Did you know that as many as 70% of small businesses have debt of some kind? If you’ve ever dabbled in business before or know someone who owns a business, you probably know that the financial and legal side of business are among the most complicated and daunting matters.
Understanding the legal side of business doesn’t have to take years of study to master, however. In fact, you can learn the basics in a short time with the right information. Whether you’re considering becoming an entrepreneur, you’re a sole proprietor already, or you’re a student with a term paper to finish, this article should help you gain a basic understanding of the legal side of business.
Please note that this article was not written by a lawyer and should not be taken as legal advice. For real-world, non-theoretical legal problems, always find a qualified lawyer to help you.
Getting Legal Advice and Representation
For the majority of the population, going their whole life without speaking to an attorney is an accomplishment: it means they’ve kept themselves out of trouble. But for business owners, this is not the case. Because the legal side of business is so significant, going too long without hiring or consulting a lawyer can be a very bad sign. You could be failing to protect your business and leaving yourself open to liability.
As a business owner, you need to have a good lawyer on call to represent you and protect your business. Regular citizens will hire experts like disability lawyers when they need representation in court to get certain rights and benefits. But an entrepreneur needs a lawyer they can count on at a moment’s notice, because they never know when someone’s going to file a lawsuit against them. And once a suit is filed, it’s too late to research and choose the best legal firm to help you. In any case, you’ll stand to pay a lot more.
You won’t just need a lawyer if you get called into court unexpectedly. There are many situations involved in starting a business where an attorney is necessary. For example, when you register your business, create your first contract with a client or partner, hire your first employee, and get someone to invest, you’ll need a lawyer to help you navigate that situation safely. Business lawyers don’t just put out metaphorical fires after they’ve been started. They also prevent those fires from being kindled in the first place, by recognizing red flags and creating legal safeguards.
Sometimes you don’t need a lawyer to represent you in person so much as you need reliable legal advice. In these cases, it may be more economical for you to get help from recognized legal websites, such as Rocket Lawyer or LegalZoom.
Keeping Your Customers Safe
Product liability lawyers work hard to hold businesses accountable for the products they sell. If you’re a manufacturer or seller of physical goods, it’s important to be familiar with the safety regulations and best practices that apply to your products.
As a business owner, one of your first priorities must be to keep your customers safe. Not only is this ethical, but it keeps defective product lawyers off your tail. If you’re thinking of going into business with new or untested products, make sure you’re taking all the right steps to do it right.
Having an Employee Injured On the Job
Workplace accidents are no joke, especially when they result in someone getting seriously hurt. If an employee gets injured in an accident while they’re on the job, your first priority should be to make sure everyone is safe, that the situation is stabilized, and that the hurt employee has appropriate medical care immediately. Although injuries at work certainly fall under the legal side of business, in the moment when it happens, the first thing on your mind needs to be your employees’ and customers’ safety. Not only is this morally and ethically right, but it’s the best response to avoid legal repercussions later.
In a best-case scenario, the employee involved in the workplace incident won’t need anything more than disinfectant, a bandaid, and a place to sit and recover for a few minutes. But in other cases, the employee must be taken to a hospital or have an ambulance called, and they may not be able to return to work for a few days or weeks. If you’ve been a good employer and built a trusting, healthy relationship with your associates — and if the accident wasn’t a direct result of leadership incompetence — then you should get away without facing a lawsuit. However, you should talk to your lawyer to learn what steps need to be taken and what paperwork to fill out after the incident. Make sure you have evidence of what happened on hand for any lawyers or the court to see, should it be necessary.
If the employee is unable to work for longer than a few days, social security attorneys will help them get government assistance to cover lost pay. As their employer, it’s your responsibility to help in this process where you can, such as by supporting their claim with evidence of the incident.
Understanding Trademarks and Copyrights
Copyrights and trademarks are integral to the legal side of business, but that doesn’t mean business owners always understand them. Like most of the things on this list, trademarks, copyrights, and other forms of legal ownership can easily be misunderstood and confused with one another if you aren’t careful.
Whether you’re filing patents for new products or ordering corporate logo stamps, it’s important to understand intellectual property, and how to protect yours. Technically, anytime you create something original, you own the copyright on that property by default. This doesn’t mean it’s always easy to prove your ownership in court, however. By registering the copyright on written works, designs, and recordings, you make it easier to win your case if someone tries to infringe on your copyright.
Trademarks are different from copyrights, in that they must be registered in order to legally apply. They’re also only used for names and symbols that identify corporate products and services. While copyright applies to a created property, such as a book or website, trademarks apply to branding. For example, McDonald’s might own “Egg McMuffin” as a trademarked name, but they can’t copyright the idea of serving egg and cheese on a sandwich.
Other forms of ownership include patents, which are essentially copyrights that apply to physical product designs; legal business names, which must be registered and usually trademarked to be official; and domain names, which anyone can purchase and hold on to, regardless of whether they own a registered business name or trademark or not.
