More than 500,000 businesses are started in the United States each month, according to Forbes. Of those with employees, about 70 percent of new businesses survive at least two years. Operating a successful business requires commitment and a breadth of skills. In addition to industry-specific knowledge, business owners must be familiar with—or learn about—an array of general practices to succeed.
Before an entity gets off the ground, prospective owners often create a business plan in order to secure financing, whether from a bank or investors. Many businesses, especially technology startups, operate with the goal of being acquired or merging with another business. Others, such as investment firms or manufacturers, may be extremely concerned about asset protection.
As a company grows, legal compliance becomes increasingly important. Complying with tax laws and employment laws are essential for any U.S. business. At some point, all businesses encounter difficulty, which may involve insurance claims or the need for litigation. Even when a business faces dissolution, however, its owners must ensure that it is wound up properly.
Starting your own business involves making several decisions at the outset, with one of the most important ones being which corporate form you will choose. For individuals who plan to run a small business on their own, it may make sense to operate as a sole proprietorship. Partnerships and limited partnerships are options when multiple stakeholders are involved, as are limited liability companies (LLCs), which provide added protection against owner liability. Some business owners are best served by forming a corporation, which is generally a completely separate entity from the individual owners in terms of liability and taxes. Regardless of the corporate form that is the best fit for you, there are other important considerations that you will need to take into account when starting a business, such as where your business will be based, and what kinds of licenses, permits, and insurance you will need in order to operate.
Contract law affects nearly every business. Contracts might formalize agreements between a business and its clients, other businesses, or the owners themselves. Many people do not realize that a contract can exist between two parties even if nothing is in writing. Although there are some exceptions, once the four elements of a contract are satisfied, there may be an enforceable and binding contract, regardless of whether the terms were reduced to paper.
Some types of contracts are subject to additional requirements or restrictions. Commercial leases and other agreements for real property are one type of contract that must be in writing to be enforced, as are most contracts that are worth a large amount of money. Meanwhile, governmental contracts have their own particularities.
Employment Law Compliance
Once a company has grown to the point of having employees, complying with employment laws is extremely important. Federal law prohibits many employers from discriminating on the basis of gender, race, religion, and other personal characteristics when hiring employees. Most employees are also entitled to the federal minimum wage, and many states have passed a higher minimum wage. Furthermore, nonexempt employees are entitled to overtime if they work more than 40 hours in a week, although some states give employees additional overtime rights. Employers must also provide the rest and meal breaks required by federal or state law.
Even in the course of a business’ normal operation, disputes with another company may arise. One of the most common business disputes is breach of contract. Depending on the circumstances of the dispute, an owner may attempt to resolve it through a formal process, such as litigation, mediation, or arbitration. Other times, a dispute can be handled with a simple demand letter, direct negotiation between company representatives, or communication via each party’s legal counsel.
Sometimes internal disagreements may lead to an owner dispute. This is especially true when one owner is bought out of a company or otherwise relinquishes ownership. Although a partnership agreement can avoid many ownership disputes, it is no guarantee that owners will always see eye to eye.
The best way to prevent a business dispute is to reduce all business agreements to writing. While handshake agreements are sometimes necessary to close a deal, they should always be followed up with a written agreement between the parties so that each business is aware of its obligations under the contract.
Discover answers to frequently asked questions about business operations and formation.