As an entrepreneur, it’s always important to continually educate yourself regarding the basic regulations and rules pertaining to running a small business in your particular area.

There are eight basic concepts that entrepreneurs should understand about business law:

Intellectual Property

What is intellectual property? Any idea that a person comes up with to develop services and products that are offered to customers for sell and will generate the individual income. The most effective way to protect your intellectual property as an entrepreneur is by patenting ideas or filing copyrights and trademarks with your local government. Examples of intellectual property include inventions, business ideas, products, services, trademarks, and trade names.

Business Agreements & Contracts

What do business agreements or contracts require? The main purpose of a contract is to establish promises or a single promise that is enforceable by law. There are five elements of any agreement: an offer, acceptance, consideration, meeting of the minds, and execution or delivery of the contract. The first step of the agreement in the contract process is the offer, which is the terms that line out the agreement. There are three requirements of an offer: 1) There must be some current intent to contract on the part of the offeror that is shown by an objective indication. 2) The alleged offer terms must be definite and specific. 3) The alleged offer must be communicated to the offeree in some form or fashion. The second element of the agreement is the acceptance. An acceptance is a willingness to be bound by the terms and conditions contained in an offer by a promise or act by the offeree. The third element of a contract is consideration. This is when they agree upon payment, whether it is actual money or property exchanged, a promise to pay, a benefit, acceptance of an additional obligation, forbearance, release, etc. The fourth step is the meeting of the minds in which there’s communication that each party has consented to the terms of the agreement. The last element is execution or delivery of the contract with the intent that it be mutually binding.

Product Liability

What is product liability? When a customer sues a business for a defective product that has caused them loss or harm. There are several theories regarding recovery under product liability including contract theories and tort theories. Contract theories have to do with product warranty which deals with promises of the nature of the product sold to the customer. In these type of civil warranty cases, the plaintiff will claim the product didn’t live up to the promises of the seller. Tort theories happen in regards to the plaintiff making claims that the defendant was negligent causing either monetary loss, bodily harm, or emotional harm to the plaintiff.

Negotiable Instruments

What are negotiable instruments? Negotiable instruments are a substitute form of payment also known as commercial paper. This method of payment is the use of payment as a contract form, agreeing to pay money and promises that you will pay a certain amount of money for a transaction. Commercial paper and negotiable instruments can be a form of payment accepted in the place or real money and typically pass easily through any financial institution. Other forms of negotiable instruments include: certificates of deposit, promissory notes, drafts, and checks.

Sales Contracts

What are sales contracts? A form of agreement between the buyer and seller of goods which involves the ownership of personal property being transferred in lieu of services, money, or other goods. There are four essential terms to any sales contract: 1) The price terms have to be spelled out and the terms of the price don’t have to be fixed. 2) The quantity terms must spell out the amount of products purchased by the buyer and the cost of the products by the seller. 3) The sales contract should state contracts terms and how they will be performed and how long it will take to perform the terms. If no performance time is stated in the contract, it’s implied that it will be performed in a reasonable time period. 3) The contract should lay out how the seller will deliver the products to the customer.

Liability For Business Partners

Are partners legally liable? In a business partnership, all members of the partnership assume personal liability for legal obligations of the business, business debts, and all business obligations. Each and every partner are held responsible and liable for tortious acts, wrongful acts, and business debts of the other partner(s). If business assets are unable to pay off a certain debt, the creditor(s) may hold all of the partners personally liable for the rest of the debt owed.

In a Limited Partnership (LP), the general partners will generally be held liable for the debts of the business and all transactions and the limited partners will not be held responsible. After paying their share of capital contributions to the business, the limited partners will be protected against liability.

In a Limited Liability Partnership (LLP), typically the primary partner is held personally liable for debts of the business/partnership and the limited partners are not held personally liable for business debts within the LLP. The limited liability partners will only be held liable for what they have invested in the business. ALL partners of the business are held accountable for the transactions made by the business partner(s).If the limited liability partner(s) committed wrongful or tortious acts, they may be held liable with the result of them being sued for malpractice.

In a Limited Liability Limited Partnership (LLLP), all business partners have elected personal liability protection for all partners involved. The general partner is held liable for any business transactions that were handled in an illegal manner. However, the LLLP partners can still be held liable for any transaction(s) that were been done illegally by a partner.

Liabilities, Rights, & Obligations Of Shareholders

What are the liabilities, rights, and obligations of shareholders in a corporation? The role of the shareholder is not to handle daily operations of the corporation. They are also not liable for actions of the corporation, such as, if an action caused harm or injury to an individual. Shareholders aren’t personally liable for any corporate debts any only report to the dividends received from the corporation within the year on their personal taxes. Simultaneously, the shareholders can’t report on their personal taxes any corporate losses. However, they are able to report losses from corporate investments. When can a shareholder be held personally liable for corporate debts? When they received corporate dividends or distributions in an illegal manner that they had knowledge of. Here are a few ways that shareholders can be held personally liable for corporate debts: 1) Incorporating the business in a defective way. 2) In certain states, shareholders can be held liable for all wages owed to employees of the company 3) Committing acts that “pierce the corporate veil”. When you “pierce the corporate veil”, two things occurred: 1) The corporation must be dominated by shareholders. 2) Shareholders use domination status for illegal purposes

Resolving Legal Disputes

How do you properly resolve legal disputes involving your business? Alternative Dispute Resolution (ADR) is a method many states are starting to require companies to embark in to resolve legal disputes before any lawsuit can be filed in court. Alternative Dispute Resolution is a safe and amicable technique where individuals resolve legal disputes. A few reasons states are requiring parties to use ADR techniques before court litigation include: 1) Some legal disputes can be resolved rather quickly. 2) It saves the parties time, money, and litigation of the dispute. 3) The court system will not be on case overload. 4) Parties can often play a significant role in conflict resolution for the issue(s) they are facing. 5) The decision makers have specialized expertise and experience to aid in resolving the legal dispute. Common forms of Alternative Dispute Resolution include settlement, arbitration, mediation, summary trial, and mini-trial. Settlements commonly involve a pre-trial conference where parties will settle on witnesses to testify at the court, the time length for the trial, the number of exhibits each side will provide, and ultimately, see if the case is resolvable. The settlement conference is typically handled two or three weeks before the trial. Both sides will determine if any of the proposed issues have been resolved and cover the procedures of the court case. Occasionally, the conference parties are able to avoid trial by resolving the entire case or shorten the length of the actual trial by resolving some of the issues. The next form of ADR is arbitration, which typically involves the parties to allow a neutral third party to assist in resolving the dispute before filing a legal claim in court. Like arbitration, mediation involves a third party that will assist the parties in trying to resolve their issues. However, in mediation the agreements of the resolution are not binding and can only be binding if signed by a judge. The third party, in this case, is considered the ‘mediator’. In a summary trial, the parties are are normally given a good dose of reality when it comes to their case. This trial is a ‘jury trial’ that isn’t pubic and is considered a mock trial, in the sense that it lets the plaintiff and defendant know the possible outcome of the case with a jury deciding it. A mini-trial is an informal trial that encourages parties to settle the case. In this situation, both sides present their side of the case to a panel that’s made up of senior management from each company in the lawsuit and either a retired attorney or judge will advise to proceed. Mini-trials help prepare both parties for the actual trial, if needed. The ultimate goal for all parties involved is to try and settle the legal dispute.