“Business Owners Under Investigation for Fraud”
“Restaurant Closed for Health Violations”
“Company Shuts Down Despite Lawsuit Victory”
We have all seen headlines like this. The law kills businesses. In a few cases, it does so because the business is hurting people through fraud or some other illegal conduct. Other times, it is failure to comply with regulatory standards that may be just or arbitrary, but are the law in either case. Sometimes the legal system itself simply sucks the money and will out of a business through lawsuits, taxation, or burdensome compliance issues. I have even seen a business legislated out of existence. A law was passed and the business was no longer legal, end of story. So, pretty clearly the law matters to small business and you need to give it some thought.
Now, you may be hoping for a convenient checklist of perhaps a dozen business laws that you can run through, check off, and assure yourself that your business is safe from legal risks. Unfortunately, that isn’t the case. There are specific areas of law that deserve your attention and that you ultimately need to master for long-term business success. We will get to those in another article. But you need to start with an appreciation of just how much crap you actually need to deal with and where it is coming from.
It’s time for a trip back to your junior high social studies class. The U.S. is designed for decentralized layers of government. This goes back to the Constitution. It is the supreme law of the land and actually a fairly readable document. It is also largely irrelevant to your business from a day-to-day legal risk perspective (but I would feel bad leaving it out). It setup the checks and balances of the Executive, Legislative, and Judicial branches. This has translated into a modern situation where the executive branch oversees a horde of Federal agencies, the legislature is constantly tinkering with new laws and budgetary approvals for the agencies to deal with, and the judicial branch is trying to sort out what it all means when it actually impacts with the reality of people living their lives and they get pissed off.
You should also remember that there is a balance of powers between the Federal government and the States. This may get you thinking about the Civil War and state’s rights, but for our purposes it means that there is another full government apparatus overseeing your business. Your state and the Feds may or may not agree on everything, like how best to tax you and whether marijuana is good or bad. At the end of the day, they both right as far as your legal compliance is concerned. And each state then has the opportunity to divide up its governance among executive, legislative, and judicial branches, empower its own agencies, and then leave some stuff to local municipalities like counties, cities, and towns (which have their own departments, law makers, and tribunals). Now, unless you are a truly tiny business, you will probably be operating across state lines, especially when you go online. International law is even more messed up, so we are just going to ignore that for the time being.
In New York, we have fairly strong cities and towns, but a lot is handled on a county level too. The state itself is bureaucratic nightmare. And I don’t need to tell you where things have gone at the Federal level as far as the variety and complexity of laws and agencies. So, a New York business probably has a town or city to deal with, a county with esoteric responsibilities and agencies, more state permitting agencies than you know what to do with, and a Federal government of epic proportions. And that’s before you start crossing state lines into New Jersey, Connecticut, Pennsylvania, etc.
If this sounds horrible and overwhelming, I have some good news and some bad news. The good news is that it is only a small portion of the federal, state, and local laws that directly impact the operations of your business and you will figure out which ones matter most in time. The bad news is that government intervention is only part of the legal environment in which your business is operating. Your biggest legal risks aren’t from the government, but your own business partners, employees, and customers. If you build a substantial business, sooner or later you will be sued.
There is just a big pile of law and your business is sitting under it. It would be best if you figured out early how to carry that weight.
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