the legal environment glencoe entrepreneurship: building a business legal issues facing start-ups...

The Legal The Legal EnvironmentEnvironment

Glencoe Entrepreneurship: Building a Business

Legal Issues Facing Start-UpsLegal Issues Facing Start-Ups

Handling Government RegulationsHandling Government Regulations

8.1Section

8.2Section

8

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Legal Issues Facing Start-Ups

SECTIONSECTION 8.1

Chapter 8 The Legal Environment

• Explain how to protect your intellectual property.• Discuss the laws affecting the start-up of a business.

Section Objectives




SECTIONSECTION 8.1


A new product or service must be protected through patents, copyrights, trademarks, or trade secrets. Other aspects of a business are protected by law as well.

The Main Idea




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Content Vocabularyintellectual property lawUniform Trade Secrets Actpatentpublic domainpatent pendingcopyrighttrademark

service markpermitlicensecontractconsiderationcapacity




SECTIONSECTION 8.1


Protecting Ideas: Intellectual Property Law

Intellectual property law protects the inventions and new ideas of business.

intellectual property law

the group of laws that regulates the ownership and use of creative works




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Intellectual property laws protect the following:

trade secretspatentscopyrightstrademarks

Protecting Ideas: Intellectual Property Law




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Trade secrets form the basis of all intellectual property. A trade secret may consist of a formula, an idea, a process, a pattern, or compilation of information that gives the owner a competitive advantage.

Trade Secrets




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Patents

An inventor may acquire a patent, which will protect his or her invention for a period of 20 years.

patent

a document that grants to an inventor the right to exclude others from making, using, or selling an invention or other intellectual property during the term of the patent




SECTIONSECTION 8.1


Patents

After a patent expires, it is placed in public domain.

public domainintellectual property whose protection has expired; it belongs to the community at large and people can use any aspect of the property free of charge




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Rules for obtaining a patent are:

The invention must not contain prior art.The invention must fit into one of five classes: machine, process, articles of manufacture, composition, or new use for one of the other four.The invention must be “unobvious.”The invention must have utility.

Patents




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Patents

After you apply for a patent, the Patent and Trademark Office (PTO) does a patent search.During this time, you may market your product but you must put the term patent pending and the patent number on the product or packaging.

patent pendingthe status of an invention between the time a patent application has been filed and when it is issued or rejected




SECTIONSECTION 8.1


Copyrights

If you plan to publish a book, place a notice of copyright in a prominent location on the work.

copyrighta legal device that protects original works of authors, including books, movies, musical compositions, and computer software, for the life of the author plus 70 years




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Trademarks

A trademark is followed by the registered trademark symbol ™.

trademark

a word, symbol, design, or color that a business uses to identify itself or something it sells




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Trademarks

Like a trademark, a service mark can be protected by registering it with the Patent and Trademark office.

service mark

a word, symbol, sign, or color that describes a service business




SECTIONSECTION 8.1


Entrepreneurs should be aware of laws involving:

permits and licensescontractslocation

Laws that Affect Start-Up of a Business




SECTIONSECTION 8.1


Permits and Licenses

Before you can officially open your business, you must get a permit. In certain professions, such as nursing, you may also need to get a license.

permita legal document giving official permission to run a business

licensea certificate that shows that the holder of the document has the necessary education and training to perform a job




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Contracts

As an entrepreneur, you will need to sign a contract with vendors, landlords, and clients.

contract

a binding legal agreement between two or more persons or parties




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To be valid and legally inferable, a contract must contain the following components:

agreementconsiderationcapacitylegality

Contracts




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Contracts

The money you pay a vendor for a product for your business is valuable consideration.

consideration

what is exchanged for the promise to do something or refrain from doing something




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Contracts

By law, minors do not have capacity to sign a contract.

capacity

the legal ability to enter into a binding agreement




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Only certain types of real property are available to business owners because they are subject to zoning laws and building codes.

Because a lease is a long-term contract, an entrepreneur should consult an attorney before signing.

Location




SECTIONSECTION 8.1


After You Read

1. Explain how to protect your intellectual property.

To protect trade secrets, you can ask employees, contractors, and investors to sign contracts promising not to reveal secret information about the product. To protect an invention, you should file a patent application with the PTO. To protect an original work, you should place a notice of copyright in a prominent location on the work and register your work with the Copyright Office. To protect a trademark or logo, you should file register it with the PTO.




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After You Read

2. Discuss the laws affecting the start-up of a business.

A person must obtain a permit from the local government office before he or she can officially open for business. A license is required for certain professions to prove that he or she has the education and training needed to do the job. Licensing requirements vary from one state or locality to another. When entering into an agreement to start a run a business, the owner creates a valid contract. This means the owner must abide by contract laws.


Handling Government Regulations


SECTIONSECTION 8.2


• Explain the laws that affect employees.• Identify the laws that regulate trade.• Discuss the tax laws that apply to a new venture.

Section Objectives




SECTIONSECTION 8.2


Laws and regulations are designed to protect employees, other businesses, and customers from unfair, unsafe, or unhealthy business practices.

