Small Business Association Legal Issues

A small business is a business that is owned and operated privately, with a relatively low volume of sales as well as a small number of employees. United States small business standards vary by state, and on an industry-by-industry basis. Small businesses are becoming more popular due to the relative ease of operation, and because there are certain tax deductions for small businesses that are commonly available.

Generally speaking, a small business is defined as having less than 500 employees for manufacturing industries, and less than $7 million in annual income for non-manufacturing industries. Small businesses most commonly take the form of a corporation, partnership, or sole proprietorship.

The laws which govern small businesses mostly specify license requirements related to the type of activity that the small business engages in. Failure to meet these legal requirements can result in penalties such as fines, jail time, or a revocation of business operation privileges. Licensing requirements are divided up into Federal, State, and Local requirements.

Some examples Federal Small Business requirements include:

• Employer Identification Number (“EIN”);
• Health insurance provisions;
• Intellectual property registration; and
• Activity-specific licenses if your small business engages in federally-regulated activities, such as manufacturing prescription drugs and pharmaceuticals.

State Requirements include:

• Business licenses;
• Occupational/profession-specific licenses;
• Licenses for product sales;
• Tax registration;
• Trade name registration; and
• Employer registration.

Local/Municipal Requirements often include:

• Local licenses such as a county or city license;
• Specific activity-related permit as required by the jurisdiction; and
• Zoning ordinances.

What Are Small Business Associations? What Do Small Business Associations Do?

Small business associations are organizations which allow small business owners to connect and network with each other. These organizations are often smaller, local community groups which are intended to assist in pooling a city’s business resources together. Such organizations commonly host meetings, mixers, outreach events, and other functions to help businesses collaborate and interact with one another.

They may also provide various services for the community, local schools, and other local groups. These associations are often similar to local chambers of commerce, the difference being that they focus more on smaller businesses and start-ups as opposed to a city’s businesses as a whole.

Small business associations can often provide information regarding:

• Small Business Financing: Small businesses may struggle with obtaining the capital needed to establish and maintain operations. Some options include venture capitalists, commercial loans, asset based financing, government lending programs, the Small Business Administration (“SBA”), and small business associations; 
• Business Insurance: Although small business insurance is not required in most cases, it is always wise to purchase insurance to cover assets, due to the fact that small business owners are generally taking a lot of risk. They could lose a considerable amount if they are sued by someone. A small business association can help connect insurance providers with small business owners; and
• Loans and Related Issues: Small business loans may be borrowed in order to help manage small business expenses in an efficient and purposeful way. These loans are gaining popularity as small business ventures become more common. Many lending institutions offer special programs that provide favorable plans for small business loan arrangements. Again, a small business association may connect its members with those willing to provide them with a loan. Alternatively, a small business association may host educational meetings regarding the subject so that its members are better equipped to apply for such loans.

A small business association may also provide information and assistance with compliance matters, advertising and marketing, and collaborating with other businesses. It is important to remember that all services and sharing must occur within the bounds of the law, and according to acceptable and fair business practices.

What Are Some Common Examples of Small Business Disputes?

Some of the most common examples of small business disputes are contentions regarding succession plans, and disputes among the business partners. 

A small business succession plan is a plan for the business when one of the owners dies or becomes permanently disabled. This plan is agreed upon by all of the business owners and/or partners. Most specifically, an owner of a sole proprietorship may face difficulty without a succession plan as the business will likely be forced to terminate, which may not have been their intention.

It is usually best practice to include a succession plan in the business entity formation documents. What this means is that when the business is first formed, there is generally a document detailing how the business is to be governed. This applies whether the business if formed as a partnership, limited partnership (“LP”), limited liability partnership (“LLP”),  limited liability company (“LLC”), an S-Corporation (“S-Corp”), or any other business entity,

Additionally, that governance should include how the death or permanent disability of an owner will impact the business. The business owners may choose for the deceased or disabled owner’s share to be distributed among the remaining owners or allow the deceased or disabled owner’s share to pass to that owner’s heirs. There are a few exceptions, but generally speaking, the options are the same for most businesses. By agreeing in advance as to how to address this type of situation, it can reduce the probability of disputes later on when the unexpected happens. 

Planning ahead can also mitigate the risk of disagreements among the partners, related to any and all other matters. An example of this would be how an owner may engage in behavior that harms the business. A clear understanding of the rules governing the business will help reduce the risk that any serious disagreements will negatively impact the business.

What If I Have a Business Dispute Involving a Small Business Association?

Generally speaking, membership or enrollment in a small business association is voluntary. As previously mentioned, disputes can occur between small businesses, but also with a local small business association. These may involve minor conflicts regarding issues such as:

• Business advertising;
• Zoning;
• Trademark and copyright issues; and
• Trade secrets.

The negative effects on business reputation or conflicts between businesses may also necessitate a business seeking protection for a small business name. A trademark is a word, series of words, a symbol, and/or a logo. Businesses can register trademarks with the United States Patent and Trade Office (“USPTO”). If the USPTO approves the registration application, the registrant gains specific legal rights and protections. These rights include the right to sue for infringement of, or copying of, the trademark. Trademarking a business name can help in protecting a brand name. 

Small business associations may provide some mediation measures for conflicts. However, they do not provide any legal services or legal advice. Serious legal conflicts must be remedied in court or with the appropriate government agency.

Do I Need an Attorney for Small Business Association Legal Issues?

If you require assistance with any laws, conflicts, or complaints, you should consult with a local small business lawyer. An experienced and local business attorney will be best suited to understand the specific laws of your state regarding small businesses and small business associations, and how those laws may affect your case. 

An attorney will be able to review your legal claim(s) and advise you regarding your best course of legal action. They will also be able to represent you in court as needed, and provide you with an appropriate legal defense when necessary.