3.06 Acquire foundational
knowledge of business laws &
regulations to understand their
nature & scope
Describe legal issues
affecting businesses
Business Law
• Everything that relates to our society is governed
by laws and business is no exception.
• Business law or commercial law is
simply a body of law that governs every
aspect with regards to conducting a
business.
• Before you start your own business,
you should always familiarize yourself
with the different laws to avoid legal
liabilities and to protect yourself from
fraudulent attacks.
Business Laws
• Business law is applicable to both small and big
businesses
• Because of its broad coverage, several branches
of it are categorized to avoid confusion
– Contract law
– Sales law
– Property law
– Intellectual property & computer law
– Bankruptcy law
– Tax law
Contract Law
• Designed to provide stability,
predictability, as well as
certainty, for buyers and sellers
in the marketplace.
• Necessary to ensure compliance
with a promise or to entitle the
innocent party to some form of
relief.
Contract Law
A contract is a legal agreement negotiated
between two persons that creates an obligation
to perform (or not perform) a particular duty
A “person” may be either a human being or an
entity, such as a corporation, created by law.
A legally enforceable contract requires:
An Offer (I’ll mow your lawn this weekend, if you pay me
$35)
An Acceptance (You’ve got a deal)
Consideration (The value received and given – the
money and the lawn mowed)
Contract Law
• What law governs contracts?
–Common Law of Contracts – Service
Contracts.
• Mainly deals with real estate, service, insurance,
intangible assets and employment contracts.
–Uniform Commercial Code (UCC) - Sale and
lease contracts
• Mainly concerned with sale of goods and securities.
Sales Law
• The sale of a good, or item of
value, is a transaction designed
to benefit both buyer and seller.
Sales laws relate to the
transfer of ownership of
property from one person to
another for value
Sales Law
• What law governs sales?
• The Uniform Commercial Code (UCC)
– All 50 states and territories have enacted
some version of UCC.
• Once a state's legislature adopts and
enacts UCC, it becomes a state law and
is codified in the state's statutes.
Commercial Property Law
• Governs the lease, sale and use of
land as well as buildings that are
mainly used for business purposes.
– Includes shopping malls, office
buildings, warehouses and grocery
stores.
• Looks after people who own and
use commercial property.
• Commercial property laws vary
from jurisdiction to jurisdiction.
Intellectual Property & Computer
Law
• What is intellectual Property?
–A product resulting from human
creativity, an original work fixed
in a tangible medium of
expression.
• Intellectual property laws
protect the value of the
investment in their creation
and their economic potential
into the future.
Intellectual Property & Computer
Law
• Types of Intellectual Property:
– Patents - Inventions
– Copyrights - Movies, Songs, Plays, Literary
– Works, Choreography, Paintings,
drawings, Photographs
– Trademarks - Products and Services
– Trade Secrets - Formulas, Practice,
Process, Patterns
– Designs - Machines, Building, Products
Copyrights
• Copyright law protects the expression of an
idea but not the underlying idea itself, i.e.
composers, artists, photographers.
– Minimum term of life of author plus 70 years
– 95 years in case of anonymous or pseudonymous
works
– Published and unpublished works
Patents
• Exclusive federal grant from U.S. Patent and
Trademark Office to make, use and sell an invention
for 20 years.
– Cannot be renewed.
• Protection much stronger than
copyright.
• Holder has exclusive rights to produce
• Must be an original idea.
• Patents for Software are now
available.
Trademarks
• Trademark is a distinctive mark, symbol, or
slogan or any combination of these used by a
business to identify goods and to distinguish
them from products sold by others.
• Trademarks apply to products.
• Trade name applies to companies and are
protected by federal law as well.
– Example: IBM, Coca-Cola, NBC.
Trademarks
• Register with U.S. Patent Trademark Office
– Registration allows use of “®” symbol.
• Continuous use good forever.
• Renew every 10 years.
