An entrepreneur needs to be well versant with the law of the land, at least to the extent to which his firm will be affected. Ignorance of the law can be very detrimental to the survival of the firm and could prove costly in the end. When starting up a business, there are some important legal matters that the entrepreneur will have to deal with, no matter how much he would love to just dive in and get started. If he neglects these legal steps, he will find that maintaining the business down the road becomes much more difficult, and in some cases, impossible. It’s in his best interest to take these legal aspects seriously and get them sorted out as soon as possible when starting a business. The emphasis on this section is to bring out the salient legal aspects that affect the running of a business and what the entrepreneur needs to know. The legal aspects the entrepreneur needs to be aware of are;
1. Laws that can affect the business
By looking at the legal documents which are usually available for all to see, the entrepreneur will be in a position to assess the effect of each law that is relevant to his kind of business venture. One important thing that he should be interested in, for instance is the issue of taxes.
The entrepreneur should assess how the Government will tax him and his business under the various forms of business ownership. On the same note, he may also be interested in knowing the tax incentives available for his type of business. It may work in his favor in subsequent periods.
2. Laws concerning capitalization
The firm cannot survive as a business without proper capitalization, and this will include both matters of equity and debt. Equity is gained through sales of business ownership interest, such as stock shares while debt is acquired through financial loans from lending institutions. Before the entrepreneur even thinks about starting the business, he’ll need to have a good relationship with his bank or an established financial institution. If he doesn’t have adequate capital, the
business will fail, regardless of how thorough his business plan was.
3. Law concerning the various forms of businesses
This will determine whether the entrepreneur can be sued for issues arising between the business and his customers. It is extremely important, and often neglected when starting a business, but this can actually make or break the entrepreneur during those crucial first years when the business is trying to be established and grow. The entrepreneur would not want to be left with liability issues, debt problems, or unnecessary obligations. The kind of legal entity will also determine the tax strategy that the government applies to the business. The entrepreneur should protect himself from liability issues, and he should ensure that he is not personally held responsible for any
4. The nature of business contracts
A business contract is a legally binding agreement between two parties for an exchange of services that are of value. For a contract to be valid, an offer must be made and accepted. Using a contract in business dealings helps ensure an agreement is acted on, insofar as a broken contract could result in a lawsuit or out-of-court settlement and the payment of damages caused by the breach. The best way the entrepreneur can avoid a dispute or potential litigation, however, is to prepare a solid agreement in which he is confident he has negotiated the best terms for his business.