Entrepreneurs, Welcome to the Law, Part 1

As a business attorney, I advise entrepreneurs on how to start businesses. It occurred to me that all business owners need to know the scope of how the law applies to business. This blog post will not teach you the law, it will only clue you in to the types of issues that require an attorney’s advice.

Part 1
Part 1 is about the legal duties and legal relationships you have with others.
If you take out a dollar bill, you will notice on the left side the words “This note is legal tender.” What that means is that when one of those pieces of paper changes hands, the arm of the law applies.
Going into business, you now have a whole bundle of new obligations. Here is a quick overview:

Big Picture
First, figure out your business’ main line activity. It should be aligned with your personal values and your talents. You are offering a good or service that a market (a pool of money) is willing to pay money for.
Next design an organization and contractual alliance that you need to sell your good or service.
Lastly, pick the right legal structure for your organization. Make sure that your personal will, marital agreements, and insurance is aligned with your business relationships.

Financing your business
There are two types of financing. Both have implications for taxes, corporate governance, and intellectual property.
With debt financing, you are getting loans or selling bonds. You still own the company and your payments are regular and predictable. The lender wants a track record to know that they will be paid back.
With equity financing, you are selling a slice of the company for needed capital.

Legal duties of the Other Players
Your Board and Officers- Assuming you are incorporated, these people have a legal duty to be loyal to the company and treat it as if they owned it. This goes for nonprofits.

Investors- They may insist on becoming board members. Nevertheless, know that soliciting investment must be from someone accredited, basically wealthy. So do not ever ask friends of ordinary means to invest in your company. It is technically illegal to even talk about raising money unless it is a serious, private conversation with an accredited investor. Talk to a securities lawyer about starting a business with someone who is unqualified as an accredited investor, as opposed to asking for money later. The law is murky.
All conversations and prospectuses with investors should be done very carefully with guidance from a lawyer.

Employees-Adhere to employments laws discussed below.

Regulators- Make sure you have a good document retention policy. Management needs to make sure your business is operated in a legal way.

Opposing Counsel- Everyone in the company should know not to speak to a lawyer suing the company.

Media/blogosphere- Everyone in the company should know not to talk to reporters and to report any internet rumors to the PR person. Social media has its own discussion below.

Marketing, Your Duties to Consumers
Do not mislead consumers and be able to back up all claims. Do not lie or stretch the truth in writing. It is easy to slip up on a social media site.

Duty to Customers and the public
Have you ever noticed in a grocery store whenever someone spills juice on the floor, the workers immediately clean it up? They know that by opening their doors to commerce, they have a duty to keep their place of business safe. This they are liable for a slip and fall.
The same duty extends to the goods you sell. If you are a deli, and the bread you sold to a customer came from the wholesaler with poison, you are liable being in the stream of commerce.
Lastly, if your business involves a dangerous activity, you owe a duty to follow regulations and to be safe.