Owning a business comes with a lot of benefits and also some challenges. The increasing threat of ethical issues is one of them, as it can cause significant damage to business reputation and finances. It is therefore essential to address these ethical issues.
Again, establishments face a host of legal issues, which is quite dependent on the industry one operates. Startups that take legal issues into account, experience quick progress and get long-term benefits. There are, however, some litigious factors that small business owners have to note when it comes to legal issues.
Hence, this article explores some common legal and ethical issues in business that every small business owner should have knowledge of.
Business ethics is a collection of appropriate policies and practices concerning controversial issues within a business environment. Business ethics are practices that examine moral problems that arise in a business.
These are behaviors that all businesses generally stick to. Ideally, it applies to all facets of business conduct. Hence, relevant to the conduct of individuals and organizations as a whole.
However, employees will resist if an organization’s rules and codes do not fit in well with their core values.
It is important to outline proper contracts if an establishment has more than one owner. Draft it in virtue of the relevant legislation and ensure it also include an exit strategy.
Shareholder contracts, therefore, become important during succession, planning, decision making, and termination of a contract.
Nonetheless, choosing the wrong type of contract has severe consequences.
The business entities available to choose from are as follows:
Each type comes with a tax structure. Each type has a dissimilar way of legally regarding the owner and business. It is therefore important to hire a lawyer who can help you select a business structure that is most appropriate for your business.
This comprises an organization’s obligation to the society. Big companies and other businesses that have more direct impact on the environment are targeted. Hence, every business is responsible for the air quality, water cleanliness, the conservation of other natural resources, among many others.
Therefore, businesses operating within the confines of an office building are meant to be environmentally responsible.
Startups bring good ideas, products, and marketing plans into the market. However, more often than not, they fail to patent, trademark, or copyright them. This allows other companies to swoop in and claim it. Since these unique ideas and products often make startups attractive, it is vital to protect intellectual property. Determine what should be protected by copyright, patent, or trademark with your lawyer.
There are advertising regulations against business owners. These regulations can be limited to a particular industry. However, entrepreneurs are the determinant of regulations periodically.
You have to review all advertisements even if you have engaged an advertising agent or company. Therefore, every business owner should get legal advice on any industry-specific regulations on advertisements.
Every business should have a genuine license in order to operate. Different government preconditions thus exist for each business type. However, these conditions vary with the size, type, and location of the establishment.
The goods or services that your business supplies, can be affected by these licenses. Failure to obtain a license can cost a small business large fines or even lead to a forced shut down. It is, however, a good idea to get a lawyer who is specialized in small businesses.
The lawyer will navigate through the paperwork and help such business get the proper licenses.
Once your business decides to go online, you have to understand the laws that come with it. Protect your business from online defamation suits and third-party liability. Also, you have to explain your online privacy policy to your customers.
It is important to present your online terms and conditions to the general public.
Entrepreneurs need consent in other to send commercial electronic messages. Electronic is not limited to only emails. Customers must be obliged to unsubscribe even if they are messaged without their consent.
Thus, the unsubscribe options should be enabled for the customers. There should also be a time limit to remove customers from the message list.
Moreover, violating this law can lead to severe penalties.
As the business expands, it becomes necessary to hire employees. Entrepreneurs make the mistake of hiring employees with an unofficial verbal agreement. This can cause great setbacks in the future.
In this vein, problems may arise in the future. Thus, employing without documents that outline the rights and rules of the employee may result in a court case.
Make sure to include information about when the employee was hired. Also document the following information;
Many people think that succession planning is not important when starting a business. However, it is an important aspect of a business. Sole proprietors need to acknowledge who will handle their businesses in their absence. There should be someone to replace you if you are unable to work. These are decisions that should be addressed in the early stage of a business. For incorporated businesses, there are restrictions under the articles or by-laws. Thus, it is reasonable to go over all corporate records before devising a succession plan.
Businesses must be transparent in reporting and deploying financial resources. This will attract investors, and other stakeholders can easily trace the movement of funds in the organization.
This is to ensure that customers do not use financial resources unethically to gain unfair advantages in tendering for contracts. HR should, therefore, keep clear policies on the behavior of workers in areas that are susceptible to unethical practices.
Regardless, take caution to ensure that consultant services in the financial department are not provided by the same organizations that audit the financial accounts unless there is a clear corporate level difference connecting the consultants and auditors. Most contracts will address this in a section on “conflict of interest.”
