Starting a Business in a Down Economy
How a Business Attorney Can Help: A Legal Guide to Owning a Business
Most people assume that starting your own business in a down economy is ludicrous. Although there are risks involved, there are also many advantages to fulfilling the dream of building a small business including the freedom of setting your own rules, unlimited earning potential, and most importantly in a down economy, having job security. This article will focus on the starting, running, and winding down of a business and the legal aspects of each.
Where do I start?
A. Business Plan
It is highly recommended that before starting your own company you prepare a well thought out and realistic business plan. This should be a flexible document that adapts with industry trends, market changes, and overall business attitudes and perceptions. Not only does a plan help recognize your competition, and evaluate the industry need, but it also helps define your niche in the marketplace. A business attorney can help you establish your niche in the marketplace by protecting your specialized trademarks, copyrights, and patents.
B. Capital & Entity Selection
After writing your plan the next step is to focus on capital for your business. Raising your startup capital depends largely on what type of business formation you choose. There are four main business formations with variations of each:
Whichever entity you chose, it is advisable to have a business law attorney help obtain proper licenses and permits, draft contracts and agreements, counsel on all tax planning, examine all documents, asset and stock acquisitions and sales direction, and provide intellectual property protection.
You’re ready to hire!
C. Employment Law
Now that you have your business formation in order, you are ready to start the hiring process. There are many things to consider when dealing with Employment Law. What kind of benefits will my employee(s) receive? What are the rules on Child Labor Laws? What if I find myself wrongly accused of harassment or wrongful termination? These are all valid questions that should be reviewed with your business attorney. Below is a brief overview of various Employment Law rules and statutes business owners should be aware. Note that these are not the only issues that can occur; every situation needs careful consideration and evaluation.
a. Minimum Wage and Overtime Pay - Fair Labor Standards Act
b. Wage Garnishment - Consumer Credit Protection Act
c. Child Labor Protections - Fair Labor Standards Act - Child Labor Provisions
d. Workers with Disabilities - Fair Labor Standards Act - Section 14(c)
2. Safety and Health Standards
a. Occupational Safety and Health - Occupational Safety and Health Act
3. Health Benefits, Retirement Standards, and Workers' Compensation
a. Employee Benefit Plans - Employee Retirement Income Security Act
b. Family and Medical Leave - Family and Medical Leave Act
c. Worker’s Compensation- Worker’s Disability Compensation Act of 1969
4. Other Legal Considerations
b. Contract & Separation Agreements
c. Wrongful Terminations
Up and running
Now that you have successfully completed the start up process, there are several legal aspects to consider to keep your business thriving in all facets of operation. Knowing the rules and regulations concerning marketing and advertising is a must to keep your business humming, especially in an unstable economic market. There are several advantages to utilizing a business law attorney for marketing protection. Below are just a few examples:
D. Consumer Protection Laws
It is important to create public awareness for your business. Marketing your brand, image, and market position is extremely important for a successful and profitable small business. There are many avenues to accomplish this, but also many regulations and rules to adhere to. Advertising laws are designed to ensure fair trade competition and the free flow of truthful information in the marketplace. All businesses must act in accordance with advertising and marketing laws. Failure to do so could result in costly lawsuits and civil penalties. So, before you start a marketing campaign, it's essential you understand some basic laws that are summarized below. Note these are not all of the consumer protection laws. There may be specific regulations your business must follow. It is important to discuss and plan with your business law attorney.
E. Truth-in-Advertising Laws
The Federal Trade Commission (FTC) is the governing body that regulates and enforces advertising laws. Under the Federal Trade Commission Act concerning truth-in-advertising laws:
F. Product Labeling Laws
The Fair Packaging and Labeling Act (FPLA) facilitates value comparisons and to prevent unfair or deceptive packaging and labeling of many household "consumer commodities." The FPLA requires each package of household "consumer commodities" that is included in the coverage of the FPLA to bear a label on which there is:
Some businesses may also need to follow the Food and Drug Administration (FDA) regulations when it concerns packaging and labeling. Those include businesses dealing with food, drugs, and cosmetics. Businesses selling insecticides, fungicides, and rodenticides are under the jurisdiction of the Environmental Protection Agency (EPA) and have additional rules and regulations to follow.
G. Pricing Laws
a. Price reduction practices-actually selling the price for less than acquired
b. Rebates and Less-than free offers
c. Bait and switch- advertising a product with the intention of persuading customers to purchase a more expensive product
H. Telecommunication Laws
There are specific rules and guidelines concerning consumer protection when advertising through media outlets. Below are a few examples of governing bodies and acts that help protect consumers that every business owner should be aware of. Again, there are many other regulations that are business specific. Please seek the counsel of your business law attorney.
a. National Do-Not-Call Registry
b. Telemarketing Sales Rule (TSR)
2. Communications Decency Act
3. Better Business Bureau
4. National Advertising Division
5. Federal Trade Commission
I. Tax Issues
Deciding what type of business entity for your business is only half the battle of an entrepreneur. Your choice of business structure will largely determine how your business income will be taxed. From start to finish your business law attorney will guide you through the perplexities of business taxes and determine your best course of action. Things to consider include:
8. Income taxes
9. Property taxes
J. Passing Your Business On
Whether you are passing your business on to the next generation, or selling it to another entity, there are many things to consider. Working hand-in-hand with your business law attorney will ensure a smooth transition. If you are the buyer, you will need to do a due diligence investigation including review of the following:
a. Recommended past 3 years
2. Tax returns
a. Recommended past 3 years
3. Value of inventory
4. Number of employees and work schedules
5. Any Customer Relationship Management systems (CRM’s)
6. All leases, contracts, and agreements paperwork
7. Names of outside advisors-attorneys, accountants, etc…
If you are the seller, you will want a strong written purchase agreement to protect your interests especially if the purchase price is being paid on an installment basis.
Starting a business in any economy is a decision that should be well thought out, detailed in conception, and planned carefully in advance. Having the right tools, including the correct legal team, can make the difference between a successful business practice and a failed venture. Contact us, a trusted team of business attorneys with more than 60 years of combined business law experience, when you are ready to begin your journey. We look forward to serving you.