The ONLY 5 Things You Need to Know About the Law for Your Business

I've heard this time and time again from people.

You've started a new business and have gotten caught in the Google rabbit hole. Hours of searching (or a couple minutes) has your head spinning. Your eyes feel like sandpaper after so much screen time. Everyone and everything is telling you all the things you need to get done and you don’t know who to believe or where to start.

You guys, don't do this to yourselves! Life is too short to get overwhelmed and bogged down with legal heebie-jeebies.

Here are the ONLY five things you need to know:

1. Contract law is state based

Contract law varies from state-to-state. All of your business contracts will be analyzed using the statues and laws of the state that you are registered in OR where you have determined your venue and jurisdiction to be in your contract. Thus, because your contract is legally binding, if anything were to go wrong or an issue were to arise, your lawyer (or YOU) would interpret the contract from the laws of your certain state. Thus, make sure all of your contract clauses are valid in the state you chose.

2. The law requires you to pay taxes

While you may not agree with our constitution whole heartedly, the government is allowed to tax you. The 16th Amendment gave Congress the authority to enact an income tax.

Section 1 of the Internal Revenue Code clearly imposes a tax on the taxable income of individuals and Section 11 imposes a tax on corporations’ taxable income. The United States Internal Revenue Code states that for federal income tax purposes, “gross income” means all income from whatever source derived and includes compensation for services. I.R.C. § 61. Unless it is exempted or excluded, you must pay taxes on your income as a business owner.

3. Suing someone does happen

If you think that you’re too small of a fish in a big sea of companies to come after, you’re wrong. Lawsuits happen all the time. In the US District Courts, there were 358,563 civil filings in 2018.<1> In California throughout 2017, for example, there were 712,299 civil filings in state superior courts.<2> Now, times that amount by 50!

Clearly, lots of people sue. Litigation happens all the time and you cannot hide under a rock. You never know when someone will get litigious against you or your business.

4. The word evidence in the legal world means: proof that something did or did not occur

Evidence is used in the law to help prove whether or not you violated something. Thus, you should try to keep track of your most important documents/emails just in case your lawyer needs them to present your side of the argument. These include: receipts, invoices, contracts, important emails to clients, business registration documents.

5. The IRS is real

It’s true. There is a bureau of the Department of Treasury called the Internal Revenue Service. It is headquartered in Washington D.C. and its employees administer the collection of taxes. If you can believe it, good old Abe Lincoln created the Commissioner of Internal Revenue in 1862 to pay for war expenses. This later became the IRS around 1953.

Why do I tell you all of this history?! Because there are living, breathing tax agents who investigate tax returns. And these people initiate tax audits frequently to double-check your numbers and make sure you don’t have any discrepancies in your return.

Therefore, don’t think they don’t exist, and you will never be audited. It’s a thing and you NEVER know if or when they will flag your business return.

Take a deep breath.. you've got this! Now get back to creating the biz of your dreams

<1> http://www.uscourts.gov/statistics-reports/federal-judicial-caseload-statistics-2018

<2> http://www.courts.ca.gov/documents/2017-Court-Statistics-Report.pdf (citing 201,390 for unlimited civil, 352,562 for limited civil, and 158,347 for small claims filings)