In addition to the marketing, financial, human resources and other challenges small-business owners face, legal and ethical issues of operating a business loom as another stumbling block. Knowing your legal responsibilities, as well as following a code of ethics, will help you minimize distractions that take you away from what you do best.

Laws and Regulations

Small businesses, even those with one or only a few employees, must follow state and federal labor laws. If you hire contractors, make sure you do not cross the line in their job descriptions, which might classify them as employees. Know the rules and regulations governing any limitations on hours worked, overtime pay, wrongful termination, workplace harassment, discrimination, right to organize and equal opportunity regulations as you add employees. Secure all necessary permits, licenses and insurance necessary to operate even a home-based business.

Safety Issues

Whether you run a restaurant, professional services office or factory, you will need to know the rules governing workplace safety. Work with your insurance provider to implement all state and federal safety regulations. Visit the website of the U.S. Office of Safety and Health Administration additional for information. Contact your local fire department to inspect your workplace and guide you on your legal obligations. Businesses such as restaurants, hotels and daycare centers will need to stay up on the latest health regulations.

If your product, service or an employee or agent harm a customer or member of the public, you might be liable for damages. Meet with your insurance company to evaluate your exposure and arrange for the appropriate insurance coverage. Look into product and premises liability insurance and director’s and officer’s liability insurance. Make sure you set up your company as an entity that protects you from personal lawsuits.

Image Problems

When you, your employees or agents act unethically, even if you don’t break the law, you can damage your business. If the public believes you discriminate against customers or employees, try to skirt environmental laws, don’t honor contests you hold or act in other inappropriate ways, individuals might stop patronizing you or groups might organize boycotts. Some unethical behavior is also illegal, such as bait-and-switch advertising, sexual harassment, age, sex or racial discrimination, and intimidation of workers who want to organize a union. If you break your word or a handshake agreement with one vendor or client, word can spread in the marketplace, making it more difficult to operate. Creating a detailed company policy and procedures guide and distributing it to each employee will help you avoid many legal and ethical problems.