3.06 Acquire foundational knowledge of business laws & regulations to understand their nature & scope Describe legal issues affecting businesses

Business Law Everything that relates to our society is governed by laws and business is no exception. Business law or commercial law is simply a body of law that governs every aspect with regards to conducting a business. Before you start your own business, you should always familiarize yourself with the different laws to avoid legal liabilities and to protect yourself from fraudulent attacks.

Business Laws Business law is applicable to both small and big businesses Because of its broad coverage, several branches of it are categorized to avoid confusion – Contract law – Sales law – Property law – Intellectual property & computer law – Bankruptcy law – Tax law

Contract Law Designed to provide stability, predictability, as well as certainty, for buyers and sellers in the marketplace. Necessary to ensure compliance with a promise or to entitle the innocent party to some form of relief.

Contract Law  A legally enforceable contract requires:  An Offer (I’ll mow your lawn this weekend, if you pay me $35)  An Acceptance (You’ve got a deal)  Consideration (The value received and given – the money and the lawn mowed)  A contract is a legal agreement negotiated between two persons that creates an obligation to perform (or not perform) a particular duty  A “person” may be either a human being or an entity, such as a corporation, created by law.

Contract Law What law governs contracts? – Common Law of Contracts – Service Contracts. Mainly deals with real estate, service, insurance, intangible assets and employment contracts. – Uniform Commercial Code (UCC) - Sale and lease contracts Mainly concerned with sale of goods and securities.

Sales Law The sale of a good, or item of value, is a transaction designed to benefit both buyer and seller. Sales laws relate to the transfer of ownership of property from one person to another for value

Sales Law What law governs sales? The Uniform Commercial Code (UCC) – All 50 states and territories have enacted some version of UCC. Once a state's legislature adopts and enacts UCC, it becomes a state law and is codified in the state's statutes.

Commercial Property Law Governs the lease, sale and use of land as well as buildings that are mainly used for business purposes. – Includes shopping malls, office buildings, warehouses and grocery stores. Looks after people who own and use commercial property. Commercial property laws vary from jurisdiction to jurisdiction.

Intellectual Property & Computer Law What is intellectual Property? – A product resulting from human creativity, an original work fixed in a tangible medium of expression. Intellectual property laws protect the value of the investment in their creation and their economic potential into the future.

Intellectual Property & Computer Law Types of Intellectual Property: – Patents - Inventions – Copyrights - Movies, Songs, Plays, Literary – Works, Choreography, Paintings, drawings, Photographs – Trademarks - Products and Services – Trade Secrets - Formulas, Practice, Process, Patterns – Designs - Machines, Building, Products

Copyrights Copyright law protects the expression of an idea but not the underlying idea itself, i.e. composers, artists, photographers. – Minimum term of life of author plus 70 years – 95 years in case of anonymous or pseudonymous works – Published and unpublished works

Patents Protection much stronger than copyright. Holder has exclusive rights to produce Must be an original idea. Patents for Software are now available. Exclusive federal grant from U.S. Patent and Trademark Office to make, use and sell an invention for 20 years. – Cannot be renewed.

What is a Patent? A patent for an invention is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office. Are temporary property rights as they expire after 20 years. Patents only protect your property in the United States, United States territories, and United States Possessions. To quote the United States Patent and Trademark Office, a patent gives “the right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States.

Types of Patents Utility Patents: These patents protect processes, machines, manufactured items, or compositions of matter. Some examples include medicine, electronics, etc. Design patents: These patents protect new, original, and ornamental designs for manufactured items. Examples are the design of athletic shoes, or an automobile body. Plant Patents: These patents cover asexually reproduced and distinct plant varieties. For example, plant patents covered hybrid tea roses, as well as Better Boy Tomatoes.

Who can obtain a Patent? Anyone can apply for a patent. Patents are obtained through the process of applying to the U.S. Patent and Trademark Office.

Patent Application A patent application is typically submitted with several forms and a fee. Components of the application include basic information such as: – Applicant name – Design title – Cross reference to related applications – Summary of the invention – Drawings with explanations – A detailed description.

Trademarks Trademark is a distinctive mark, symbol, or slogan or any combination of these used by a business to identify goods and to distinguish them from products sold by others. Trademarks apply to products. Trade name applies to companies and are protected by federal law as well. – Example: IBM, Coca-Cola, NBC.

