Five Legal Terms Every Entrepreneur Should be Familiar with In order to keep their Biz out of Trouble

Dixie Somers

March 06, 2015

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As an entrepreneur, it is important to have a good understanding of many concepts including good business strategies, financial practices, and industry trends. However, one often overlooked skill that is invaluable to new business owners is a solid understanding of legal regulations in the business world. While not every entrepreneur has the ability to attend law school, a basic understanding of legalese can truly come in handy when trying to launch a business. A solid understanding of specific legal procedures can help entrepreneurs avoid some major business headaches. Here are five business law terms entrepreneurs should understand so they can avoid legal trouble in the future.

Corporation

Business entities usually take the form of a sole proprietorship, partnership, corporation or limited liability company. A corporation is a separate legal entity distinct from its shareholders. The corporation can enter into contracts, hire and fire employees, sue and be sued and hold assets. Understand that incorporating can operate to protect you and your personal assets from liability. If you are planning to launch a new business, you will want to deeply research the possibility of incorporating the company in order to protect yourself.

UCC

The Uniform Commercial Code (UCC) is the law on contracts, sale of goods, checks and other business transactions. It has been adopted in all 50 states. Whether selling goods or providing services, the UCC governs details of your business. It tells you the proper procedures to follow and avoid commercial legal disputes. You want to ensure that you comply with all UCC regulations before your business gets too deep into development, so don’t skip this essential step when in the startup phase.

Statute of Frauds

All 50 states have a Statute of Frauds. In business, a contract for the sale of goods in excess of $500 must be in writing. A promise to pay the debt of another is required to be written. Any sale of any interest in land must also be in writing. Other provisions of the Statute of Frauds apply to promises outside of the scope of a business transaction too. Knowing the Statute of Frauds can help you if somebody is threatening to sue you on an unenforceable contract.

Breach of Contract

There are generally four elements to a contract. Those are offer, acceptance, legal purpose and consideration. Once the contract is established either orally, in writing or by the conduct of the parties, a material deviation from that agreement can be held to be a breach of contract if damages can be shown. Understand the elements so you have clarity, a meeting of the minds and avoid expensive lawsuits. While many new business owners understand the basics of contracts, it is important to be fully informed about terms and conditions before entering into any type of business contract.

Quantum Meruit

This is a form of a contract action to recover the reasonable value of services rendered. Quantum meruit means "as much as he has deserved" in Latin. If a person performs services for you, they're most likely going to recover something. Don't just walk away from a contract. You'll get sued.

A complete understanding of these business legal terms can aid you and your business in earning and retaining revenue. Stay away from the school of hard knocks, and be sure you know what you are getting into on the legal side of a business before you launch your company. According to the corporate lawyers in Sacramento at Carter West, It is best to seek legal help before fully launching your company to ensure you aren’t violating any regulations that could put a stop to your business success. For businesses that skip steps and ignore the law, entrepreneurial dreams are often cut short when they are slapped with legal fees or cease and desist orders. As you can see, it is worth it to research, prepare, and attend to details in order to ensure your business is operating above board and in accordance with business laws.