5.5 million new business applications were filed in 2023, which is great news for the US economy, but starting and running a business involves dealing with a variety of legal issues. While it’s a good idea to have a lawyer to advise you, understanding the basics of business law will help entrepreneurs and small business owners spot potential problems and know when to seek professional legal help.
Here are some key areas of business law that entrepreneurs and small business owners need to be familiar with.
Forming a Business Entity
One of the first legal tasks when starting a business is choosing what type of business entity to form. Each structure has different legal and tax implications in terms of ownership liability, raising capital, paying taxes, paperwork requirements, and more.
Protecting a Business from Personal Injury Claims
A business can be held liable if a customer or employee is injured on their premises due to negligence, with 39.56 million personal injury cases filed by personal injury attorneys each year. To reduce liability, focus on safety and make sure the property is well-maintained. Address any hazards immediately and block off unsafe areas. Post clear warning signs if necessary. Also, make sure proper procedures and training are in place, especially for the use of any dangerous equipment. Carry adequate insurance, including general liability insurance, to cover costs in the event of an injury lawsuit.
Contracts & Agreements
Contracts are legally binding agreements that are at the foundation of many business relationships and transactions. Common business contracts include those with partners, vendors, customers, employees, banking/financial institutions, and commercial leases. Ensure contracts adequately protect your interests and are compliant with applicable laws and regulations. Having clear, written contracts prevents misunderstandings and provides legal recourse if the terms are breached.
Intellectual Property (IP) Protections
Intellectual property theft costs the US $225-600 billion every year. Intellectual property refers to creations of the mind that have commercial value, including copyrights, trademarks, patents, and trade secrets. Registering your IP rights gives you legal ownership of your unique business name, branding, inventions, digital content, and other intangible business assets. This allows you to prevent others from using your IP and to take action against infringements.
Employment Laws
There are many federal, state, and local employment laws that businesses must comply with. This includes laws related to hiring, pay, benefits, anti-discrimination, termination, workplace safety, family and medical leave, and more. Common requirements like minimum wage, overtime pay, unemployment insurance, and workers comp have serious implications for labor costs and legal liability.
Data Security & Privacy
There were 3,205 data breaches reported in 2023. If your business collects or stores sensitive customer or employee information, you must comply with data security and privacy laws. This includes protecting data with reasonable security safeguards and disclosing how data is collected and used. If you suffer a data breach, you may need to notify those affected and relevant government agencies. Develop clear data policies and procedures to reduce legal risk in this area.
Understanding key legal issues in these areas will help entrepreneurs and small business owners build a solid foundation for their company’s success.
