Legal Issues in Business: What You Should Know

Business owners have to keep track of many details in order successfully run their business. One of the aspects of business ownership that should be at the forefront of their minds is that there are many legal issues in business.


The financial laws surrounding business ownership are many and are varied from location to location.

To make it even more difficult to stay up to date, it seems there are always new rules and regulations to learn. The best thing you can do is to hire an accountant who has business experience.

They will be able to keep up on all the new tax laws and other financial regulations.


Another legal issue in business is contracts. Any time you have a contract between your business and a customer or vendor, it is essential that you both read and understand that contract.

Unless you have a legal background, you should always have a lawyer approve any contract that your business creates before putting it into use.

The wrong wording can bring very negative consequences.


This should go without saying, but some small business owners think they can say pretty much anything they want in their advertising. Well, you can’t.

Overstating claims or otherwise making promises that you have no intention of keeping can cause you more problems than you’ll want to deal with. Also, making derogatory comments about the competition is not a good idea.

At best it’s bad business – but at worst, it could be slanderous depending on the language that is used.


The way you run your business is another business legal aspect that you must consider. Your business operations are governed by federal, state and local laws. You’ve got to make it a priority to know and follow all of them.

There are laws regarding human resources, tax reporting deadlines, required insurance, the list is long. Most cities have regulations about businesses being run from the home.

Most restrict what types of business can be conducted from the home and many put restrictions on the traffic that will be coming and going from a business that operates out of a residential neighborhood.

If you plan to run a business from home, this is information you need to consider before starting. Once you hire employees, there is a whole world of laws and business legal aspects that didn’t apply when it was just you.

Sole Proprietorship vs. LLC

By setting up your business as an LLC (Limited Liability Corporation) rather than a sole proprietorship, you will remove some of the burden for legal mistakes off of you personally and onto the business.

While you, as the business owner, will still be responsible for illegal practices, operating under an LLC will remove your personal finances from the equation should any legal action be brought against the business by a customer or vendor.

If you operate as a sole proprietorship, everything you own, including your home and personal savings, can be seized should you lose a lawsuit. If you operate as an LLC, only business assets are subject.

While these legal issues in business can seem overwhelming, it’s not as difficult to navigate as you may think. Just be thoughtful about your decisions, do the necessary research and hire a lawyer when you aren’t sure about something.

The saying “better safe than sorry” definitely applies to laws that govern your small business.

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