Depending on what kind of business you operate, some of these property types will be more important to you than others. If you primarily sell digital content, such as online courses, then understanding copyright will probably be most important. If you design original physical products, you’ll need to understand patent law.
Renting Out Property
As a business owner, you may decide to rent out underutilized property at some point to help with expenses. Or your entire business might be real estate, where you rent out homes or manage rentals for other people. In either case, you’ll need a firm grasp on landlord and tenant laws.
Laws pertaining to property rentals are set up to protect both parties involved in the relationship: the landlord and the tenant or renter. Both parties need to understand and comply with federal, state, and local regulations. Property owners need to run a profitable business and protect their investment, while tenants need to live peacefully and safely in a home where their personal rights are protected. Whenever you sign a property lease with someone, it’s critical that you understand your rights, as well as your legal obligations.
The two major federal laws that impact all landlords and property managers are the Fair Credit Reporting Act and the Fair Housing Act.
The Fair Housing Act prohibits landlords from discriminating against potential tenants based on color, race, ethnicity, religion, sexual orientation, or disability. Beyond simply ensuring that landlords don’t turn away qualifying renters unfairly, the law also prohibits landlords from advertising their properties to specific groups of people.
Meanwhile, the Fair Credit Reporting Act defines how a landlord is permitted to use a tenant’s credit history for screening purposes. Under this law, a landlord must acquire an applicant’s permission before they may run a credit report. They must also provide the applicant with information on which reporting agency was used, and they must let the applicant know if any information on the report was the basis for denying their application.
As with most things, the legal side of business is different depending on what state, county, and city you’re operating in. Besides getting clear on the federal laws that apply to your company, you must also research and understand the state and local laws for your area.
It’s very important to familiarize yourself with landlord-tenant laws before going into the leasing business. Not being aware of a law, or failing to realize you were violating one, isn’t an excuse that will hold up in court. You can be prosecuted and sued for disobeying state laws, even if you weren’t aware of their existence. This is just one more reason why it’s so important to have a good lawyer you can talk to, as well as to do your own research carefully before starting a business.
Shipping Safely and Legally
If your business involves shipping products through the mail, then an entire separate list of rules and regulations will apply to your company. Packages and cargo shipped domestically are regulated by the United States and Postal Service guidelines. Before you go into business, you should make sure that nothing you sell is on the USPS prohibited or restricted list. Restricted items can still be shipped through the mail in certain circumstances, as long as certain conditions are met. Prohibited items cannot be shipped through the mail at all. Keep in mind that there are entirely separate regulations that apply if you intend to ship products internationally.
According to the USPS website, domestically prohibited items include:
- Air bags
- Marijuana (medical or otherwise)
The list of domestically restricted items is much longer, and different rules apply to different product categories. Most restricted items are common sense products, such as firearms and alcoholic beverages. Others are more surprising, such as nail polish and hand sanitizer, but they’re usually on the list because such products can be flammable. Note that you can probably still ship these items, but you need to find out how to do it legally.
Once you’ve reviewed USPS guidelines to ensure your products aren’t hazardous, restricted, or too perishable to be mailed, you will be responsible for packing products securely and using required mailing labels. You should find that the legal side of business is less complicated when it comes to shipping regulations than in other areas.
Working With Food Products
If your business works in the food industry, then the legal side of business for you will be quite a bit more complicated. This is because the government applies strict regulations upon food companies to protect citizens’ health and keep businesses operating safely.
If you own a restaurant, your reputation depends on the trust your customers place in your establishment to serve high-quality food. If word were to get around that some of your menu items cause food poisoning, you would lose you customers, and probably your food permit. Following food safety regulations carefully will ensure that you’re serving safe, high-quality food.
The first thing to consider is where the food you serve comes from. Restaurants and businesses are not allowed to serve food that was prepared in a private home kitchen. Certain foods must be sourced from a government-approved vendor or processing plant for you to serve them legally. These include milk, eggs, fish and shellfish, wild mushrooms, game animals, and any beef that may be served undercooked at a customer’s request.
Other food safety regulations determine the temperatures at which certain foods have to be stored and served. Raw eggs have to be refrigerated at a temperature of 45 degrees Fahrenheit or lower. Potential hazardous foods, including most meats, have to be cooked to a temperature of at least 135 degrees, going all the way up to 160 degrees for certain dishes.
Businesses that prepare or serve food must also have strict rules for their employees about washing their hands and protecting food from contaminants. Soap, hot water, and hygienic hand-drying options must be provided to all employees who prepare food.
Other federal regulations dictate how ice should be used, and still others governing how meat should be handled and prepared. Some laws only apply at the state or local level. Your business will have to observe those to avoid unpleasant surprises at your first health inspection.
As you can see, the legal side of business is often complex and confusing, but you can make sense of it if you break it down into the areas that apply to your company. Hopefully this article has helped you better understand the legal side of business.