6 Areas of Law Every Business Owner Needs to Understand

October 25, 2019 4 min read

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If you own a business, especially a fledgling or small business, you probably do not have a large team of attorneys on retainer to address the myriad legal issues that arise in the course of a given day, week or quarter. Nevertheless, there are certain areas of law that you need to familiarize yourself with to help ensure your business is prime for growth.

While this list is not all-inclusive, here are six important areas of law every business owner needs to know.

1. Obtaining a Business License and Other Necessary Legal Documents

To start a business, you will likely need to secure a license by contacting your local city government or applying online, depending on where you plan to establish your primary location. To obtain general information about federal and state licensing regulations, visit the Small Business Administration website. 

2. The Family and Medical Leave Act

As your business makes ground and expands, you are going to need to hire employees. This will open a proverbial pandora’s box of rules and regulations, which includes the Family and Medical Leave Act. This is a federal law that established certain rights for employees to take personal leave while retaining their position with your business. For example, if an employee has a baby and needs time off, or if an employee is struggling with a medical condition or is taking care of a loved one with a medical condition, there are rules that you, the employer, must adhere to. This includes allowing the employee to take a certain amount of time off, as well how such leave impacts compensation. A full set of guidelines is available via the Department of Labor.

Related: Why the Legal Sector Needs Entrepreneurs

3. Workers’s Compensation

Most states obligate employers to obtain a workers’s compensation insurance policy that will provide financial support to employees if they suffer a bodily injury or become ill due to a workplace accident. Generally, each state governs the rules and regulations for their respective systems. 

4. Truth in Advertising and Marketing

This federal law requires all advertising or marketing efforts to be truthful. Also, if you, as the business owner, make any claims during an advertisement, you must have some form of proof to substantiate that claim. You cannot ever be misleading or unfair. This rule becomes even more specific when you market to children or use endorsements.

5. CAN-SPAM Act

The CAN-SPAM Act is a law that regulates commercial email solicitations on a federal level. For example, it prohibits deceptive subject lines on emails sent to customers or clients. The subject line must precisely convey the content of the message itself. In addition, you must tell recipients where your business is located. The recipient also must be able to find your physical postal address somewhere in the email (most business emails put this information at the bottom), and you need to give the recipient an easy way to opt-out of your email list. Complying with the CAN-SPAM Act is extremely important, since each separate email that violates the CAN-SPAM Act is subject to penalties of up to $42,530, according to the Federal Trade Commission. 

Related: How to Choose the Best Legal Structure for Your Startup

6. State and Federal Taxes

The old adage is true. There are only two certainties in life: death and taxes. This is why you need to familiarize yourself with applicable state and federal tax laws. The business structure you selected when creating your business will actually have a big impact on the taxes you will need to pay as a business owner. For example, if you own a limited liability company versus an S-corporation, the taxes owed will be different. The Internal Revenue Service provides an overview of the types of taxes owed by business owners.  

As you can see from the six areas discussed above, understanding relevant business laws can be a bit intimidating and even tedious. Nevertheless, it is extremely important to be informed. A business owner who buries their head in the sand is exposing themselves to a legal violation that could ruin the long-term viability of their business.