Entrepreneurs: Know These Laws to Protect Your Startup

Don't get to get informed until your startup is under a legal threat. By Sarah Landrum (Founder, Punched Clocks) If you’re ready to turn your business idea into a profitable reality, you’ve already come a lot farther than some would-be entrepreneurs who can’t seem to get out of the planning phases. But as you fixate on how to boost your income and look for customer insights, remember that other, less glamorous necessities have the power to make or break your business — specifically, the ones that are related to legalities. Below is a rundown of laws you need to be aware of so your startup has a better chance of succeeding in the marketplace.

Intellectual Property Laws

Intellectual property laws relate to things that cannot be copied, borrowed or otherwise used without permission from their owners. Copyrights, trademarks and patents usually protect things that are considered intellectual property. It’s important to make sure your products are unique to your business are protected under these laws. For example, if you manufacture a type of water bottle that purifies the liquid as you drink it but haven’t patented the technology behind it, your business could go bust if another company takes the idea.

Fair Labor Standards Act

If your startup has employees, you need to become familiar with the Fair Labor Standards Act. It sets out specifics for how you treat employees such as overtime, minimum wage requirements and how hours worked should be tracked. The U.S. Department of Labor has a Wage and Hour Division that specifically assists workers whose rights are being violated. Over the past six years, 1.5 million workers have been assisted through that branch, equating to over $1 billion in back wages paid to them. Those figures prove it makes good business sense to ensure workers are treated right under the law.

Contractual Law

No matter what kind of business you have, contracts will probably be important to at least part of it. Put simply, a contract is a promise or group of promises that are enforceable by law. Contracts must contain certain specifics. Firstly, a contract must have an offer, which describes the terms. It must also contain an element of acceptance, which gives a person the opportunity to clearly indicate those terms are agreeable. The latter requirement is generally done via a section where each person involved in the contract can sign to say they have read and accepted it. So, if you spell out terms of an agreement but never provide a method whereby a person can agree to them, there’s a chance a court may rule you never actually had a contract. In some states, a verbal agreement or handshake is sufficient to convey acceptance. More on this topic: Can’t Afford an Attorney? A Deep Dive Into Understanding Startup Legal Contracts

Equal Opportunity Employment Laws

Equal opportunity employment laws prohibit discrimination based on age, race, skin color, disability, gender, nationality or religion. For example, a woman could not legally be barred from a job if she disclosed she was pregnant. Furthermore, there are protective measures in place that prevent retaliation from occurring against people who speak out against such discrimination in the workplace by filing a complaint or participating in a court hearing. Because there are rigid time limits that protect a person’s right to potentially file a lawsuit, it’s important for individuals to contact the Equal Employment Opportunity Commission (EEOC) through the proper channels immediately after they notice discrimination allegedly occurring.

Workers’ Compensation Laws

Startup companies in most states are required to provide workers’ compensation if they have one or more employees. Although it’s important to discuss your needs with a specialist to ensure you get insurance that matches the needs and scope of your startup, it’s also important to make your workers aware they are covered. For example, some people think their standard coverage offers the same protection as workers’ compensation insurance. However, workers’ compensation insurance is different. There are specific steps that must be taken so covered workers can get the rights to which they are entitled. If you don’t get informed about whether workers’ compensation is mandated in your state, you could get caught up in costly and time-consuming lawsuits. Being proactive and knowing about workers’ compensation before an accident happens could help you avoid a disaster. Consider meeting with a workers’ compensation expert to get your questions answered. Now that you’ve learned some basics about these entrepreneurial essentials, make it a priority to sit down with the leaders of your startup. Verify you’re properly protected against legal troubles through the laws listed above. Some entrepreneurs get so preoccupied with other aspects of their business, they only take action when under threat. Rather than going with that haphazard approach, aim to stop problems before they start.


About the guest blogger: Sarah Landrum is a freelance writer and Digital Marketing Specialist. She is also the founder of Punched Clocks, a site dedicated to sharing advice on navigating the work world. Passionate about helping others find happiness and success in their careers, she shares advice on everything from the job search and entrepreneurship to professional development, and more! Follow her for more great tips @SarahLandrum.