Legal consideration is a critical element in business. A business majorly revolves around giving out a product and getting a stipend in exchange, but there are some legal requirements to follow. Everything has to be acceptable by law in exchange for a conducive and peaceful operational environment.
Some of the tips for citing legal considerations in business are listed below:
What is the legal structure of the business?
A business organization’s structure is how particular activities are assigned to achieve specific goals of a business. This is one careful consideration that must be defined deeply before starting any business. The structure of a business affects the following:
- Your control over the organization.
- Your obligations in the business.
- The amount of tax to be paid.
- The potential of your growth.
It’s essential to get a lawyer to help you choose the right structure for your business. Here are the most common legal structures in business.
1. Sole proprietorship
Proprietorship is the right to own and operate a business organization. Here you have the right to make any decision without consulting anyone whatsoever because you and you alone incur losses and profits.
Essentially, you are liable for the business’s debts and expenses, and you are required to record the all in your returns.
Examples of sole proprietorship businesses include Chemists, small supermarkets, DJ services, catering services, phone and electronics repair shops, etc.
This one applies in cases where your business is to be owned and operated by several individuals. Partners acknowledge and run the company and take responsibility for the liabilities and losses incurred in the industry.
However, there are cases where some partners are limited as investors only, and they take no responsibility in the liabilities of the business. All partners share the profits, taxes, debts, and any other expenses incurred in the industry. According to the permits accorded, each partner can make decisions affecting the business, such as taking loans. However, partnerships are costly compared to sole proprietorships.
Twitter is one perfect example of a partnership business. It was founded by three partners: Jack Dorsey, Evan Williams, and Biz Stone. Another excellent example is Apple Inc., which was founded by Steve Jobs, Ronald Wayne, and Steve Wozniak.
This is a business organization owned by shareholders who appoint directors to manage it. The board makes most of the decisions of directors.
This is an entity that is entirely separate and distinct from its owners. Corporations can enter contracts with other entities, sue someone. Get sued, apply for loans, pay taxes, employ someone, etc.
What are the shareholder agreements?
A shareholder agreement is an order in which the business’ shareholders operate, and the rights and obligations of those particular shareholders.
This is a shield for the shareholders from possible threats within and without the business. It outlines the following aspects of the company.
- Conflict resolution.
- General meetings and how often the shareholders should meet.
- Decisions that can be made by directors and shareholders within the business.
- Dividend payments, among other things.
Applicable Business Terms and Conditions
These two (terms and conditions) establish a foundation for a consumer and the business to relate while using the products and services. The rights, liabilities, and obligations of all users and consumers in the marketplace are covered.
Examples of terms and conditions include these:
- What are the applicable return policies?
- The inclusion of after-sale service etc.
Documentation of the contracts and the contract agreements
A business should have a vividly described and documented contract when dealing with different parties including shareholders, contractors, consumers, and suppliers.
Contracts prevent future conflicts within the business, and they also provide a way forward for the resolution of those disputes.
What are the policies regarding privacy and confidentiality?
Privacy policies are applicable in cases where the business requires data on their customers. It outlines how this information will be used, by who, and its confidentiality.
As guided by the privacy act, it is required to address the following:
- The storage of this information.
- The type of information to be collected.
- What will be the use of this information?
- And if the information will be disclosed to third parties.
This may include lawyers and advocates to advise you on legal matters. Legal experts are professionals who practice civil law and whose opinions are highly valued in an organization. They are well versed in civil law and the most appropriate option for representations in court over civil matters.
Personal ties and obligations to the business
This one here depends on the structure of your business. It defines your position in the organization and clarifies the roles to be played by you to achieve business goals.
Applicable skills are outlined, while licenses and business permits needed are taken care of. The refunds and feedbacks are also considered.
Intellectual property protection
Intellectual property protection is the security provided to concepts, inventions, innovations, and business ideas. They are intangible assets claimed by the business and cannot be used anywhere else without legal permission from the business owners.
The following methods are applicable in IP protection:
This is an exclusive right or license awarded by the government to the organization for a particular period, barring others from using, making, or selling one specific idea new to the business environment.
A trademark is an emblem, a logo, a symbol, a word(s), or a letter(s) that is legally registered and used to represent an organization. It usually helps in distinguishing your products from those of others with a similar outcome.
Copyright protects the expression of the initial idea and the operations performed on that idea. It usually has a time limit, and whenever that period ends, another entity could use that same idea. It requires permission to reproduce.
For this to happen, that idea has to be original and recorded in material form. It mostly applies in authorship and literary works such as poetry, music, artistic works, etc.
People love to talk. In fact, it’s likely you’ll share fresh opinions and new ideas with our employees, who, in turn, might betray you to your competitors.
To curb this, we can have our employees and contractors sign a non-disclosure agreement that will incriminate them should they start running their mouths to the wrong people.
It’s always an adventure to start a business. Some unexpected challenges will arise from time to time, so make sure your business is legally protected by complying with all legal requirements. Always keep a legal expert on your side to offer you the advice and support you need to run a legally compliant business.