With an innovative business idea, you plan to offer something new to the market. You implement your innovative business plan to set up a new business to take advantage of the market loopholes and start a new business. So in the initial stages, you are all caught up with setting up of your office, hiring people, getting clients, searching for suppliers and setting up your business stage. In the wake of these exciting early-stage developments, executives sometimes overlook certain legalities which can lead to serious charges down the line. At times, Businesses break the laws, but they fail to realize that they have stepped into the criminal zone. Here are some ways businesses unknowingly break the law:
1. Failing to turn over payroll taxes
If you have employees, you have an obligation to withhold their federal income taxes and turn those taxes over to the federal government. Unfortunately, sloppy bookkeeping, bad luck, or other circumstances often lead small business owners to fail to do so, even with good intentions.
It’s a dangerous game, though. If a company that failed to pay taxes goes under the the IRS can and does go after principals and others it deems “responsible persons” individually. In other words, the tax debt doesn’t necessarily die with the company.
2. Deducting personal expenses as business expenses
A lot of expenses are useful for both business and personal purposes, and that can become awfully tricky to report correctly. There are many ways through which one can legally deduct business expenses. All it takes is to maintain proper records.
3. Collecting Internet sales taxes
Wait, you might say – I thought we established at the start of this article that the law currently doesn’t require you to collect sales tax for Internet purchases, and that instead it’s the buyer’s responsibility to file and pay. Our tax system is complex, confusing, and often counterproductive, and second, if you want to be an entrepreneur, I hope you’ve got a good accountant you can trust!
4. Failing to mark patented products
We may have unique products/services and may patent them to protect the asset and the right to use/sell them. But many a times businesses fail to mark items with patent numbers to assert patent rights against third parties or want recourse for willful damages in the event of infringement.
5. Non-compliance with federal wage and hour statutes
Hiring people without their taxpayer identification number and social security number to avoid payroll taxes would lead you to break business laws.
6. Improperly billing for government services like Medicare.
Generally, there are strict rules about how healthcare organizations can bill for Medicare related expenses. Since Medicare is a government provided service if you change that billing structure, or if you break those rules, you may only realize you’ve done something wrong when Federal Agents are raiding your hospital or medical practice.
7. Improper use of investor funds.
In short, anytime a businessperson is acting as a fiduciary (ie: taking money from people in trust) he or she must be very careful how it’s spent. For example, if the owner of a promising startup were to misuse investor funds to, say, drive a luxury car or otherwise live a lavish lifestyle in order to project an image of success, that’s an obvious issue.
8. Mistakenly offering a recalled product.
To prevent this high-liability situation, Powers Taylor suggests inspecting the Consumer Item Security Commission’s site, which often updates its recall list. How frequently you need to check it depends greatly on what type of product you offer. As an example, companies offering products utilized for infants are encouraged to inspect more often.