AND WHO THEY PROTECT Laws That Regulate Business.

AND WHO THEY PROTECT

Laws That Regulate Business

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: 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: 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

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

PartnershipsAn association of two or more people who

jointly own a business.

Partnerships are governed by the Uniform Partnership Act

Corporate Law

PartnershipsUniform Partnership Act – governs general

partnerships in two ways:1. Must be owned by two or more people2. 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 DisadvantagesPartners have unlimited liability for business

debtsPartners may disagree

How to run the business How to invest profits

Disagreements may hurt the business

Corporate Law

CorporationsA 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 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 stockVery 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

businessPay 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 Highways and roadways Public schools

Tax Law

Businesses pay several different kinds of taxes: Income Tax Property Tax Withholding Federal Taxes

Tax Law

Income TaxA 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%

How much will the business have to pay the government?

Tax Law

Property TaxTaxes 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 TaxAssessed 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 TaxesTaxes 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

PatentsA 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

TrademarksWord, 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

CopyrightsProtection provided to a creative work such

as: 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

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

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 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 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 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: 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) 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 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. 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

LicensingState 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

LicensingGovernment 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

LicensingUsually, a warning comes first

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

ZoningBuilding Zones – Industrial, Commercial, or

Residential

Industrial – land zoned for industries and large corporations McClellan Industrial Park

Commercial – land zoned for places of business Quintard Avenue

Residential – land zoned for places for people to live Barrington Farms

Licensing and Zoning Law

ZoningBuilding Codes – Regulates the physical features or

structures of a building

May regulate: 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