One of the craziest challenges facing any business owner is thinking: I know I need a lawyer, but I don’t know which lawyers I need. As with so many other aspects of being an entrepreneur, knowing what your legal needs are is like hiking a mountain without a map. Or a compass. (I’ve done this, literally, and let’s just say I don’t recommend it.) What laws impact small businesses?
We’ve got your answers and we’re here to help! There are particular areas of business law that most small to medium sized businesses (SMBs) tend to need. Plus, depending on your space or industry, there may be specialized areas of business law for your business.
What type of business entity are you? What should you be?
But first: the initial questions you need to ask yourself is what type of business entity you have — and what should you have. This is the core of the first and most fundamental type of business law, regarding business formation and governance.
Is your business formed as a limited liability company (LLC)? Or one of the two main types of corporations, a C-corp or an S-corp?
(If your answer to this question is “none of the above,” then put down your #2 pencil and stop right now — and read about why it’s sooooo important to have an entity for your business.)
If you have an entity created for business, how do you know if it’s the right one? We’ve got you covered there.
And if you’re confident that you have the right entity type for your business, then the next thing to consider is whether you have the right governance documents. If you have an LLC, do you have an operating agreement? Or if you have a C-corp or S-corp, do you have bylaws? These documents are critical, because they clarify who’s in charge, how decisions get made, how voting occurs, and how the pie gets divided. (Mmm pie.)
Once you’ve handled formation and governance, it’s time to move on to the other types of business law that can have an impact on small businesses.
The 5 types of law with a big impact on small business
There are a lot of types of law. Pretty much any area of life has an area of law governing it. But luckily for you, there are only a handful of types of business law most SMBs need to know:
(1) Business formation and governance –
Done! See above. Plus, this area becomes super important if you want to sell your company, or if you and your business partners want to part ways.
(2) Contract law –
How contracts (or agreements) are drafted and interpreted is a key area for any business. Whether it’s a consulting agreement, a bill of sale, a master services agreement or statement of work, terms of service, a privacy policy, or anything else, if it’s an important relationship with a customer, supplier, vendor, or team member, put it in writing. And better yet, consider getting a lawyer to help you.
(3) Employment law –
Consider this contract law’s boring friend. Boring, but with a super important job. Employment law may sound like a snore, but making sure you take care of your team — while making sure no one can take advantage of you — is another critical area for your business.
(4) Intellectual property law –
IP sounds like something only tech companies do, but that’s a misunderstanding. Everyone has IP. Your customer lists, your ideas for new products or services, your internal ways of conducting business — it’s all IP you need to protect, even if you never register any of it with the government. Then there’s your brand. Virtually every business should consider trademarking their brand. If you have an app or a custom-built website, think about registering a copyright for your code. Even if what you do isn’t high-tech, if you have a unique design, a design patent may be right for you. And while patents may sound expensive — and often are at a lot of other law firms — there are budget-friendly alternatives.
(5) Regulatory law –
Do you need a license to operate your business? The answer is pretty much always yes, even if it just means registering with your state. Then if you conduct sufficient business in any other state, you need to register in that state too. Plus you may need other licenses depending on your business.
Those are the big ones to know. There are plenty of others — like, say, litigation, which you hopefully can avoid — but the 5 listed above are the ones to think about on an everyday basis.
What about types of business law specific to your space or vertical and specifically have an impact on small businesses? Glad you asked!
Specific types of law for your business
There are certain types of business law that are specific to, well, certain types of business. If any of these apply to you, you may want to find a law firm with experience in that particular area. Here are a few to consider:
Entertainment law – Do you produce video, photo, audio, live performance,or written work and get paid for it? Do you get paid as an influencer? Or do you have a large enough audience that brands would pay you if you connected with them? Then you live in a world of rights, licenses, and royalties — which all combine IP and contract law. And any lawyers you hire need to know the market and what kinds of deals are possible — and be strong negotiators in what can often be a cutthroat industry.
Technology law – Do you have apps or websites? Are your customers mostly coming to you as users or visitors on a digital platform? Then you need to worry about having the most up-to-date terms of service and privacy policies, which bring together contract and regulatory law.
Do you have developers, engineers, or researchers? Are they coming up with innovations? Then you need a combination of patent and employment law to make sure that all inventions belong to the company and are fully protected.
Startup financing and fundraising – This area can apply to tons of businesses that don’t necessarily think of themselves as startups. Are you raising any money from outside investors? Will you ever in the future? Even if you never plan on raising venture capital (VC) — or especially if you do have those ambitions — it is critical to structure the investments the right way. Doing your friends and family, pre-seed, or seed round incorrectly can make it difficult to raise more capital in the future. This is one of the areas of business law that the majority of business owners get wrong.
That’s it — we got to the top of the mountain! The good news is that we just covered 90% of the business law issues you’ll encounter. And the right business law firm can help you with most or all of them, so you won’t have to deal with all this alone.