which enables them to collect sales taxes. This is usually needed for businesses that sell goods or services, although it’s not always necessary for service-based businesses. The IRS also requires that all companies file for an Employer Identification Number (EIN). This is a unique number that identifies your business for tax purposes.
Intellectual Property Rights
Intellectual property rights are the legal protections given to individuals for creations of their mind, such as a book (copyright), invention (patent) or work of art (copyright). These types of intellectual property give the creator exclusive use for a limited period of time.
These rights increase incentives for individuals to produce new ideas and creations that might further economic growth. They also enable the production of a better world by providing businesses with a legal foundation to enter contracts, collaborate with others, share resources and create new technologies. Additionally, IP-intensive industries account for over 45 million American jobs and generate hundreds of billions in annual gross domestic product (GDP).
In the United States, there are four primary forms of intellectual property: copyrights, patents, trademarks and trade secrets. Business owners should be aware of these laws to protect their business and prevent infringement.
The best way to ensure your intellectual property is protected is to consult with a qualified attorney. It is essential to take proactive steps to protect your company’s assets — like logos, branding, products and technology — as soon as possible. This will help you avoid costly infringement or loss of rights. Moreover, it will allow you to focus on the development of your company and client base. Taking these precautions will also set you up for success in the event that your business faces a lawsuit or other legal issues.
Banking
As a business owner, you need to understand your legal obligations and how they relate to your financials. Popular cloud accounting apps like QuickBooks and Xero allow you to keep track of your finances. Staying up to date with laws that affect your industry is also key – laws change over time, so it’s essential to learn about what changes may impact your business.
Once you’re registered as a business, it’s important to open a bank account for your company. This ensures that any money related to the business is kept separate from your personal funds. This could help protect you in the event of a lawsuit.
Employment
Businesses with employees need to be sure they are complying with federal and state laws regarding employment. These laws protect employee rights to a safe work environment, fair pay, and freedom from discrimination, among other things. Employers must also comply with labor laws related to things like hiring veterans, workers with disabilities, household employees and child labor.
Keeping up with these types of laws isn’t an easy task, but it’s a necessary one for every business owner. If you don’t, your business could run into serious legal trouble down the road.
For more information on employment laws, the Department of Labor has a wealth of resources available. To learn more, check out their employment law fact sheet for small business owners. You can also access a variety of other EEOC materials for small businesses categorized by topic. This makes it easier to find the specific information you need quickly.