LO 10.1 Name the laws and regulations that affect small business.
The maze of federal, state, and local laws and regulations is a confusing place for small business. Specific laws that owners of small businesses should know include the Fair Labor Standards Act, Family and Medical Leave Act, Affordable Care Act, Equal Employment Opportunity Act, Clean Air and Water Acts, Sherman Act, and the Occupational Safety and Health Act.
LO 10.2 List and explain the types of bankruptcy.
The U.S. Bankruptcy Code is made up of nine chapters, only three of which apply to most small businesses (Chapters 7, 11, and 13). Chapter 7 uses liquidation, meaning that the business ceases to exist in an effort to provide the debtor with a fresh start. Liquidation involves selling all of the business assets and nonexempt personal assets and then distributing the proceeds among creditors. Chapters 11 and 13 allow the business owner to file a reorganization plan with the court that offers protection from creditors until the debt is satisfied.
LO 10.3 Describe the elements of a contract.
For a contract to be legally binding, it must have a legal purpose. Both parties must come to an agreement including a legitimate offer and a legitimate acceptance of that offer. Consideration, or something of value, must be exchanged. Finally, all parties must have the capacity to enter into a binding contract, meaning that they must not be underage, intoxicated, or of diminished mental ability.
LO 10.4 Discuss how to protect intellectual property.
Patents, copyrights, and trademarks are legal ways to protect intellectual property. A patent grants an inventor the exclusive right to make, use, and sell an invention for a period of 17 years. A copyright provides legal protection against infringement of an author’s literary, musical, or artistic works. Copyrights usually last for the author’s life plus 50 years. A trademark is a legally protected name, term, symbol, design, or combination of these elements used to identify products or companies. Trademarks last for as long as they are in use.
LO 10.5 Describe the three main forms of ownership—sole proprietorship, partnership, and corporation—and their unique features.
There are several choices for the form of ownership of your small business. The most common is the sole proprietorship. If you choose a partnership, you have the choice of a general partnership, in which all partners are fully liable for the business, or a limited partnership, in which at least one partner retains unlimited liability. A corporation offers its owners limited liability. In forming a corporation, you are creating a legal entity that has the same rights as a person. Variations of corporations include S corporations, limited-liability companies, and nonprofit corporations.