Legal
For most business entities to thrive, it is important to provide a formal legal structure for the entity. A formal legal structure provides a measure of protection for the owners and establishes some basic rules of conduct for the business. There are three legal elements that any organization should pay attention to: (1) structure, (2) protection, and (3) organizational law.
Creating a legal entity is also known as organizational structuring. Entities can legally be recognized as sole proprietorships, partnerships, limited liability companies, corporations, or not-for-profits. Each of these has both advantages and disadvantages, however, the primary differences between these types of organizations are the separation between the enterprise and the individuals involved in the enterprise; the treatment of profits; and tax liability. It is important to recognize that not all business structures match all visions. Therefore, when selecting a business structure, the ultimate vision of the organization should be considered.
In addition to organizational structuring, entities must also consider other important areas of business protection. Organizations need to ensure that any unique aspects of their entity are protected. It is also critical to make sure that the business operates in accordance with established legal guidelines. Depending on the entity, a combination of two other categories of protection should be considered: (1) Patent & Trade Secrets; and (2) Copyrights & Trademarks. Patents and trade secrets are used to protect the inventions that are useful in the real world. For example, the formula for Coca-Cola is a trade secret, while IBM has patents on several technologies they invented. Copyrights and trademarks are used to protect the output from the artistic process. Music is copyrighted and logos or names may be trademarked.
The final element of law that an entity must evaluate is organization law. Organization law is a broad category that includes many of the legal guidelines and laws that an enterprise must abide by to ensure orderly operation of the entity. More specifically, this area includes human resources and employee law, international law, contracts, financial reporting laws, etc.
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