3.06 Acquire foundational knowledge of business laws & regulations

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
• 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
• 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
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
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
• 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
• Looks after people who own and
use commercial property.
• Commercial property laws vary
from jurisdiction to jurisdiction.
Intellectual Property & Computer
• What is intellectual Property?
–A product resulting from human
creativity, an original work fixed
in a tangible medium of
• Intellectual property laws
protect the value of the
investment in their creation
and their economic potential
into the future.
Intellectual Property & Computer
• 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
• 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
– Published and unpublished works
• 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
• Holder has exclusive rights to produce
• Must be an original idea.
• Patents for Software are now
• 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.
• 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
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
Chapter 12 – Reorganization (Family farmers or
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
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
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
– 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
• 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