Key Legal Aspects You Should Care About
When Starting a Business
If you are a small business, a startup, or a rapidly expanding mid-market company, your online operations are likely to be governed by various types of corporate, copyright, and contract laws, among others. That is in addition to the laws on consumer protection and corporate governance.
There is no rush to get a law degree. But you need to be aware of all the legal issues that your business may face.
To stay on the safe side, you should invest the time to learn about:
1. Taxes
Business taxes are based on the profit your business makes. This profit is what you will pay taxes on. Taxes you need to consider:
- Social Security and Medicare taxes.
- Payroll tax.
- Federal employer tax: Payable by employers who have a payroll of $1,500 or more in any calendar quarter during the current or preceding calendar year. This amount can be increased if there are employees who work a certain number of hours per week.
- State and local taxes
- Self-employment tax
In addition to these taxes, you will also have to pay income tax on the money you make from your business. Income tax is payable by anyone who makes money, whether they are an employee or a business owner.
2. Payment gateways
A payment gateway is a computerized service that lets you accept payments from your customers.
There are various types of payment gateways for online businesses. For example, if you have an e-commerce website, you can use a payment gateway to process credit card payments from your customers.
If you have a mobile app, you can use a payment gateway to process in-app purchases and subscriptions. If you run an online marketplace, you can use a payment gateway to process transactions between buyers and sellers.
And if you are running an auction site, you can use a payment gateway to collect bids and payments from buyers.
In other words, if your business is involved in any kind of digital transaction, chances are that there is a payment gateway for it!
You should consider using a payment gateway for your business as it allows easy processing of digital transactions without having to worry about security issues or building complicated software systems from scratch.
Also, using one is much cheaper than developing your proprietary system!
3. Trademarks, patents, and copyrights
Trademarks, patents, and copyrights are the three major forms of intellectual property. They are also the main subject of business courtesies.
These are exclusive rights granted to an individual or a business for certain products, services, or even the name of a business.
It is very important to understand that trademark registration is not just about protecting the brand name of your business. It can also be used to protect other assets such as logos, slogans, and even colors.
The process of registering trademarks is a tedious one and numerous considerations need to be made before starting this process. Here are some important legal aspects you should care about when starting a business.
Trademark vs Copyright?
The first thing you need to know about trademarks is that they can only be used for products or services while copyrights can only be used for creative works such as books, songs, poems, plays, movies, software code, etc.
This means that if you have registered a trademark for your company’s logo or slogan then you cannot use it for your book cover design or your music album cover art because copyrights are different from trademarks in this regard.
Also, note that trademarks cannot be applied for on their own; you must register them with the trademark office first. This is not the case with copyrights.
How Do You Trademark a Company Name?
Trademarking a company name is not very difficult but it does require some preparation and effort.
There are many factors that you need to consider before you can apply for a trademark for your company’s name.
The first thing you need to do is find out if your company’s name has already been registered by someone else. If it has then you cannot use it and you will have to find another name.
Next, make sure that your company’s name is unique and has not been used by anyone else before. If the name sounds similar to an existing brand then this could confuse customers which could result in loss of business.
Also, make sure that your company’s name does not violate any laws or regulations such as obscenity laws or discrimination laws, etc.
Now that you have ensured that your company’s name is unique and it doesn’t violate any laws, you can proceed with the registration process which involves sending an application form to the trademark office along with other relevant documents such as proof of use, etc.
It takes around 6 months for the trademark office to complete the registration process and you will receive a trademark certificate from them after they have finished the process.
4. Inventory, Insurance, and Liability
Inventory, insurance, and liability are three of the most important things you need to consider when starting a business.
You should always have enough inventory for the demand of your product. The higher the demand, the more inventory you should have. Inventory can be expensive, so try to purchase in bulk if possible.
Make sure that you are covered with business insurance for any liability that may occur from your business and make sure to cover all your employees under your policy as well.
Also, make sure that you have a good liability policy to protect yourself from any claims or lawsuits brought against you by customers.
5. Licenses and permits
How to get a license
You must meet the legal requirements to get a license. Your business plan must be approved by the government, and you must have enough capital to start your business.
In addition, you need to get a permit from the local authorities before you can run your business.
Why licenses are important
Licenses help businesses make sure that they don’t do anything illegal. They also make sure that they operate in accordance with the law and government regulations.
Without licenses, businesses could operate illegally and harm consumers. They could sell unsafe products or pay their employees too little or too much money.
Licenses also make sure that businesses are paying taxes on their profits and don’t do anything illegal like discriminate against customers or employees based on race or gender.
Who regulates licenses?
The federal government issues licenses for some types of businesses like banks and insurance companies, but state governments regulate most other types of businesses including retail stores, restaurants, beauty salons, etc.
Cities and counties also issue licenses for some types of businesses like home-based daycare providers or home-based restaurants.
So, you need to get a license from the federal government, state government, and local government.
6. PCI compliance
PCI compliance for small businesses is a very big issue. PCI stands for Payment Card Industry. The standards are issued by the Payment Card Industry Security Standards Council (PCI SSC).
The standards are issued to help protect cardholder data in any environment where it is handled, stored, or transmitted, either electronically or in hard copy.
If you’re not familiar with the rules, they require merchants to be extremely careful about how they store and transmit cardholder data.
The standard also outlines certain requirements regarding software and hardware that you must have in place to comply with the standard. There are also specific rules that apply to merchant services providers, like PayNearMe.
The PCI standard is mandatory for any merchant that accepts, transmits, or stores cardholder data. If you fail to comply with the PCI standard, your business could be fined and even lose its ability to accept credit cards from customers.
7. Privacy policy
Every business should have a privacy policy whether they are online business or offline.
It does not matter if you have a website or not, this law applies to everyone, including your clients and employees. This policy can be applied by all companies, including websites and online stores.
Privacy policies are required by law in most countries of the world including the US, Canada, UK, and EU countries (European Union). This means that all businesses must comply with these laws and regulations regardless of the size or type of business they operate.
For example, if you have an online store then you must make sure that your users can find your privacy policy on your website before they sign up for any kind of service or product.
If your website is related to online advertising then there are special laws that apply in this case.
The best way to avoid legal issues is to create a privacy policy and add it to your website.
It is difficult to start your business. But if you heed my advice and are very diligent about getting your startup legal checklist in order, you’ll save yourself from having some serious headaches down the road.
Some of those items you may take care of yourself. If you need more complicated legal services, or if you encounter questions, it is important to hire a competent attorney to help you.
About the Author
I am the Founder of Cudy Technologies, a full-stack EdTech startup helping teachers and students teach and learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
You can connect with me on LinkedIn and let me know that you are a reader of my Medium posts in your invitation message.
