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Updated Apr 04, 2024

A Crash Course in the Business Legal Terms You Need to Know

Mark Fairlie
Mark Fairlie, Senior Analyst & Expert on Business Ownership

Table of Contents

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Marketers, accountants and software developers all have their own jargon – common industry words that others might not readily understand – but the legal field is also well known for its complex lingo.

While there’s no need to go to law school if you’re not pursuing a career in this field, it’s important for business owners to have a basic understanding of the legal terminology they’re likely to encounter. You don’t have to know everything, but you do need to know enough to stay compliant. It’s also essential to know when you should hire an attorney. Consider this your crash course on legal terminology – no Bar exam necessary.

General laws affecting businesses

In the statute books, there are tens of thousands of laws covering business behavior. You should be aware of the following six laws and their associated terminology:

  • Antitrust laws: These prevent businesses from working together to fix prices or control distribution. So, if a competitor contacts you and suggests that both of you sell a particular product for the same price, this would violate antitrust laws. If your competitors get significantly more favorable terms than you on price and stock allocation for no reason, this also may be a violation.
  • Class-action lawsuit: If a group of people or businesses launches a class-action lawsuit against you, they believe your products, services or advice put them and/or the public at large at severe risk of injury and/or financial loss. In other words, do not give out advice that you’re not qualified to give or that you do not have insurance to cover.
  • Environmental laws: Before you open your business, check whether you need permits to operate and comply with laws such as the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act. As new legal requirements are introduced, make sure your business stays in compliance.
  • Insurance laws: Federal law requires you to have disability, unemployment and workers’ compensation insurance to protect your employees. Your state may require additional insurance policies as well.
  • Permits and licenses: Before you start operating, make sure you have all permits, licenses and registrations in place. Failure to do so puts you at risk of being shut down and fined. For example, there are certain licenses required for construction companies.
  • Tort: A tort is a form of economic injury caused by one business against another. Common torts include maliciously spreading “injurious falsehoods” about a business or interfering in an existing business relationship in a way that disrupts each business from fulfilling its contractual obligations to the other.
TipBottom line

Listen to your lawyer. Their job is to keep you out of court whether you’re bringing an action against someone else or someone is bringing one against you. It’s much cheaper, faster and easier to come to an out-of-court settlement than it is to take the dispute before a judge.

When your business needs a lawyer

As a business owner, you need to be prepared to work with lawyers regularly. They’re a necessary expense, and you’ll come to appreciate what they do when you need them to defend you. You’ll need to hire a lawyer to start your business and set up your company, which includes applying for any necessary permits and licenses and drawing up the governing agreement that defines the roles of all shareholders in the business.

Try to hire a business lawyer who has experience with your sector. They may be able to see risks and opportunities you’re unaware of, particularly if this is your first business. On more specific matters, like intellectual property or environmental laws, seek specialists. They may be more expensive than standard lawyers, but you’ll receive better advice.

Many law firms now offer fixed-fee monthly consultation services with unlimited calls to attorneys on employment and HR issues. This will probably be cheaper than using an employment lawyer on an ad-hoc basis. If you are sued, most flat-fee service providers offer big discounts on fees to defend you. At any rate, by at least understanding the terms highlighted above, you’ll be better equipped to comprehend whatever legal predicaments you face as a business owner.

Mark Fairlie
Mark Fairlie, Senior Analyst & Expert on Business Ownership
Mark Fairlie has written extensively on business finance, business development, M&A, accounting, tax, cybersecurity, sales and marketing, SEO, investments, and more for clients across the world for the past five years. Prior to that, Mark owned one of the largest independent managed B2B email and telephone outsourcing companies in the UK prior to selling up in 2015.
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