This post is for educational purposes only. For legal or tax advice related to your specific business, be sure to consult a qualified professional.
Starting a new business is an exciting and, sometimes, nerve-wracking time. While you may be an expert in your industry, the business laws that apply to your company might be new territory for you.
And there’s a lot to know, so you might not know where to start. We’ve broken down seven types of business laws you should be familiar with when you start a business.
But what we’ve included here is not exhaustive. Researching these topics further (and consulting with professionals) can help you stay compliant, treat your employees well, and protect your business.
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Intellectual property laws
The term “intellectual property” relates to intangible property such as patents, trademarks, copyrights, and trade secrets. The U.S. Patent and Trademark Office (USPTO) oversees domestic and international intellectual property protection for U.S. companies.
A trademark can be a word, phrase, symbol, design, sound, movement, color, or anything else that serves to identify a brand, good, or service and distinguish it from others’ brands, goods, and services. Trademarks function as the face and heart of a business; they’re the first thing a customer sees when interacting with a company, and they represent the quality, reputation, and “goodwill” of a company.
In the U.S., a company can develop protectable trademark rights merely by using its mark in commerce; however, obtaining a trademark registration through the U.S. Patent and Trademark Office offers many useful benefits. Before selecting a trademark, businesses often employ trademark attorneys to perform “clearance searches” to make sure the trademark is not already taken.
Patents protect the rights of inventors. They give the patent owner the right to stop others from making, using, or selling an invention. Patents usually last 20 years from the date the patent application was filed.
There are three types of patents you can apply for: utility patents, design patents, and plant patents. Doing your research on these patents can help you protect your one-of-a-kind idea and give you an advantage in the market.
In the same way that you need to familiarize yourself with tax laws in your personal life, there are specific tax laws for business. It’s important to understand these laws and consult with professionals so you can try to avoid audits and hefty fees.
When you start a business, one of the first things you need to do is register your business with the IRS. The IRS tracks businesses through an Employer Identification Number (EIN), so you need to apply for one. You also need an EIN to open a business bank account, apply for business licenses, and register with a payroll service, among other things. You can apply for an EIN through Square using our free EIN assistant.
Of course, the IRS oversees all of the taxes you’ll encounter, including:
All businesses must file an annual income tax return, unless you are a partnership (then you file an informational return). Learn more about different business structures and how they affect your taxes.
If your business has employees, you must pay all taxes associated with employing them. These taxes include Social Security and Medicare taxes and Federal unemployment (FUTA) tax. Employers are also responsible for withholding federal income tax from their employees’ wages. Other taxes may apply.
Excise tax comes into play when you manufacture or sell specific products, operate certain kinds of businesses (such as businesses with trucks and/or tractors), use various kinds of equipment, facilities, or products, and/or receive payment for certain services. Common U.S. excise taxes include taxes on gasoline and tobacco, but indoor tanning providers are also subject to excise taxes. Check with your accountant to see if your business is subject to any.
Employment laws, or labor laws, are the general set of rules that apply to businesses that have workers. These laws cover the rights and responsibilities between employers and workers and are governed by both state and federal law.
Some of these laws only apply to businesses over a certain size, but it’s a good practice to follow them regardless of the size of your business to make sure you’re treating employees fairly. Here are just a few to be aware of:
- The Fair Labor Standards Act (FLSA) sets the federal minimum wage, which is currently $7.25. It also classifies employees as exempt or nonexempt from overtime pay. In general, all employees are entitled to overtime unless a legal exemption applies. Typically, you do not need to pay employees overtime pay if they earn a guaranteed salary of at least $455 a week (subject to possible future increase) and meet the requirements of the executive, administrative, or professional (like an engineer, doctor, or lawyer) exemptions. Details and other exemptions can be found here.
- The Federal Equal Employment Opportunity Commission oversees laws that ensure all people have an equal chance for work, including laws that make it illegal to discriminate against someone in the hiring process or make employment decisions based on protected characteristics such as race, color, age, disability, sex, or national origin. Many states have additional EEO protections, such as sexual orientation, gender identity, and genetic information, so it is advisable to consult with a legal professional if you have any questions.
- Workers’ compensation is a type of business insurance that provides monetary benefits and/or medical care for workers who are injured or become ill as a direct result of their job. As an employer, you are required to pay for this insurance, and you cannot ask your employees to contribute. This is important to adhere to so you can cover any accidents that may happen.
