A common mistake that individuals make when opening a business, tiny businesses, is that there are few legal requirements to follow. However, this is not true, and entrepreneurs and their employees need to understand the basics of business law to protect themselves and their interests. Here are seven key concepts that every entrepreneur should know about business law.
1) BUSINESS FORMATION
Setting up your company is the first step that every entrepreneur should take in order to begin operations. This can include filing incorporation documents with their state or selecting an appropriate business structure for their firm. There are many types of businesses to choose from, including sole proprietorship, partnership, corporation, and limited liability company (LLC). Each has varying degrees of legal protection for owners as well as responsibilities to adhere to at both the federal and state levels. For example, corporations have stricter regulations concerning shareholder meetings, while LLCs may be liable for debts incurred by members without it being considered fraud. Additionally, some states require registration fees for specific types of businesses, such as professional service companies like attorneys or accountants or other related occupations.
2) EMPLOYMENT LAW
Once a company has been established, the next step is to hire employees. This will require compliance with labor laws in order to make sure that they work legally and do not violate any rights or protections afforded by federal law, including worker’s compensation coverage and protection from harassment, discrimination, and wrongful termination. Employees must be paid at least minimum wage unless they are exempt because of their job duties, status as an intern, or non-salaried executive staff members such as a consultant or independent contractor. In addition, overtime rules must also be followed if they put in more than 40 hours in a given week on the job.
3) INTELLECTUAL PROPERTY
Businesses need to protect their interests when it comes to intellectual property (IP) rights. These can include trademarks which are used to identify a business’s goods and services, patents that protect new processes or products, copyrights for creative works such as instructional manuals or computer programming code, and trade secrets for sensitive information like marketing plans or customer lists. The best way to protect IPs is to register them with the United States Patent and Trademark Office (USPTO). For instance, an unregistered trademark could jeopardize your ability to use your chosen name if another person registers it and uses it first.
4) BUSINESS CONTRACTS
Contracts between businesses must be drafted carefully in order to avoid misunderstandings about the terms of the agreement. This becomes even more important when one business outsources work to another company through a contract staffing firm such as a construction staffing firm or IT recruiting agency. Misunderstandings about the duties, responsibilities, and payment arrangements are very common when it comes to contractual agreements between businesses which is why entrepreneurs should never sign an agreement before seeking legal advice from themselves or their company’s attorney.
5) PRIVACY LAW
Every business that operates online must comply with data privacy laws that affect how they handle information collected from clients or customers. For example, companies must honor ‘Do Not Track’ requests which prevent the transfer of personal data to third parties for advertising purposes. In addition, social media sites like Facebook may request consent in order to share users’ information with other websites which use tracking tools such as ‘like’ buttons or customized advertisements based on browsing history. Businesses must make sure that they are in compliance with data privacy laws in order to avoid severe financial penalties or even criminal charges for non-compliance.
6) NON-COMPETE LAWS
Even if a business is not required to be incorporated, it must still abide by the state’s non-compete law before it can hire any employees. This type of labor agreement prohibits former employers from hiring an employee within a certain timeframe and geographical area after their employment has ended, which gives them the incentive to stay loyal to their current employer so that they will not face restrictions on where they can work moving forward. Some states do allow exceptions based on individual circumstances, such as if a former employee refrains from using confidential information learned while employed at another firm.
7) EMPLOYEE CLASSIFICATION
Many companies classify their employees as exempt if they are executive, administrative, or professional in nature. However, it is not always clear which types of jobs fall under each of these three categories, so small business owners should contact the U.S. Department of Labor before taking any action. For instance, rules regarding overtime pay for white-collar workers differ depending on whether or not they earn a salary of more than $455 per week and meet the necessary job duties to be classified as exempt.