Laws That Regulate Business
AND WHO THEY PROTECT
Government Regulation of Businesses
 Federal, State, and Local legislations pass many laws
that regulate businesses.
 Federal, State, and Local Government agencies
enforce these laws
Government Regulation of Businesses
 Businesses that do not comply with these laws may
face legal actions, in the form of:
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Fines
Penalties
Loss of license
Jail
Government Regulation of Businesses
 Many companies hire a government affairs manager
to make sure the company follows the laws that
regulate its business
 Government affairs manager – a person with a great
knowledge of laws pertaining to their business and
keeps up with all new laws created
Government Regulation of Businesses
 Regulations – rules that government agencies issue
to implement laws
 Business must comply with all laws and regulations
Government Regulation of Businesses
 There are six important areas of law that affect
business operations:
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Corporate Law
Tax Law
Intellectual Property Law
Consumer Law
Commercial Law
Licensing and Zoning Law
Corporate Law
 Law that regulates how businesses set themselves up
to operate as companies.
 Laws regulate one person, small, or large companies
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One person company – Sole Proprietorship
Small company – Partnerships
Large company – Corporation
Corporate Law
Sole Proprietorship
 A business owned by a single individual, or a
proprietor
 Easy to start, most of the time a person just starts
doing business, after checking with state and local
officials about licenses, zoning regulations, etc…
 Examples may be restaurants, grocery stores, hardware stores,
consignment shops, ebay dealers
Corporate Law
Sole Proprietorship Advantages
 The proprietor controls the entire business, and
keeps all the profit
 The proprietor can make decisions quickly, due to
nobody else having any decision making power
 Pay fewer taxes than other kinds of business
Corporate Law
Sole Proprietorship Disadvantages
 Proprietor has full responsibility for the business
 Success and failure, so profit and debt
 Business may fail completely due to proprietor
becoming ill, disabled, death, etc…
Corporate Law
Partnerships
 An association of two or more people who jointly
own a business.
 Partnerships are governed by the Uniform
Partnership Act
Corporate Law
Partnerships
 Uniform Partnership Act – governs general
partnerships in two ways:
1.
2.
Must be owned by two or more people
Partners must share profits from the business
Corporate Law
Partnerships Advantages
 Allows partners to combine talents, ideas, and
financial resources
 Partners share decision making responsibilities
 Pay less taxes than a corporation
Corporate Law
Partnerships Disadvantages
 Partners have unlimited liability for business debts
 Partners may disagree
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How to run the business
How to invest profits
 Disagreements may hurt the business
Corporate Law
Corporations
 A business formed under state and federal
regulations that is authorized to act as a legal person.
 Corporation owners have limited liability (L.L.C.)
 Owner cannot lose personal funds or resources, just those of
the corporation
Corporate Law
Corporations
 L.L.C – Limited Liability Company
 Publicly Traded Company – Shares of stock are
issued for people to invest in
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People invested in the company are called stockholders
Corporate Law
Corporation Advantages
 They offer stockholders limited liability and a share
of the profits
 Stockholders have no management responsibilities
 Can raise money by selling stock
 Very easy to get a line of credit
Corporate Law
Corporation Disadvantages
 Have the most federal and state regulations to follow
 Must register with state agency before beginning business
 Pay more taxes that other types of businesses
 Pay taxes to state and federal governments as well as income
tax on profit
Tax Law
 The type of ownership businesses choose often
depend on the types of taxes required
 Tax – Money paid by corporations and individuals
that are used to fund government programs and
services
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Highways and roadways
Public schools
Tax Law
 Businesses pay several different kinds of taxes:
 Income Tax
 Property Tax
 Withholding Federal Taxes
Tax Law
Income Tax
 A tax levied against the businesses profits
 Example
 Spending $80,000 on expenses and had a revenue stream of
$180,000, A business earns $100,000 in profits this year.
 The income tax rate is 30%
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How much will the business have to pay the government?
Tax Law
Property Tax
 Taxes levied against the property, buildings, or land
owned by a business
 Property taxes are based on an assessed valuation of
the building or land
Tax Law
Property Tax
 Assessed Valuation – the amount that a piece of
property is worth, according to the tax assessor
 Example
 The assessed valuation for a building in the heart of
Manhattan is extremely high due to very little space to
construct new buildings.
 Business owners would pay more taxes in New York City than
any other place in the U.S.
 What about the assessed valuation of land in Ohatchee?
Wellington? Oxford?
Tax Law
Withholding Federal Taxes
 Taxes withheld from each paycheck to employees to
be sent to the federal government.
Tax Law
 Some states have more favorable tax breaks available
for businesses
 Tax standards should be considered when building a
business
 Example
 In 1998, the Caterpillar Corporation, a major equipment
manufacturer, moved its operations from Illinois to Texas
because the taxes were more favorable in the state of Texas
Intellectual Property Laws
 Laws that protect ideas and inventions of individuals
or businesses
 Three kinds of intellectual property protections:
 Patents
 Trademarks
 Copyrights
Intellectual Property Laws
Patents
 A document the federal government issues to
inventors and companies that give them the
exclusive right to make, use, and sell their inventions
 Patents are granted at the Federal Patent and
Trademark Office
Intellectual Property Laws
Patents
 A patent is good for 17 years, then it expires
 The inventor must renew the patent after it expires
or other companies can use that invention or idea
Intellectual Property Laws
Trademarks
 Word, name, symbol, or slogan a Business uses to
identify its own goods and set them apart from
others
 What are the World’s most recognizable trademarks?