- The Family and Medical Leave Act requires employers of 50 or more employees to give up to 12 weeks of unpaid, job-protected leave to eligible employees for the birth or adoption of a child, or for the serious illness of the employee or a spouse, child, or parent. This can be unpaid, but you must hold the employee’s job for them for 12 weeks. Many states have additional leave laws that may be applicable to smaller businesses and/or that expand certain types of leave entitlements, so it is advisable to direct any questions to a qualified professional.
- The Occupational Safety and Health Act requires employers to provide employees with a workplace free from recognized and serious hazards. The act can be enforced through inspections and site visits. It’s important to have a safe workplace to prevent accidents and avoid fines.
- The Americans with Disabilities Act prohibits discrimination and guarantees that people with disabilities have the same employment opportunities, ability to purchase goods and services, and more. This may affect your business in a variety of ways, including, for example, handicap-accessible entrances at your retail store or providing auxiliary aids, and providing reasonable accommodation to employees with physical or mental disabilities.
- The Equal Pay Act requires employers to pay male and female employees who perform similar jobs and tasks under similar conditions the same amount of money.
Several federal agencies, including the Department of Health and Human Services, the Department of Labor, and the Internal Revenue Service, oversee laws regulating health care and the health insurance coverage provided by employers, including the Affordable Care Act (ACA). In addition, state and local laws also regulate health care.
The ACA imposes reporting obligations on certain businesses, such as employers with more than 50 full-time employees, as well as employers who offer self-funded health-care coverage. If you decide to offer health insurance to your employees, you must offer this health coverage to all eligible employees within 90 days of their employment start date.
The Small Business Health Options Program (SHOP) was created as part of the ACA. It allows small businesses that employ 1–50 employees to offer affordable health and/or dental care to their employees. SHOP plans allow for lower premium costs.
Learn more about your responsibilities as a business owner under the ACA.
If you’re thinking about advertising on the internet or in print, there are rules and guidelines to protect businesses and consumers — and help maintain the credibility of those advertising media.
The laws work to prevent acts or practices in advertising that might deceive or be unfair to consumers. The Federal Trade Commission (FTC) is the governing body that enforces these laws and enacts rules.
The CAN-SPAM Act is a law that sets the rules and requirements for email and gives recipients the right to have you stop emailing them. The fines for violating this act can be detrimental to your business.
The main requirements of CAN-SPAM include not using false or misleading headers in your email, avoiding use of deceptive subject lines, and letting recipients know where you’re located. Giving recipients the opportunity to unsubscribe is also a critical part of CAN-SPAM.
Businesses also need to comply with Telemarketing Sales rules and the Telephone Consumer Protection Act. If you’re making marketing calls or selling anything by phone and say that you’ll repair credit, promise loans for a fee in advance, or tout investment opportunities, you need to follow these rules.
You may also need appropriate disclosures and consent before you make calls or send texts. You cannot misrepresent or mislead customers via these channels.
There are also regulations about customer testimonials that you might use in advertising. For example, the testimonial must reflect the typical customer’s experience and you may have to explain that results are not the same for everyone.
There are regulations on endorsements. Unclear or unexpected connections between an endorser and the company must be disclosed also. That means that if you’re paying for the endorsement (with money, position, or stock), it needs to be disclosed.
These laws tend to be complicated, so we recommend seeking counsel from an expert in the field to determine if these apply to you and what steps you need to take to be compliant.
It’s important to maintain the privacy of your customers and the Federal Trade Commission also enforces laws that protect consumer privacy.
Consumers and employees care about the privacy of their personal information, and it’s critical that you’re clearly communicating how you use their data. This includes everything from storing and sharing email addresses to protecting payment info.
If you accept credit cards at your business, for example, you want to ensure that you are PCI-DSS compliant. This standard ensures that businesses that accept, process, store, or transmit credit card information have a secure environment in which to do so. (Square is PCI-DSS certified, so you don’t have to worry about compliance if you use Square for all your payments and payment data).
If your business uses consumer credit reports to evaluate customers, or credit scores for job applications, leases, or insurance, you also have responsibilities under the Fair Credit Reporting Act. You must ensure you’re using, reporting, and disposing of information in those reports in a way that aligns with the law.
As a business, you must follow finance laws. Finance laws govern how companies can spend money and grow their businesses.
Bankruptcy falls under this category. If your business debts become unmanageable, you can file for Chapter 7 (closing your business) or Chapter 13 bankruptcy (plan to reemerge). The type of chapter you file for depends on the structure of your business, how much debt and assets you have, and whether you plan to continue running the business.