Trademarks Register with U.S. Patent Trademark Office – Registration allows use of “®” symbol. Continuous use good forever. Renew every 10 years. General trademarks can be lost (Corn flakes and aspirin)

Why Are Trademarks Important? They help make an invention sell. They identify the source of origin of a product or service. Trademarks or brand names can also come to signal quality of a product to consumers. – Examples: Uggs vs. Bear Claws Apple vs. Acer Tylenol vs. Generic Pharmacy Brands

Symbols of Trademarks Designation marks used to alert the public of your claim: TM – Trademark SM – Service Mark ® - Federal Registration Symbol (Note: you may use the registration symbol with the mark ONLY on or in connection with the goods and/or services listed in the federal trademark registration.

Trade Secrets Includes business processes or information that cannot be patented, copyrighted or trademarked. – Includes: customer lists, plans, research, formulas, pricing information, marketing techniques. Gives businesses protection from competitors. Protection for trade secrets does not expire Governed by the Uniform Trade Secrets Act.

What is a Trade Secret? A Trade Secret is information that a company keeps to give them an advantage over their competitors. Trade Secrets can include: -Formulas -Patterns -Plans -Designs -Physical Devices -Processes -Software -“Know-how” TRADE SECRETS

What Makes a Trade Secret? Although it varies from field to filed and among jurisdictions, there are three (3) general guidelines as to what defines a trade secret: – It must not be generally known to the relevant portion of the public. – It has economic benefit for the holder (economic benefit comes FROM it not being known). – The holder makes reasonable attempts to maintain its secrecy.

Trade Secrets vs. Patents A trade secret is protected without disclosure of the secret. Holders protect the secret by taking steps such as making employees sign agreements not to reveal information or by keeping information known to only a handful of employees.

Brand vs. Generic A Trademark is known as a brand name. Most inventions have a brand name and a generic name. – Example: Coca-Cola has the brand name “Coke”, but its generic name is soda, pop, or softdrink.

Why are brand and generic names important? People identify it generically, and associate the brand with quality and desire to purchase. Companies spend millions of dollars to advertise their products, so no company wants their trademark to be used generically.

Formula Examples: – Coco-Cola – Did you know that Coca-Cola has no patent? The formula is kept secret. A patent would allow anyone to read the formula and they would have been able to produce the exact soda when the patent expired (20 years from the time the patent began). – Others – Food, drugs, cosmetics.

Bankruptcy Law Business owners who can't afford to pay back their creditors may file for bankruptcy. – Way to settle their debt & avoid costly legal action – Creditors may be prevented from collecting on debst until the bankruptcy process is completed. Generally Two Forms of Bankruptcy Relief – Liquidation – Reorganization Forms are divided into Chapters: Chapter 7 – Liquidation (Personal or Business) Chapter 11 – Reorganization (Personal or Business) Chapter 12 – Reorganization (Family farmers or fishermen) Chapter 13 - Reorganization (Personal)

Bankruptcy Law Chapter 7 – Liquidation. Primarily for individuals but affect businesses operating as sole proprietorship Trustee will sell assets (business & personal) to satisfy outstanding debts Chapter 11 – Reorganization Applies to both individuals & small businesses Small businesses operate under increased scrutiny but may keep operating under a reorganization plan Chapter 12 – Reorganization Family farmers & fishermen Chapter 13 – Reorganization Personal only. Trustee sets up a 3-5 year repayment plan. Debtor keeps more assets under this plan.

Tax Law Businesses must consider: – Federal Tax Laws – State Tax Laws – Sometimes Local Tax Laws N.C. businesses will need to obtain: – Federal Employer Identification number (EIN) from the IRS – State Employer Identification number from the N.C. Department of Revenue

Federal Tax Laws Income taxes: – Tax on profits of the business – Determined based on the type of business ownership Payroll taxes – tax on salaries and wages paid to employees – Social Security – paid by business & employee – Medicare – paid by business & employee – Federal income tax withholding – paid by employee only – Federal Unemployment tax – paid by business only Excise taxes – broad category of taxes covering certain types of businesses – Environmental taxes. – Communications and air transportation taxes. – Fuel taxes. – Tax on the first retail sale of heavy trucks, trailers, and tractors. – Manufacturers taxes on the sale or use of a variety of different articles

State Tax Laws Income taxes: – Tax on profits of the business – Determined based on the type of business ownership Payroll taxes – tax on salaries and wages paid to employees – State income tax withholding – paid by employee only – State Unemployment tax – paid by business only – Worker’s Compensation Insurance – paid by business only Sales & Use Taxes – collected from customers & remitted to N.C. Dept. of Revenue Property taxes – tax on the assets of the business – Real estate – Personal property – trucks, equipment, etc.

Local Tax Laws May vary County by County or Municipality to Municipality Privilege License – license to operate a business in locality – Ensures a business is located in an area that is properly zoned Permits, Zoning requests Property Taxes