11 Business Law Terms to Know As an Entrepreneur!
As a small business owner, it is very important to understand some basic laws pertaining to business. It is very imperative to understand general law terms to protect your business and your personal assets. It is always good to hire a lawyer to assist one with running your business. But, at the same time, you cannot leave all legal obligations of the business up to the attorney. The small business owner must have a general understanding of the legal aspects of running a business. Lawyers are there to educate the business owner on the basic laws of what it takes to run a successful business.
Here are a few ways that a lawyer can assist an entrepreneur with running a successful business:
- Can assist you with determining the best legal structure for your business. A lawyer can lay out the pros and cons of each legal structure. They can explain to you the legal aspects of each business structure. An attorney will help you to determine whether to incorporate as a Corporation, Limited Liability Company (LLC), Partnership, or another legal structure. The lawyer can let you know when it is a good time to incorporate your business. Also, he/she will let you know the rules and regulations of incorporating the business in a particular state, country, or province. The lawyer will let you know the cost of incorporating your business on a yearly basis.
- A lawyer can assist a small business with determining what licenses will be needed to start the business. The attorney will let the entrepreneur know how to obtain said licenses and the cost for such licenses. The lawyer will let the small business know the rules and regulations of obtaining certain licenses. With legal counsel, an entrepreneur can determine the significance of a particular business license.
- The business attorney can assist the owner with the preparation of certain documents needed for the daily operation of the business. Many companies have attorneys on retainer or who work for the company (Of Counsel) to assist with the legal aspects of the business.
- Many business attorneys will provide the following services to companies:
- Assist with setting up the legal structure of the business.
- Ensure that the entrepreneur has the proper licenses to go into business.
- Review legal documents like contracts, agreements, etc. for the business.
- Will assist the business in legal disputes or court litigation.
- Ensures that the small business owner is protected from personal liability.
Running a small business takes a lot of work and involves many basic laws that an entrepreneur needs to familiarize themselves with.
Here are some basic business laws that every entrepreneur needs to have a general understanding of:
- Copyright Law, Patent Law, Trademark Law, and Infringement Law: These laws protect the intellectual property of individuals like authors, musicians, and artists from being stolen and being illegally used by third parties. These laws even protect the products and services offered by any business to their customers. These laws ensure that no one steals or infringes on the intellectual property, products, and services of business (small or large).
- Intellectual Property Law: This law ensures that free competition is not limited by allowing companies and individuals legal remedies for abuses of free competition. Here are some business practice abuses that an entrepreneur can sue another over:
- Infringement regarding intellectual property rights that is protected by copyright law, trademark law, and patent law.
- Trade secrets being misappropriated.
- Intentional torts actions like injurious falsehood, prospective advantage interference, and contractual relations being interfered with.
- Violations of Section 43(a) of the Lanham Act concerning unfair competition.
Unfair competition occurs when:
- One steals from creative people the fruits of their labor and innovation and discouraging their creativity.
- It causes commercial life to be uncivilized and unbearable to be tolerated by local laws.
- Employment Law: These laws state how a business should recruit and hire individuals to work for them. Also, ensures that the business does not have any discriminatory hiring practices based on the religion, race, national origin, sex, or age of the applicant. These laws ensure that employees are paid fair wages, employees have a safe working environment, good working hours, overtime pay, and right to organize and start a union.
- Tax Law: These laws are usually administered by the Internal Revenue Service (in the USA) or equivalent agency in whatever country your business operates in. It is good for an entrepreneur to have their accountant or tax attorney explain to them the rules and regulations regarding the payment of business taxes. Each legal structure (LLC, S-Corp, Inc., etc.) have different rules and regulations regarding the payment of business taxes.
- Corporate Law: These laws are created to govern how one runs and operates their business. Here are some general concepts concerning corporate law:
- How to create a business or company.
- The legal structure or legal status of the business.
- How much power does the owner have based on the legal structure of the business?
- How is the management team set-up based on the legal structure of the business?
- The personal liability of each owner of the business.
- Will the owner be able to transfer their interest in the business?
- What are the tax ramifications for the business based on the business’ legal structure?
- Property Law: These laws deal with the physical property owned by a small business like a building or plant. These laws pertain to small businesses purchasing property, owning property, leasing property, or renting property to others. Also, deals with the legal ramifications of owning property or leasing property.
- Business Ethics: These are customs and rules governing how companies should conduct business. Business ethics lays out basic business practices that are considered fair and legal. Many governments have certain rules and regulations that state how business should be conducted in their state, country, or province.
- Tort Law: These laws protect individuals from civil wrongs caused by others or businesses. Here are four basic concepts of tort law:
- Intent: When an individual’s behavior has the substantial probability of causing certain consequences or the desire to cause such consequences.
- Recklessness: This is the conscious disregard that an individual has to a known risk or harm (that is substantial as well) caused by their behavior.
- Negligence: The failure of an individual to use reasonable care causing harm to another party.
- Strict Liability: The actions of an individual that causes harm to another without actual fault.
- Contract Law: These laws deal with promises being legally enforced. An entrepreneur must understand that every “promise to do a certain task or complete something” is not legally enforceable. The main function of a contract is that it is a set of promises or a single promise that is enforceable by law. When a promise or set of promises are considered a contract, a person that was harmed by the breach of contract has the right to seek remedies in court like requiring the breaching party to honor the terms of the contract.
- Commercial Paper Law: These laws are covered by the Uniform Commercial Code (UCC) of the United States. Other countries have their own equivalent codes concerning commercial paper. Commercial paper is the use of payment of money as a contract form. Commercial paper includes promissory notes, certificates of deposits, money orders, and checks that are used as forms of payment. These are also known as negotiable instruments which are basically orders to agree to pay money and promises that you will pay a certain amount of money for a transaction.
- Cyber Law: This is a new area of law that has been created since the development of the internet. These laws are set-up to protect businesses and their intellectual property from being stolen on the internet. Cyber Law protects individuals and businesses from crimes that are done by way of the internet, computer, or cyberspace. Here are a few ways that cyber laws protect small businesses:
- Protect businesses from being hacked.
- Protects customers’ personal information from being stolen from the business’ databank.
- Ensures that customers are the appropriate age to receive certain products or services offered by businesses.
- Ensures that small businesses have the necessary cyber security to protect their personal data, intellectual property, and personal data of their customers.
These are just a few of the business law terms that an entrepreneur needs to have a general understanding of when starting a business.
Donya Zimmerman is a business consultant, mediator, and legal professional with over ten years of experience. Donya is also a public speaker and aspiring author. She has a few books in the works that will be published and released in the latter part of 2015. The books will focus on entrepreneurship, small business, and daily devotionals. She is owner of Family & Community Mediation and Business Consulting (FACMBC) based in Baltimore, Maryland and has been in business since 2013. Services provided by FACMBC: Mediation and Conflict Resolution Services; Business Registration Assistance (Limited Liability Company, Corporation, S-Corp, Limited Liability Partnership, etc.); Business Plan Drafting Assistance; Business Certification Assistance (MBE, WOSB, 8A, 501(c) (3), Hub Zone, etc.); and Business Development. She is also a contributing writer to the Maryland Daily Examiner Newspaper. Donya Zimmerman has made article contributions to the Simply Inspirational Women in Business Journal for 2014 published by Dr. Cheryl Cottle.
If you are thinking about starting your own small business or non-profit organization do not hesitate to contact me because I can show you how to do so. Contact information: firstname.lastname@example.org; www.facebook.com/FACMBC; www.twitter.com/FACMBC; https://dzimmerman36.wordpress.com; www.linkedin.com/in/dzbusconsultantandmediator
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