10 Things Business Owners Should Know About the Law

Ethically running a business requires a significant amount of legal knowledge and careful attention to detail. Depending on the company’s industry, there are factors to consider pertaining to finances, employment and labor, environmental regulations, workplace safety, online business, intellectual property, and more. Because there are so many policies and procedures to follow and implement, many business owners become overwhelmed and promptly make a plethora of mistakes. Here are some of the most important legal points to keep in mind to ensure business runs smoothly:

  • It is crucial to select the appropriate business structure. S-corps, LLCs, and sole proprietors are categorized based on very specific information. This includes personal tax information, tax benefits, ease of filing taxes, and financial health. Consult with a reputable tax professional for advice about business structure.
  • Don’t rely on common contract law. Selling products and services without written agreements falls under the authority of common contract law if disputes arise. Service agreements, however, can address issues pertaining to pricing, method and schedule of payments, refund policies, confidentiality issues, and more.
  • Cultivate solid business relationships. Agreements with vendors and other third parties should also be carefully outlined in writing.
  • Understand the ownership of creative assets. Company name, logo, and other branding elements warrant legal protection. It is more efficient and cost-effective to ensure this protection as early in the life of the business as possible due to the tedious nature of obtaining copyrights, patents, and trademarks.
  • Take advantage of work-for-hire agreements. Anytime an individual or professional entity creates something on behalf of the company, such as the design of a website, it is essential that a signed work-for-hire agreement is in place prior to the commencement of the project. Otherwise, the final result could be resold or reused.
  • Maintain an understanding of copyright law. It is estimated that nearly 30 percent of software in the US is obtained illegally. Organizations that engage in this behavior are particularly vulnerable to copyright violation fines. Permission may or may not need to be obtained in writing before reusing content, so it is vital to carefully research relevant permissions policies.
  • Implement firm HR policies. Even the smallest businesses should approach employee relations with care and discipline. Formalize an employee handbook that outlines company policies, and conduct regular employee reviews.
  • Characterize employees accurately. Incorrectly characterizing employees violates the Fair Labor Standards Act. This includes misrepresenting exempt and non-exempt statuses, miscalculating time and attendance, and requiring workers to perform duties that fall outside their job descriptions. According to the Department of Labor, nearly 200,000 employees received over $140 million in back wages due to fair labor violations in 2008.
  • Seek outside assistance for disputes. It may be tempting to manage certain conflicts in-house, but attorneys should always be consulted if any type of grievance is suspected. This is especially crucial if the company has already been contacted by council representing another party.
  • Complete and keep incident reports. Employee or customer injuries, equipment malfunctions, criminal victimization, and a myriad of other incidents should be chronicled for future reference. Reports should include names and contact information of anyone involved, witness information, follow up and remedial actions, and any other relevant details.

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