If you are engaged in a venture or enterprise where you are providing goods or services to consumers (usually in exchange for money), it is important that you follow the applicable laws and regulations that govern your type of business. Varying by state, these laws will determine everything concerning your business, including how it is created, taxed, dissolved, acquired, or sold.
Laws also vary depending on whether the business is private or public or for-profit or not-for-profit. Many lawsuits against businesses often result from the failure to adhere to these laws, which can be federal (generally governing disclosures and securities), local and state-based.
Your business may be subject to laws related to employment, insurance, intellectual property, immigration, environmental, taxes and other matters. If your business provides goods or services in multiple states, your business may also be subject to laws in all the states in which you are doing business.
Why Does Business Formation Matter?
When you are deciding to set up a business, one of the first things you need to consider is the type of business you want to form. Some of the more popular business forms are a corporation, a limited liability company, a partnership or a sole proprietorship.
The form of your business can have a significant impact on the amount of funds, resources, and skills you might need to invest in your business. Crucially, this will also dictate which business laws are applicable and whether you will share in the gains and losses of the business.
For example, if you decide to organize your business as a corporation the law will treat it is a separate and independent legal entity from the people who own and manage it. This is a great consideration when you are thinking about how to minimize your personal liability as a member of the corporation.
Depending on the particular facts of the case, the creditors of the corporation are generally limited to collecting their debts from the corporation itself, not the individual shareholders.
In a general partnership, however, where two or more individuals agree to conduct a business and each partner contributes something of value, the general partners are liable together and individually for the partnership liabilities and debts. Though it can operate as a separate legal entity like a corporation, creditors may collect their debts from the individual partners.
What are Common Business Law Areas?
Business law is covered by federal and state statutes, and by local practices. Though by no means exhaustive, traditionally, businesses will implicate laws that touch on the following areas:
- Commercial Law and Contracts—relating to warranties, sale of goods, secured transactions, investments, lease of goods, among other matters.
- Business Formation and Dissolution—corporation, partnership, limited liability company, etc.
- Nonprofits—purpose is non-monetary.
- Public Offerings—first non-private sale of securities.
- Business Investments and Securities Law—acquiring ownership or financial interest in a business.
What are Common Disputes Implicating Business Law?
If you run a business, you know that disputes are a predictable cost of running a business. Some disputes are more common than others and can be more easily incorporated into the management of the business.
For example, a common dispute may arise between the individuals who own and control the business itself, between different businesses or between the business and its vendors.
Generally, these disputes are contractual in nature and can frequently be resolved by referring to the governing contract. As a matter of fact, courts often refer to this document when resolving such disputes.
As an example, if the members of a business are disagreeing about who may control the business, they can refer to the member or partnership agreement which was entered into at the time the business was formed. It is important that any agreement about how to run the business is clearly written and reflects the precise understanding of all parties involved.
It is also not uncommon to have disputes with customers regarding a shipment of goods or the provision of services. Many goods and services come with implied warranties. This means businesses that deliver goods or services to customers can have disputes with their customers regarding whether the goods or services were delivered or up to the standard expected.
For example, if a customer orders a book and claims the book was damaged when received, the customer may demand that the book be replaced or the money returned. It is always difficult to determine in a scenario like this when the product was actually damaged, but the owner may just determine to replace the book as a cost of running a business.
Should I Consult a Business Lawyer for Questions about Business Law?
Business laws can be extremely complicated and made even more so because they can vary from state to state. Consulting an experienced business lawyer in your state will help you determine which laws are applicable.