Legal Issues in Business -- Top 10
Facing legal issues in business? What are the top 10 legal issues in business? Over the years, I have identified the Top 10 legal issues in business, that owners should consider. Business Plans. Business plans are not a legal requirement. However, business organizations should clearly define their business’ objectives in a concise, dynamic business plan to communicate the mission and business goals to key players in the business. Legal Structure. Probably the most important decision for a business owner is deciding the appropriate legal structure. The choice will impact the owners choice of entity, management, liability, taxation, financing, and some other key issues. Business owners should consider consulting with a lawyer before making this decision. Financing the Business. Depending on the type of business entity an owner selects and its financial goals, financing can be done in several ways. Typically, the business owner will decide to finance the business with debt and/or equity. Such ways include obtaining loans from a bank or another lender, issuing short-term or long-term debt securities, and issuing equity securities. Because of the legal complexities and risks associated with issuing securities, consulting with a lawyer is imperative. Selecting a Business Name. A new business name should be legally cleared before its first use. This means a business owner should complete some research to make sure there are no similar names. Once cleared for use, a business name should be protected by filing it with the relevant secretary of state office, registering as an Internet domain name, filing an application for federal or state trademark registration, and filing applications for foreign trademark and service mark registrations in key international markets, if the business is planning on operating outside of the US. Choosing a Business Location. Factors to consider when choosing a business location include the business’s proximity to customers, suppliers and distributors. Consider its minimum business requirements, like office space size, access to public transportation, and parking. Recruiting and Hiring Employees. Recruiting and hiring employees creates new legal obligations for the business to consider. Some of these considerations include: complying with federal, state, and local anti-discrimination laws in the hiring, interviewing, and selection process; satisfying I-9 requirements; maintaining the “at-will” status of employees, unless an employment agreement states otherwise; complying with wage/hour laws; employee benefits; drafting and maintaining employee policies or an employee handbook. Obtaining Business Licenses and Permits. The nature and location of the business will determine whether licensing and permits are necessary. Check the state and local laws and regulations. Also check Federal law for businesses that are federally regulated. The new business will also need to apply for an employer identification number (EIN) with the IRS. Identify Suppliers, Distributors, Logistics Providers, and Customers Depending on the type of a business and the kinds of goods and services it provides, an owner will need to identify and contract with: Suppliers; Distributors; Logistic Providers; and Customers. Don’t rely on handshake deals. The best practice is to maintain written agreements with all these individuals. Acquiring and Protecting Intellectual Property. Many new businesses create intellectual property (IP) to be used in connection with the manufacture, marketing, advertising, and sale of their goods and services. These IP assets include: Trademarks; Copyrights; Trade secrets; and Patents. Before the business considers exploiting these IP assets, they should be cleared for use, ensuring protection remains available, and then protected. Remember, when sharing any proprietary information, parties should enter into a nondisclosure agreement. Evaluating Insurance Needs All new businesses need insurance. Factors owners should consider when deciding what insurance to buy, and how much is necessary, include the scope of: exposure to suppliers and customers; activities of employees and independent contractors; corporate activity, including inherently dangerous activities. At a minimum, a business owner should consider obtaining commercial general liability, including property damage, personal injury, and advertising injury; workers’ compensation and employer liability; Key man or key person; Insurance for ERISA fiduciaries, including ERISA bonds; fiduciary liability insurance; errors and omissions insurance; and directors and officers liability insurance.