November 07, 2020
Business and law are oftentimes described as separate entities, but in reality there is major overlap as businesses need legal assistance throughout their organization. No matter the business stage, every business has legal obligations that need to be addressed.
Business law is a legal specialty that focuses on all the legal needs of a business. These needs include the formation of the business enterprise, internal operations, interactions with other businesses, and ensuring compliance with local and federal regulatory bodies.
Business owners are often familiar with a few of the laws and regulations surrounding running a business, but knowing the ins and outs of laws, contracts, and agreement documents is something that requires the trained eye of a lawyer.
Being familiar with the types of business law can better enable a business owner to understand the need of legal expertise in their day to day operations and decision making process.
One poorly worded legal document, or one business decision made without legal advice could result in a costly mistake for a business. Ensuring these business law-related blunders never occur in the first place is what TransGlobalSystems was created to do. Having the ability to seek legal counsel enables businesses at any stage to have confidence in their decisions knowing that their legal needs are taken care of.
Formation
Perhaps one of the most legal-heavy stages of owning and running a business is the actual formation of the business. Deciding what type of entity to form, assigning roles and responsibilities, and making sure you’re in compliance with local, state, and federal laws can be a lot to handle.
Corporate bylaws, for example, are essentially the internal rules and guidelines of your corporation, outlining your company’s structure and also providing instructions for what actions to take in certain scenarios like adding new board members.
Operating agreements are another key document during formation, and are typically utilized for LLCs. The five most important components of an operating agreement include discussing member roles and responsibilities, distributions (how profits and losses are passed onto LLC members), classes of interested (if applicable), books and recordkeeping (who’s responsible and how it will be established), and dissolution (the protocol if the company dissolves).
Other formation documents to be aware of include:
- Articles of Incorporation
- Articles of Formation
- Articles of Organization
- Certificate of Authority
- EIN Confirmation Letter
There are many state-specific and industry-specific documents that also need to be completed and submitted to various governing organizations, which is why businesses can benefit from the help of hired legal help, even if only on an as-needed basis like TransGlobalSystems.
Employee Documents
When a business has employees, an entirely separate type of business law enters the picture.
Just a small sampling of employee-centric documents include:
- Worker’s Compensation Documents
- Onboarding and Tax Documents
- Employment Agreements
- Employee Practices
- Corporate Governance
- Employee Separation Agreements
- Equity/Deferred Compensation Agreements
This list is not a comprehensive list but gives a general understanding of all the topics that are encompassed under employee-based business law. These legal topics all aim to ensure a business and its employees are protected and are in compliance with local, state, and federal employee regulations.
To illustrate the importance of operations business law, one can look at the Employee Separation Agreement to understand how operation business law attempts to protect both business and employees.
When a business needs to let go of a salaried employee, the business needs to ensure that a legal document is drafted outlining the terms of the separation and to ensure the prior employee cannot pursue further legal action or other potentially harmful actions against the business.
In an employee separation agreement, there are multiple clauses which ensure an employee cannot go after the business after termination. In return, the employee will typically receive a severance pay which provides subsidized pay after termination for a set period of time. The separation agreement protects the business by preventing an employee from claiming wrongful termination, going to a competitor with inside information, or disparaging the business through media outlets.
The separation agreement document is one example of many. Business operations and employee-focused documents covers a wide scope and being legally competent as a business is vital in ensuring a business can run as usual. Once a business gets to be more than a handful of employees in size, seeking external legal assistance specific for businesses is vital in ensuring a business can run smoothly.
Specific Types of Contracts
While ensuring a business is running smoothly internally is important, it’s vital to ensure that business deals and interactions with the public are also legally sound.
No matter the product type, a business needs to have a solid understanding of how to coordinate business deals that are all-inclusive and free of loopholes.
Product-based businesses often need to create vendor agreements with suppliers and manufacturers to ensure that they have a secure supply chain. As a business, contracts between manufacturers and other businesses are commonplace. Typically, repeat business transactions or large purchases are accompanied by a contract to ensure both supplier and recipient carry out their obligations.
Issues arise when contracts are poorly written or have deceitful language. Poorly written contracts can give the other party an easy loophole to escape a contract while deceitful language could open a business to being sued.
Contracts are legally binding documents, and as such, need a careful review from a lawyer and business contract specialist.
Service-based industries need to create contract agreements with customers, contract workers, development software companies, and many more.
Master Service Agreements (MSAs) are an example of a business-customer contract that really needs to be detailed and inclusive because it highlights the procedure for a long-term project that’s anticipated to have additional costs along the way, which is very different than a customer simply signing off on a quote or invoice at the start or finish of a project.
Another very common set of contracts for both product and service-based businesses are Privacy Policies and Terms of Service.
A Privacy Policy on your website is not just good business practice to show your customers you’re transparent in your business practices and the way you handle their personal information--it is increasingly becoming legally required by many state and federal institutions, and even Google is requiring it, too.
Terms of Service and Terms of Use are also vastly important, especially for e-Commerce businesses, and should include your website’s copyright/DMCA policy, governing law and venue, an arbitration clause, limitation of your liability, and permissible uses of your site and content.
As a business, the only way to protect yourself from malicious and unfairly binding contracts is to seek legal counsel from a well-versed business law lawyer.
Regulatory Compliance
No matter where a business is located, there will be some form of governmental oversight.
Whether that is from the federal government, local government, or marketplace, every business faces regulations that need to be satisfied.
Examples of business regulatory agencies are as follows:
- U.S. Federal Trade Commission (FTC)
- U.S. Environmental Protection Agency (EPA)
- U.S. Department of Commerce
- U.S. Securities and Exchange Commission (SEC)
- U.S. Patents and Trademarks Office
- U.S. Office of Safety & Health Inspections (OSHA)
For a business owner, it is an extremely poor utilization of time to try and familiarize yourself with all of the current laws and regulations that need to be followed.
As outlined in the list above, there are numerous regulatory bodies that each have their own unique requirements from a business. These regulations change frequently and have many nuances that need to be followed to a tee.
For instance, the regulations surrounding a healthcare-based business are drastically different from a marketing-based business.
Having legal expertise in the specific business sector is crucial to stay within compliance and within regulation. The fines associated with regulatory violations tend to be hefty, and can leave a negative long-term impact on a business.
Instead of reinventing the wheel and learning every single law and regulation, a business should consider getting professional help and legal guidance. Delegating these tasks to a third party will ensure that an unbiased assessment can be performed and will give a business the best chance at avoiding penalties.
Conclusion
Overall, business law can be broken down into many different ways since it is focused on all the legal needs of a business. Formation, operations, transactions, and compliance are all areas that business law impact. Each category carries specific legal needs and as such, it can be difficult for a business to handle all of its legal requirements.
Delegating is the sign of a good leader, and by adding a business-specific legal service like TransGlobalSystems, a business can worry less about legal issues and more about delivering their products and services.
Give your business the legal confidence it needs to succeed and flourish by getting legal advice on demand with TransGlobalSystems--click here today to get started!
Sources
https://www.dol.gov/general/topic/wages/severancepay
https://www.merriam-webster.com/dictionary/contract
https://multimedia.journalism.berkeley.edu/tutorials/businesses-regulatory-and-licensing-agencies/
