Business Law For Entrepreneurs: A Guide For What You Need To Know

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Business Law Guide For Entrepreneurs: What You Need To Know

Entrepreneurs:

Your business may be breaking the law without realizing it.

It's true. Businesses break the law unknowingly and the results can be devastating.

So, if you're a business owner, you must check out this business law guide we put together with one of our contributors.

After all, having a business comes with a lot of legal issues that you never had to deal with before. The whole thing can get a bit confusing but it’s part of the job so you’ve just got to get on with it.

Hopefully, you aren’t going to be breaking any laws on purpose but when you’re trying to learn all of these new rules and regulations, it’s easy to make mistakes.

In fact, it’s far easier than you think to accidentally break the law when you’re a business owner and the authorities won’t have any sympathy for you if you do.

Also, you'll learn crucial business law topics along with the most common ways that businesses break the law accidentally.

First of all, I also want to stress what I mention in the disclaimer above every post: I am not a lawyer!

Please, please, please get legal advice before acting on the information below on business law. It's a tricky and confusing subject and it's best to get professional assistance in dealing with these complex matters. We're just doing an overview here.

BUSINESS LAW TIP: Download the Business Law For Entrepreneurs Guide and avoid getting yourself and your business into legal and financial trouble.

Business Law: An Overview

You're likely asking yourself:

"What is business law?"

Let's chat about that.

According to HG.org, a respected law site, we can use the following as a working definition for business law:

Business law deals with the creation of new businesses and the issues that arise as existing businesses interact with the public, other companies, and the government.

This area of the law draws on a variety of legal disciplines, including tax law, intellectual property, real estate, sales, employment law, bankruptcy, and others.

To take it a step further, HG.org explains that we should see the business as an entity in its own right:

To understand the role of business law within the legal system, it helps to view businesses as entities separate from their owners and employees.

Just like individuals living together in society, business entities are subject to legal rules designed to give every participant in the marketplace a fair opportunity to succeed.

As I would understand it then, business law helps our company (or entity) navigate the waters with other entities (people, other companies, and government). These legal rules supposedly provide a level playing field for all.

That's the essence of what I put together from that. It gives us a solid basis to move forward and understand what entrepreneurs must know about business law.

Business Laws Every Entrepreneur Should Know

Now that we've established what business law covers, let's explore what particular areas of business law we need to be aware of.

To comply with these, you may or may not need the help of lawyer and/or accountant. So, keep that in mind.

Business Structure

What kind of business do you run?

I'm not talking about a retail store or online blog.

Instead, I'm asking you what kind of business structure you have for your company. It could be a sole proprietorship, limited liability company, partnerships, C-corporation, or S-corporation.

And, yes, what you decide matters because it determines how your company is taxed and what you're personally liable for. Don't lose your retirement nest egg because you get sued and your personal assets aren't protected.

You should certainly read up on the different types and get professional advice before deciding which one to go with. Each business structure has its benefits and drawbacks.

Top Quote on Business Structures

"There are sole proprietorships, LLCs, S corporations, partnerships, and corporations. Choosing the right one means understanding the benefits and drawbacks of each.

For example, if you set yourself up as a sole proprietor, you must understand that you and your business are considered “one” in the legal system. All of your personal assets are at risk if your business should be sued.”

- Nathan Dineen, CEO of DUI Defense WI.

Source: Nine Common Legal Mistakes Small Business Owners Make

Business Licenses

Depending on what type of company you start, you may need a business license. This may come from your local government, your state or the federal government. It could also come from all three levels of government.

Either way, it's your job to know what business licenses your company needs (if any) as the entrepreneur. If you don't know, you can check with your local government officials or a local legal professional.

Your local government likely has a website (hopefully). You'll want to look into any particular zoning laws as well.

Bplans.com provides some advice on a great resource for state and federal business regulations:

For federal and state licensing, check out the Small Business Administration website, and follow the links that are applicable to your business.

Tax Law

Something you definitely want to get right in the realm of business law is taxes.

Again, this is something that also affects your business from a local, state, and federal level.

Personally, I have somebody else do my personal and business taxes.

After all, tax laws are constantly changing. I rather have a professional tax accountant who lives and breathes this stuff to make sure I'm doing everything correctly.

Yes, it costs money, but you're in business. You will make enough to pay for these types of necessary expenses.

Here are a few action items you're going to want to address:

Employer Identification Number

Get an employer identification number (EIN) with the Internal Revenue Service (IRS). You need this to file your business taxes. Head over to the IRS website to get your EIN.

