Share: Share this article on Twitter Share this article on Facebook

Small Business Law

Written by AskTheLawyers.com™

Small Business Law

Written by AskTheLawyers.com™

AskTheLawyers™

Ask A Lawyer
Share

What is Small Business Law?

Consult a Business Attorney to Learn More

As a small business owner, are you aware of your local, state, and federal legal obligations? Starting and maintaining a small business presents a specific set of challenges, and making sure your business is in compliance with state and federal business laws is one of the most important. Even if you feel well-equipped to handle the majority of the legal affairs for your small business on your own, it’s wise to let an attorney look over your business structure and model to make sure you have understood and executed the correct small business filing requirements and that your business is not at increased risk for lawsuits in the future.

There are several types of small businesses, and the law may vary depending on which category your business falls into. Arguably the simplest business entity is a sole proprietorship, followed by a limited liability company or LLC. It’s important to be aware of and prepared to comply with the specific business requirements for your type of small business in your state. Some of these business requirements will include filing paperwork, record keeping, and paying the appropriate taxes to your state and federal government.

Filing Requirements for Small Businesses

State and federal filing requirements are important aspects of small business law to keep in mind. If a small business owner fails to complete one or more required statements or reports, the business could be penalized as a result. It’s essential that you record or document your compliance with both internal and external business requirements, so you can prove that compliance, if it is ever called into question. If you are unsure whether to keep a record of a business decision, the safest option is to do so. It should be noted that filing requirements for your business will vary based on your business structure and state.

Let’s go over some important state filing requirements:

  • Your annual report or biennial statement may be due on different dates depending on your state. Additionally, some states require business owners to pay a filing fee of several hundred dollars.
  • For corporations and LLCs, some states charge franchise tax.
  • Some states require initial reports shortly after official incorporation which may include a filing fee.
  • If you have made any significant or important changes to your company (i.e. address, name, membership), these changes should be included in an Articles of Amendment to avoid any complication or penalties.

Here are some important federal filing requirements:

  • You must file to pay income and employer taxes; to fail to do so could make your business vulnerable to severe legal repercussions. Some nonprofits and religious-affiliated businesses may have different tax laws depending on your state.
  • Your business must be set up in compliance with the Affordable Care Act (ACA).

Defining Factors of Small Business Law

As a small business owner, you will be responsible for creating a business plan and managing the details of your business from domain names to employer identification numbers to ensuring you have the right licensing and permits. In fact, most small business owners even write their own business-customer contracts and buy-sell agreements. While the latter elements of small business law may benefit from legal advice, many small business owners choose to handle them on their own. There are a number of factors that define and separate small business law from that of larger businesses. These may include:

  • Compliance with federal regulations. This includes complying with advertising laws, copyright laws, workplace health and safety laws, and more.
  • Maintain and keep licenses and certifications. As a small business owner, it is your responsibility to make sure you have all the licenses and certifications you need for your business under state and federal guidelines, including ensuring proper and up-to-date certifications and recertifications for your employees. If you are unsure regarding the expiration of a license or certification, contact the issuing authority for more information.
  • Lower overhead. Start-up costs are one of the most defining aspects of small businesses, as they tend to be remarkably lower than for larger corporations. Although it may still feel like an expensive process to any new small business owner, in the grand scheme of businesses, a small business is less costly to begin and operate by far. Owners only need to deal with one or few locations to pay the physical costs of, as well as potentially fewer filing fees and lower insurance costs.
  • Smaller target demographic. It makes sense that smaller businesses generally have only one or few locations, meaning their geographic reach is smaller and therefore their target demographic is inherently reduced. Small businesses must be especially careful to avoid exhibiting prejudice toward any employees or customers based on race, color, nation of origin, religion, sex, age, or disability.
  • Lack of financial backing. In regard to the law, this means that a lawsuit could destroy a small business’s financial stability, whether rightfully or wrongfully filed. It’s also unlikely that a small business will have the money to keep a business lawyer on constant retainer, but it’s not a bad idea to reach out to a lawyer to help with specific high-risk issues when necessary.
  • Fewer employees. Even though a small business may have only a handful of employees compared to larger corporations, they are responsible for upholding the same employee health and safety regulations as any other larger company in their field. A failure to do so could result in the business owner having to pay their employee(s) workers’ compensation as well as risking a possible claim being filed against them.

Common Risks of a Small Business

Depending on the nature of the risk your small business experiences, the risk might be something you are well-equipped to handle on your own, or might be a risk either severe enough or complicated enough that you may benefit from hiring a small business lawyer to handle that specific issue. Let’s go over some risks which may constitute seeking legal advice from a qualified small business lawyer to protect your business from unnecessary damages:

  • Former, current, or prospective employees threatening to sue. Even if an employee does not explicitly threaten to sue your business, if you suspect they might try to file a lawsuit against you on the grounds of discrimination or a hostile work environment, it’s wise to seek legal aid.
  • A government entity investigating your business. Even if you don’t see the evidence for a government investigation of any aspect of your business, it’s wise to seek legal support to protect your business, as an investigation performed with negligence could result in serious consequences for your business.
  • If you are seeking a special allocation of profits or losses. A special allocation occurs when a business splits its profits and/or losses in a way that doesn’t correspond to the owners' interests in their business. Special allocations should be done with extreme caution and potentially the advice of a lawyer to avoid serious ramifications if an IRS investigation reveals the special allocation was done incorrectly, regardless of intention.
  • Your small business is involved in an environmental issue. Even if your business is not the direct cause of a local environmental issue, if it may be tied to the issue in any way, it’s wise to seek legal representation to protect you against whatever environmental claims are being brought against your business.
  • You are considering the sale of your business or the purchase of a new one. Any matter involving the sale or purchase of a costly item, including a business, could benefit from legal expertise. It’s easy to make little mistakes or oversights when selling or purchasing something that could result in severe consequences down the road.

Owning a small business provides many satisfactions as well as many challenges. If you come up against a challenge with your small business, you would benefit from the experience of a small business lawyer. Don’t hesitate to reach out and request a consultation. An experienced small business lawyer will be able to protect your business from potential liability and optimize the strength of your business’s overall legal standing.

Legal Disclaimer: This website is for informational purposes only. Use of this website does not constitute an attorney-client relationship. Information entered on this website is not confidential. This website has paid attorney advertising. Anyone choosing a lawyer must do their own independent research. By using this website, you agree to our additional Terms and Conditions and Privacy Policy.