When running a business, it’s crucial to have a basic understanding of business law. This area of the law encompasses all the legal issues that companies may face, from formation to dissolution.
Of course, there is a lot of business law to know, and it can be challenging to keep track of everything. That’s why it’s important to know the essential business law terms that every business owner should understand. Here are some of the most commonly used terms in business law:
Contracts
A contract is an agreement between two or more parties that establishes a legally binding obligation. It can be verbal or written, but it must contain an offer, acceptance, and consideration to be legally binding.
If an agreement is unclear or there’s confusion about its contents, fulfilling the parties’ obligations can be challenging. That’s why many business disputes come from the failure of a contract. A 2022 Delino Risk vs. Growth survey shows that 84 percent of businesses make contracts without an attorney’s help.
To ensure the contract is valid and binding, it’s essential to have it reviewed by an attorney specializing in business law. With their help, you can ensure that all the terms are clear and that all parties involved understand their obligations.
Subpoenas
A subpoena is a legal document that instructs a court or other governmental entity to compel an individual or business to provide evidence. This could be documents, records, or testimony in court. Subpoenas are often used in conjunction with investigations and trials related to business disputes.
It’s important to know that you must comply with a subpoena. If you don’t follow the instructions, it’s considered contempt of court, which can result in fines or even jail time. On the other hand, if you’re the one issuing the subpoena, you must ensure that your demands are reasonable and based on law.
Especially if you’re sending the document to another state, it’s best to seek professional advice to avoid legal issues. Often, you need to domesticate your out-of-state subpoena to ensure that it is enforceable in the requested state. In doing so, you can ensure that the evidence is legally admissible in court.
Partnership
A partnership is an agreement between two or more people to run a business. But it isn’t just a verbal agreement. It requires filing paperwork with the state and creating a partnership agreement to govern how the business will be administered.
Partnerships can be either general partnerships or limited partnerships. In a general partnership, all partners are equally liable for debts and obligations incurred by the partnership. This means that if the partnership goes into debt or is sued, each partner’s personal assets are at risk. In a limited partnership, there are both general partners and limited partners. The general partners are liable for debts and obligations incurred by the partnership, just like in a general partnership. However, the limited partners’ liability is limited to their investment in the partnership.
Knowing what type of partnership you have is essential. That way, you see each partner’s obligations and can avoid legal disputes. It’s also necessary to keep the partnership agreement up to date to ensure that all parties understand their rights and responsibilities.
“Doing Business As” (DBA)
A DBA is also known as an assumed name or trade name. It is a name that a business uses instead of its legal name when conducting business operations.
For example, “ABC Company” might operate under the DBA “XYZ Cleaners.” In some states, businesses must register their DBAs with the state government to conduct business under that name. It’s a vital step in setting up a business — whether it’s a corporation, limited liability company (LLC), or sole proprietorship.
A DBA allows you to separate your business operations from personal finances. It also helps protect you from any liabilities arising from the business’s activities, such as debts and lawsuits. In addition, it can help you to build a brand and establish credibility in the marketplace.
“Employment At Will”
This term is a doctrine that says that an employer or an employee can terminate an employment relationship at any time for any reason or no reason.
However, some exceptions exist, such as when employees have an employment contract that protects their job security. Many states also have specific laws prohibiting termination for particular reasons, such as discrimination or retaliation.
Employment at will is an essential concept in business law and is one of the most fundamental principles of employment law. Understanding this doctrine is vital, so you don’t get into legal trouble when ending an employment relationship.
Having the proper knowledge of business law is essential when setting up a business and avoiding legal disputes. Knowing the different terms and understanding your obligations can be overwhelming. But with the above terms, you can ensure that you’re taking the proper steps to protect yourself and your business.