What Taxes To Pay

Know what taxes your business should pay. You're responsible for certain federal, state and local taxes.

Here's what Bplans.com says on the matter:

Take some time to review the federal tax, social security, Medicare, and federal unemployment tax requirements. The IRS has a breakdown of your tax responsibilities as an owner. You’ll also want to talk with an accountant about these obligations and figure out a budget.

In addition to federal taxes, you’ll likely have to pay state taxes as well. Use this website to research your state tax requirements.

Advertising and Marketing

If you're in business, you're likely going to engage in advertising and marketing activities to generate sales and increase profit. No kidding.

However, in doing so, you need to make sure you're not inadvertently violating any business laws. The last you want to have to do is pay hefty fines to the Federal Trade Commission, or FTC.

Let's explore a few business laws focused on advertising and marketing that you're going to want to abide by.

CAN-SPAM Act

What is the CAN-SPAM Act?

CAN-SPAM stands for Controlling the Assault of Non-Solicited Pornography And Marketing Act and was passed in 2003.

As Sarah Wai, Content and Email Marketing Specialist of Tribute Media, explains, CAN-SPAM "is the Federal Trade Commission’s requirements for commercial messages."

CAN-SPAM "gives recipients the right to unsubscribe or mark as SPAM any email that they deem to be a violation of these set requirements, and it sets severe penalties for those who are in violation," says Wai.

Your Responsibility Under CAN-SPAM:

Here are Wai's tips to comply with CAN-SPAM:

1. Send from an email address that gives a clear idea of who you are. Don’t use personal email accounts, but rather make sure that your company name is included in the email address you are sending from.

I’ve seen a company use an address like company@yahoo.com. That doesn’t count. You need an email address associated with your company’s website domain.

2. Make your subject lines are clear, concise and honest. Your subject line should always be an indicator of what the email is about.

3. Make unsubscribing easy. Not having an obvious unsubscribe link is a great way to get marked as SPAM.

4. Include your company’s physical address in every email you send, whether it’s in the footer or included in your signature. Proof of you being a valid company is essential.

5. If you don’t do your own email marketing, monitor whoever is. Even if you are outsourcing your email marketing, you are also held responsible for every email send in your name or the name of your company.

Related: How To Make Money In 2019

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Check out the 2019 Guide To Making Money. You won't be disappointed.

Truth In Advertising and Marketing

Let's face it:

We need to be honest and straightforward in our marketing practices as business owners. The last thing we want to do is mislead or harm our customers.

As this article on Bond Street explains:

These laws protect consumers by requiring advertisements to be truthful and substantiated. Before your business starts an advertising campaign, be sure it complies with advertising and marketing laws, also known generally as “truth-in-advertising” rules.

Bplans.com also stresses these points:

In addition, if you make any claims during an advertisement, you must have proof to back it up. You can’t ever be misleading or unfair. This rule becomes even more specific when you market to children or use endorsements.

Make sure to check out the specifics of what the FTC focuses on with truth in advertising. Here are a few articles they cite:

Telemarketing and Do Not Call Registry

Telemarketing:

Love it or hate it, it still is a popular way of generating business. When my wife had her real estate business, it was how she obtained many of her clients.

However, like many other things we've seen so far, there are rules and regulations that are in place to protect consumers.

The Small Business Administration (SBA) gives us some guidance on telemarketing laws you should know about (links added):

Telemarketing is regulated at the federal level by two statutes: the Telephone Consumer Protection Act of 1991 (TCPA) and the Telemarketing Sales Rule (TSR). The Federal Communications Commission (FCC) derives its regulatory authority from TCPA, while the Federal Trade Commission (FTC) is responsible for enforcing TSR.

Another aspect telemarketers should be aware of with regards to these laws is the National Do Not Call Registry. Basically, you can't call people on this list for the most part:

The Federal Trade Commission (FTC) amended the Telemarketing Sales Rule (TSR) to give consumers a choice about whether they want to receive most telemarketing calls. As of October 1, 2003, it became illegal for most telemarketers or sellers to call a number listed on the National Do Not Call Registry.

Sellers and telemarketers can access the National Do Not Call Registry and see who is on the list before making the sales call.

Intellectual Property

What is intellectual property?

Intellectual property is "the ownership of ideas," according to Entrepreneur. "Unlike tangible assets to your business such as computers or your office, intellectual property is a collection of ideas and concepts."

The next question you may have is:

"How do I protect my intellectual property, or ideas, from competitors?"