The Main Idea




SECTIONSECTION 8.2


Content VocabularyEqual Employment Opportunity

Commission (EEOC)wrongful terminationprice discrimination

Uniform Commercial Codewarranty of merchantabilitybait-and-switch advertisingFICA


Laws That Affect Employees

27

discrimination in hiring

child labor laws

wrongful termination

sexual harassment

Americans With Disabilities Act

Family Medical Leave Act

Equal Pay Act of 1963

Fair Labor Standards Act

Occupational Safety and Health Act



SECTIONSECTION 8.2


Laws Against Discrimination in Hiring

Employers are subject to regulations of the Equal Employment Opportunity Commission (EEOC).

Equal Opportunity Employment Commission (EEOC)the government agency charged with protecting the rights of employees; it ensures that employees do not discriminate against employees because of age, race, color, natural origin, religion, gender, or physical challenge




SECTIONSECTION 8.2


Federal child labor laws protect young workers in many ways.

Employment can not interfere with their education, health, or well-being.Persons under 18 can not work in jobs the government considers hazardous.Persons under 16 are only allowed to work certain hours and times.Persons under 14 can only work in certain jobs.

Child Labor Laws




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Wrongful Termination

Employers must keep accurate records for each employee, including employee evaluations, disciplinary actions, and warnings, because employees are protected against wrongful termination.

wrongful terminationthe right of an employee to sue his or her employer for damages if he or she is terminated for an unacceptable reason




SECTIONSECTION 8.2


At the federal level, Title VII of the Civil Rights Act forbids sexual harassment. Most states also have laws that prohibit sexual harassment.

Sexual Harassment




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The Americans With Disabilities Act requires employers to provide reasonable accommodations to that allow qualified employees to do their basic jobs. Business owners can ask prospective employees about their abilities, but not their disabilities.

Americans With Disabilities Act




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The Family Medical Leave Act (FMLA) provides employees with the right to an unpaid leave of absence for up to 12 weeks for certain family and medical issues.

Family Medical Leave Act




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The Equal Pay Act of 1963 says all employers must pay men and women the same wage for the same work.

Laws Requiring Equal Pay for Equal Work




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The Fair Labor Standards Act, passed in 1938, established a minimum wage and maximum working hours. It also ensured that children under the age of 16 could only be employed full-time by their parents.

Laws Requiring Fair Labor Standards




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The Occupational Safety and Health Act of 1970 ensures safe, healthful working conditions for employees. The act created OSHA, the Occupational Safety and Health Administration, to oversee safety in the workplace.

Laws Requiring Workplace Safety and Health




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Laws that regulate trade include:

price discrimination lawsconsumer protection lawsThe Uniform Commercial Code (UCC)truth in lending lawstruth in advertising laws

Laws That Regulate Trade




SECTIONSECTION 8.2


Price Discrimination Laws

The Clayton Act of 1914 and the Robinson-Patman Act of 1936 are aimed at prohibiting price discrimination.

price discriminationthe charging of different prices for the same product or service in different markets or to different customers




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Manufacturers of consumer products must become familiar with consumer protection laws in order to avoid recalls and lawsuits.

Consumer Protection Laws




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The Uniform Commercial Code

As a merchant, you must abide by the requirements of the Uniform Commercial Code (UCC).

Uniform Commercial Code (UCC)

a group of laws that regulates commercial business transactions




SECTIONSECTION 8.2


The Uniform Commercial Code

Virtually everything consumers buy comes with a warranty of merchantability.

warranty of merchantabilitya guarantee on the quality of goods or services purchased that is not written down or explicitly spoken




SECTIONSECTION 8.2


Those involved in retail businesses must familiarize themselves with the Consumer Credit Protection Act. This act requires those who give credit to reveal all terms and conditions of their credit agreements.

Truth in Lending




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The Federal Trade Commission protects customers from false and misleading advertising with truth-in-advertising laws.

Truth in Advertising




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Truth in Advertising

A business that engages in bait-and-switch advertising is violating truth-in-advertising laws.

bait-and-switch advertising

an illegal method of selling that involves advertising a product at a very low price in order to attract customers who are then persuaded to switch to a more expensive product




SECTIONSECTION 8.2


All business owners are responsible for certain taxes, including:

sales taxes,payroll taxes,federal unemployment taxes, andbusiness income taxes.

Tax Laws




SECTIONSECTION 8.2


Payroll Taxes

When a business owner hires employees, he or she must deduct certain payroll taxes from their earnings, including FICA.

FICA (Federal Insurance Contribution Act)a Social Security payroll tax, figured as a percentage of an employee’s income




SECTIONSECTION 8.2


After You Read

1. Explain the laws that affect employees.

Laws that affect employees include equal opportunity, child labor, wrongful termination, sexual harassment, Americans with Disabilities Act, family medical leave, equal pay for equal work, fair labor standards, and workplace health and safety.




SECTIONSECTION 8.2


After You Read

2. Identify the laws that regulate trade.

The goal of the Clayton Act of 1914 and the Robinson-Patman Act of 1936 is to prohibit price discrimination. Consumer protection laws protect against unscrupulous sellers, unreasonable credit terms, unsafe products, and mislabeling of products. The UCC is a group of laws that regulates commercial business transactions.




SECTIONSECTION 8.2


After You Read

3. Discuss the tax laws that apply to a new venture.

Businesses are responsible for sales taxes, payroll taxes, federal unemployment taxes, and business income taxes.


The Legal The Legal EnvironmentEnvironment


Legal Issues Facing Start-UpsLegal Issues Facing Start-Ups

Handling Government RegulationsHandling Government Regulations

8.1Section

8.2Section

8

End of

Chapter 8The Legal Environment



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