Now, let’s talk about the legal issues small business owners might face in business;
When entering into contracts with suppliers, you should consider confidentiality and non-disclosure agreements. These firms are going to have access to business information that you may want to keep private. Therefore, you should get them to sign these agreements to be on the safer side. Hence, the more confidential information your business plan contains, the more important these agreements will be.
Law requires that companies with 50 or more employees provide health care insurance for their employees. However, some businesses may decide not to bring on additional staff if they are close to the 50-employee mark, so, the law wouldn’t apply. Smart entrepreneurs will take insurance policies to cover their employees.
This assures employees to work comfortably.
After hiring someone, you realize that you will be losing money by keeping them around. This is because they are not as productive as you thought when hiring them. It could also be that they just do not fit in well with the other employees.
This will, however, affect productivity and morale for the team. Take the right precautions before terminating these employees. This will reduce your chances of legal consequences.
You can, therefore, consult your lawyer if you have no idea how to go by this.
Parents must permit a website to disclose information to children under 13. This is from the Federal Trade Commission regulations via the Children’s Online Privacy Protection Act (COPPA). Also, if your information is adult material in nature, remember that children under 18 should not be permitted.
Finally, children under 18 are not allowed to agree to contracts such as website user agreement and purchase contracts.
The use of another company’s trademarks as meta tags on competitors’ sites is prohibited by law. Company A cannot use company B’s trademark keyword in the meta-tagging of its site. This will put company A higher in organic search results in place of company B. This can, however, cause your company great financial loss.
Entrepreneurs can easily control this issue. Carefully analyze a situation before filing a lawsuit. Paying legal fees from lawsuits can easily add up.
Therefore, find a way to settle a dispute outside of court. Let your lawyer handle issues of this sort.
This is a form of favoritism for a set of individuals over others. Thus, hiring someone based on your relationship with them and not on their ability to do the job can cause a setback for the company.
Even if they qualify for the position, it can breed hatred among other employees. Therefore, you have to be extremely careful about employing someone from your personal life. It will also be difficult to lead this kind of person. Ultimately, taking legal actions against them will be an uneasy decision to make.
This has to do with online content. Materials that are not permitted on the internet are considered “obscene” by federal law. Therefore, kids are, especially, not permitted to view such materials. Obscene materials are determined based on the local standards of the viewing community.
Reviewing your website content with your lawyer is a good way of preventing issues of this kind.
The most important part of a website for your small business is the user agreement or ‘terms and conditions.’ This will requires every user to agree to be bound by a contract controlling their use of the site. However, the user must agree to the terms and must only be allowed to proceed to use the site after clicking the ‘I agree’ bottom.
A unique environment exists in the computer world where unauthorized activities can occur. Therefore, misdeeds in this classification are understood in many forms.
Hence, fraud-related issues include the introduction of false records into a computer system. Another is the theft of money using electronic means. We also have theft of services, theft of financial instruments, and theft of valuable data.
Consider these two factors when linking to other business sites.
With all these issues raised above, here are some things you will have to keep in mind to avoid legal and ethical problems in your establishment;
Understanding employment laws is essential in a business setup. This is because labor disputes can cost you huge losses. More so, your business reputation can be tainted.
No potential employee wants to work with a company that doesn’t take care of its employees. Therefore, you should know the right actions to take when it comes to handling labor issues. You have to also learn about the legal conditions involved in firing an employee.
There are lot of laws and ethical behaviors that businesses should abide by.
Thus, you should know more about regulatory policies on the federal and state levels. Educating yourself about these laws will guide you in executing contracts. Therefore, learn more about the legal structures and corporate governance in your region.
This is an aspect of business law that entrepreneurs shouldn’t take for granted. Intellectual property infringement can cost your business huge sums of money in damages. This is why market research is important before starting a business. This will help you to avoid copyright issues.
To deal with complex legal issues, you should hire a lawyer with experience. They will provide you with ample advice and ensure that you are operating legitimately. You can also ask for recommendations from your business partners. Local bar associations are also there to help.
Making sure that you are operating within the boundaries of the law is one thing you need to do when starting your business. It will seem like a big inconvenience, yet you have to comply if you want to remain profitable and existent.
However, running into legal problems will cost your company financially. Your licenses can also be withdrawn and your business forced to shut down. More so, managers who do not work within the law might even face jail time.
In sum, every business must understand the law to protect their reputation and avoid actions that would result in financial loss. Law and ethics in business, however, is a highly complex field. Thus, the best thing to do is to apply the above tips, while also ensuring that you are not ignoring crucial details in terms of compliance.