Patents

The more common ways we all likely know about protecting intellectual property are patents, trademarks, and copyrights. Generally, "patents protect processes, methods and inventions that are "novel," "non-obvious" and "useful," says Entrepreneur.

Also, you can read up on different types of patents like utility patents, which protects how something is used or how it works, versus a design patent, which protects the way something looks.

Trademarks

Then, it's on to trademarks. This is like the brand names you see out there. Nike or Apple would be trademarked brand names.

More from Entrepreneur on trademarks:

What qualities make for a strong trademark? The cardinal rule is that a mark must be distinctive. The more distinctive it is, the easier your trademark will be to enforce. This is why so many trademarked products have unique spellings.

Copyrights

Next, it's copyrights. Here's how FindLaw explains copyrights:

Copyright protection is available for original works of authorship that are fixed in a tangible form, whether published or unpublished. The categories of works that can be protected by copyright laws include paintings, literary works, live performances, photographs, movies, and software.

Other Ways To Protect Your Ideas:

The Forbes Technology Council suggests a few other ways to protect your intellectual property, including non-disclosure agreements, or NDAs:

Get assistance with creating well-written non-disclosure agreements. Also, look at any other agreements you use in your business to make sure they cover your intellectual property. These could include employment agreements, licenses, and sales contracts. - Muhammed Othman, Calendar

Source: 10 Effective Ways To Protect Your Intellectual Property

BUSINESS LAW TIP: Download the Business Law For Entrepreneurs Guide and avoid getting yourself and your business into legal and financial trouble.

Common Business Laws Entrepreneurs Break

Businesses break the law by hiring illegal workers

Hiring workers from another country can be a lengthy and complicated process for employers. Much of the responsibility falls on them to make sure that everything is done legally.

Because if they don’t have the necessary paperwork to prove that they’re eligible to work, then you’re breaking the law (even if they used false paperwork).

The best thing to do is find the best immigration lawyers and have them check over all of the documents over for you to make sure that everything is in order.

Plus, they can inform you of what other business law topics apply to hiring workers from other countries.

Another crucial way businesses break the law is by not paying tax

When you’re dealing with your personal finances it can be tricky enough but that’s nothing compared to the paperwork you’ve got to fill out when you’re operating as a business.

You’ve got to pay your business taxes and sort out all of your employees tax forms on top of sorting your own and it’s not uncommon for people to make mistakes and pay less than you owe.

If you do this, you’re going to end up with late fees and hefty fines which can land you in serious trouble.

One of the more important examples of companies breaking the law is by destroying documents

As soon as your company gets involved in a lawsuit of any kind, you need to keep hold of any relevant documents.

The thing is that’s not your decision to make.

Those documents include anything from accounts all the way down to emails or text messages. Deleting any of those emails or getting rid of paperwork is a crime, even if you do it by accident.

You need to have a strict policy in place to deal with situations like this.

As a result, all of your employees know that they absolutely shouldn’t get rid of any documents, even if they seem completely insignificant.

Businesses break the law by selling recalled products

The Consumer Product Safety Commission exists to make sure that all products sold are completely safe to use. If something unsafe, it will be recalled. The problem is they won’t necessarily tell you if it’s one of your products.

They have a list on their website of all of the products that are being recalled which you need to be checking regularly. If you carry on selling a product after recall, you’re breaking the law.

It doesn’t matter whether you did it without realizing. If your business breaks any of these laws, you’ll find yourself in big trouble.  

Related: Don't Make These Money Mistakes!

While we're on the subject of not screwing your business up, check out our article on Money Mistakes To Avoid. It's jam-packed with all kinds of things you want to avoid in your 20s, 30s, and 40s as you navigate your financial future.

Man-up or Woman-up and take charge of your money today. Like a boss.

(You know, since you might be one if you're reading this).

Business Law: The Final Word

I know:

That was a lot to take in.

After all, business law isn't exactly a "binge-worthy" topic that you just can't get enough of.

Instead, it's more along the lines of the "necessary evil" category that you wish you could just let someone else take care of. Now, you can do that with some of this.

However, you need to understand the main elements of these business laws if you want to know whether your company is in compliance. As the business owner, you and your company may be separate in the eyes of the law. But, that doesn't mean you have no responsibility here.

So, learn as much as you can about business law. From there, be sure to get the legal help you need to keep yourself out of trouble.

Do that and you will be well on your way to take your company to the next level.

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Business Law for Entrepreneurs

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1 comment
Tyler Flood says October 28, 2018

These are some great laws for entrepreneurs.

It´s not always about taking the risk. It´s also about knowing the law, regulations and other necessary things

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