Operating a business is something that many people dream of doing. Perhaps you plan to make those dreams a reality. There are multiple rights and responsibilities associated with operating a business. It’s recommended that you learn as much as possible about the process before getting started. Learning about potential legal issues should be at the top of the list. Many businesses fold every year due to making costly legal errors that could have been avoided. Here’s a look at general education tips regarding business law to help ensure that you don’t make the same errors.
Business Law Explained
Business law is a term that refers to general laws that businesses must abide by. Business law has an influence on multiple areas, including employment, contracts, and insurance. Business law helps regulate the formation of your company.
Establishing the Structure
One of the key initial decisions that you will have to make when starting your own business is figuring out the legal structure. Your legal structure is important because it impacts the way that you operate your business. The most common structures are limited partnerships, corporations, sole proprietorships, and Limited Liability Companies.
Limited partnerships are structured with you as the general partner along with a primary investor. Corporations are overseen by a board of directors. Corporations are considered separate from your personal assets. However, a sole proprietorship means that you are fully responsible for the business and likely used your personal assets to help fund the business. Limited Liability Corporations are common because they provide extra protection in regard to your income. You can report your business expenses on your tax return. It’s recommended that you speak with an experienced lawyer if you are unsure how to proceed. A 2005 American Bar Association study found that 28% (a majority) of Lawyers in the United States are between 45-54 years old.
Purchase Insurance
Purchasing a strong insurance policy is essential. Not only is it a general requirement to legally operate your business, but it also protects your investment in the event of an emergency. If you plan to hire employees, adding workers’ compensation is a legal requirement. Workers’ compensation protects your business and allows you to take care of your employees if there’s an issue in the workplace. Purchasing insurance is also a legal requirement in most cases if you want to secure a business license, loan, or contracts.
Also, it’s recommended that you avoid simply relying on minimum liability coverage. While many small businesses are unable to afford anything higher than the minimum, you will be vulnerable to multiple risks that could cause long-term damage to your business. You could be left exposed to serious issues such as severe weather, accidental fires, theft, and negligence allegations. If you don’t have insurance in place to fight these allegations, you may end up being forced to close your business. According to Stanko and Senter Law, the cost of your insurance policy varies based on the property being covered and the amount of protection you would like to purchase, although it tends to average around 0.5% of the building’s purchase price.
Avoid Intellectual Property Disputes
Intellectual property helps your business stand out from the competition. Examples of intellectual property include your logo, design, inventions, and other creative ventures. You can protect your art in different ways. You can obtain a patent through the United States Patent Trademark Office. Patents are generally used to protect special ideas. You may obtain a trademark, which protects unique symbols, words, and phrases. You may also obtain a copyright. Copyrights are used to protect unique marketing campaigns and other strategies. It’s important to avoid potential intellectual property disputes, as these cases are often complex and expensive. According to research by the D&O Diary, intellectual property is one of five major disputes that most businesses deal with. The other four are contract disputes, class action lawsuits, securities disputes, and antitrust lawsuits.
These general education tips regarding business law should provide the foundation for you to launch a successful business.