• General trademarks can be lost (Corn flakes and
aspirin)
Trade Secrets
• Includes business processes or information that
cannot be patented, copyrighted or trademarked.
– Includes: customer lists, plans, research, formulas,
pricing information, marketing techniques.
• Gives businesses protection from competitors.
• Protection for trade secrets does not expire
• Governed by the Uniform Trade Secrets Act.
Bankruptcy Law
• Business owners who can't afford to pay back
their creditors may file for bankruptcy.
– Way to settle their debt & avoid costly legal action
– Creditors may be prevented from collecting on debst until the
bankruptcy process is completed.
• Generally Two Forms of Bankruptcy Relief
– Liquidation
– Reorganization
• Forms are divided into Chapters:
•
•
•
•
Chapter 7 – Liquidation (Personal or Business)
Chapter 11 – Reorganization (Personal or
Business)
Chapter 12 – Reorganization (Family farmers or
fishermen)
Chapter 13 - Reorganization (Personal)
Bankruptcy Law
• Chapter 7 – Liquidation.
•
•
Primarily for individuals but affect businesses operating as
sole proprietorship
Trustee will sell assets (business & personal) to satisfy
outstanding debts
• Chapter 11 – Reorganization
•
•
Applies to both individuals & small businesses
Small businesses operate under increased scrutiny but may
keep operating under a reorganization plan
• Chapter 12 – Reorganization
•
Family farmers & fishermen
• Chapter 13 – Reorganization
•
•
Personal only.
Trustee sets up a 3-5 year repayment plan. Debtor keeps more
assets under this plan.
Tax Law
• Businesses must consider:
– Federal Tax Laws
– State Tax Laws
– Sometimes Local Tax Laws
• N.C. businesses will need to obtain:
– Federal Employer Identification number (EIN)
from the IRS
– State Employer Identification number from the
N.C. Department of Revenue
Federal Tax Laws
• Income taxes:
– Tax on profits of the business
– Determined based on the type of business ownership
• Payroll taxes – tax on salaries and wages paid to employees
–
–
–
–
Social Security – paid by business & employee
Medicare – paid by business & employee
Federal income tax withholding – paid by employee only
Federal Unemployment tax – paid by business only
• Excise taxes – broad category of taxes covering certain types of
businesses
–
–
–
–
–
Environmental taxes.
Communications and air transportation taxes.
Fuel taxes.
Tax on the first retail sale of heavy trucks, trailers, and tractors.
Manufacturers taxes on the sale or use of a variety of different
articles
State Tax Laws
• Income taxes:
– Tax on profits of the business
– Determined based on the type of business ownership
• Payroll taxes – tax on salaries and wages paid to
employees
– State income tax withholding – paid by employee only
– State Unemployment tax – paid by business only
– Worker’s Compensation Insurance – paid by business only
• Sales & Use Taxes – collected from customers &
remitted to N.C. Dept. of Revenue
• Property taxes – tax on the assets of the business
– Real estate
– Personal property – trucks, equipment, etc.
Local Tax Laws
• May vary County by County or Municipality to
Municipality
• Privilege License – license to operate a
business in locality
– Ensures a business is located in an area that is
properly zoned
• Permits, Zoning requests
• Property Taxes
Picture Sources
•
•
•
•
•
•
•
•
•
Uniform Commercial Code Picture - http://store.westlaw.com/white-summers-uniformcommercial-code-5th-6th-practitioner-treatise-series/705/11518895/productdetail
U.S. Patent Office Logo - http://howtopatentanidea.net/patent-searches/
Coco Cola Trademark - http://www.worldsstrangest.com/unbelievable/worlds-top-10valuable-brands/
Top Secret Folder - http://tweenteacher.com/2009/02/25/top-10-how-to-take-control-ofyour-teaching/
Bankruptcy Petition - bankruptcylawnetwork.com
Taxes with Hand - business.com
Federal Tax Forms - myaccountantaz.com
N.C. Dept. Of Revenue Logo - checktaxrefund.com
N.C. County Map - geocaching.com