Intellectual Property Laws
Trademarks
 Trademarks are granted at the Federal Patent and
Trademark Office
 Once granted, no other company can use it for 10
years, when it must be renewed
Intellectual Property Laws
Copyrights
 Protection provided to a creative work such as:
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Literary works
Musical compositions
Plays
Dances
Paintings
Movies
Computer Programs
Intellectual Property Laws
Copyrights
 The owner of the copyright is the only person with the
legal right to sell, reproduce, or allow others to use it
 A copyright is granted by the U.S. Copyright Office
 Lasts for the life of the holder plus 70 years.
 After that, it becomes part of public domain
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Gives the public the right to reproduce or use a previously
copyrighted item
Consumer Law
 Laws that are designed to protect consumers of
goods and services for their own use
 You are a consumer each time you buy food,
clothing, medicine or any other item from a business
 Consumers need to understand laws so they know
their rights when dealing with businesses
Consumer Law
 From last exam
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The Federal Food, Drug, and Cosmetic Act
Consumer Product Safety Commission
Truth-In-Lending Act
Equal Credit Opportunity Act
Consumer Law
 Used Car Rule – Requires dealers to tell customers
important information about a car
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Mileage
Major body work
Flood Damage
 Telemarketing Sales Rule – protects against being
bombarded by sales calls by placing limitations on
businesses that promote by telephone
Consumer Law
 Clothing Care Rule – requires manufacturers of
clothing to put a tag specifying how to care for the
clothes
 Full Disclosure Rule – requires the seller of a house
to inform the buyer of any defects with the property
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Foundation
Leaky Roof
Busted pipes
Indian Burial Ground
Consumer Law
 If you feel that you have been wronged by someone,
you can write a letter to the FTC
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FTC – Federal Trade Commission
 The FTC will take action if enough complaints are
received to build a “pattern of wrongdoing” and will
then investigate it
Consumer Law
 The FDA also protects consumers
 Food and Drug Administration
 Protects consumers against mislabeled or impure
food, drugs, cosmetics, and medical devices
Consumer Law
 FDA approves all new drugs before they are sold
 Fair Packaging and Labeling Act – requires
manufactures of foods, drugs, cosmetics, and
medical devices to clearly label products with:
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Name of manufacturer
Contents
Amount contained in the package
Label must contain complete nutritional information
Commercial Law
 Laws regulating business dealings with other
businesses such as contracts
 The basic commercial law guide is called the
Uniform Commercial Code (UCC)
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Large text that was created to unify commercial standards in
all 50 states under one stated guide
Commercial Law
 Businesses must follow the UCC when writing and
entering into contracts
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An agreement between two parties to carry out a transaction,
such as a sale of goods, or services provided
 Contracts create an obligation between parties that,
if not performed can be enforced in a court of law
Commercial Law
 Businesses enter into contracts daily
 Contracts must follow very specific guidelines
outlined by the UCC.
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It may be short 1-2 pages for a small order or agreement
Very long for larger purchases
Commercial Law
 The UCC requires a business contract to:
 Must state both members that are entering into the contract
 The date the contract was entered into
 State that both parties agree to the transaction
 State the quantity to be exchanged
 Must have signatures of both parties
 Must be witnessed by a neutral, third party
 A manager will review the contracts to ensure
legality
Licensing and Zoning Law
 Laws that regulate who can operate a business and
where they can run it from.
 License – gives the right to operate a business and
guarantees the license holder knows all rules and
regulations of the business
 Zoning – Government set regulations on where a
business can be
Licensing and Zoning Law
Licensing
 State and local governments use licensing to limit
and control people who plan to open certain types of
businesses.
 Example
 To start a restaurant, you need to apply for a license from the
local department of food and beverage control. They may deny
the license if they feel there are too many restaurants in the
general vicinity of your planned location
Licensing and Zoning Law
Licensing
 Government officials may revoke a license from a
business that is not complying with laws and
regulations
 Example
 The department of sanitation will shut the restaurant down if
they are not complying with health codes, such as storing food
properly and keeping bathrooms and public areas sanitary.
Licensing and Zoning Law
Licensing
 Usually, a warning comes first
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May require a fine or penalty
 Followed by a suspended license
 Gives the restaurant an opportunity to operate on probation
 Finally, the government will revoke the license
 Restaurant will shut down and go out of business
Licensing and Zoning Law
Zoning
 Building Zones – Industrial, Commercial, or
Residential
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Industrial – land zoned for industries and large corporations
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Commercial – land zoned for places of business
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McClellan Industrial Park
Quintard Avenue
Residential – land zoned for places for people to live
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Barrington Farms
Licensing and Zoning Law
Zoning
 Building Codes – Regulates the physical features or
structures of a building
 May regulate:
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Maximum building height
Minimum square footage
Material used to construct the building
Material used on the outside of the building
Emergency exits and evacuation routes
Drainage requirements
Fencing or shrubbery
Set back ordinace