When we have a good business idea that we believe in, there are many factors that will influence the chances of success. One of the most important of these factors is also the one we often pay the least attention to: the law. By understanding and keeping in mind the rules of play at all times, we can accurately outline both our legal rights and obligations.
While trying to concisely define the concept of what “law” is, as it pertains to business here in this article and without it becoming boring or pretentious, I found the following:
“The normative and institutional order of human behavior in society is inspired by principles of justice while being based on existing social relationships that determine its content and character. It shall have no other purposes than outlining behaviors that are aimed at the enforcement of rules governing social life and to civically settle disputes that may arise “.
With such a profound thesis, emphasizing the importance of education, core values and a clear understanding of the legal intricacies in the hospitality business becomes comprehensible, if not fundamental. When we speak of law and the rules of play from an informed and educated standpoint, we are able to see how they can be implemented in our favor. Furthermore, knowing the rules can help us avoid common strategic mistakes as well as the loss of material resources or unfulfilled commitments by people or entities involved in the business project. Conversely, not knowing the rules of the game is to play at a distinct disadvantage relative to our competitors.
Starting a business not only requires dedication and commitment, but also a sound knowledge of the legal environment around us. Having this knowledge at our disposal will help us to be prepared when trouble comes. And it will come. This isn’t to say that we must comb through the fine print of any given business standard, however, it is vital to understand their most basic pillars to ensure we adequately address and resolve incidents as quickly and economically as possible.
Here are some examples:
• On the one hand, one of the early legal issues that we will be confronted with upon opening a business is whether to buy a commercial premises and become owners or to first rent for a period of time before making a decision of such magnitude. The difference between the two options will ultimately mark different strategies based on different sets of rules.
• Second, in the event we decide to rent, which is most likely, it is vital to know the basic legal framework of signing a lease with the premises’ owner. In addition, we must also take note of several other characteristics such as the lease’s duration, extension options, early termination penalties or the proration of fees, the rent to be paid each month, the bond to be deposited as security for the renter’s obligations, indemnification responsibilities of both parties, etc. These are all issues to consider before signing, because afterwards it will likely be difficult to modify unless both parties so agree. To the contrary, any issues that are not resolved before entering into a lease will have to adhere to the agreed upon terms and conditions until the end of the contract period, whether we like them or not.
• On the other hand, ignoring labor regulations that govern business relations with employees who perform services for your company carries a high level of risk. Thus, a sound understanding of these regulations should be present at all times as they affect not only employee profitability but also their commitment in the successful development of your business goal. Areas to be considered are the salary to be paid, added supplements, the structure and scope of the contract, future extensions, suspension or rights and obligations in the case of termination of the contractual relationship. These are but some of the elements that may be of concern to both the employer and the worker himself. The conditions and strategy of your business will certainly have to contemplate these concerns while stringently following present labor regulations.
• Another issue of particular interest is how to constitute the business operation. For example, should you do so as an individual or through one of the many types of partnerships that exist? To decide this you must consider the possibility of outside investors, tax rates and the limitation of our liability to the amount invested in the company. All these issues will help you decide to opt for one or another formula. The particular complexity of this environment requires a strategy that fits our goal from the beginning.
• Next come the specific taxes to be paid to either the local, regional or state government bodies. For this, often times you must rely on the advice of professional experts who know how to adjust the payment to what is actually required by law, nothing more nor less.
• Finally, do not forget that in any business, a contract of services binds you to the customer and this entails many obligations that must be given due and proper fulfillment. Failure to comply to any agreements with a customer may incur a liability of an economic nature and this could restrict your chances of success. This is without prejudice to the impact of a negative image that may derive about your product or service due to mismanagement. Similarly, we must apply this observance to our suppliers as well.
These are some of the issues that can make the difference between success and failure of your entrepreneurial dream. Making your business profitable is key and its success depends first and foremost on the quality of the service or product we sell. However, if the business, once underway, lacks in fulfilling legal obligations then a quality product or service will be of little or no use and its future will be greatly jeopardized.
For years Les Roches Marbella has been aware of the need to teach students the legal tools that regulate hospitality businesses and allow you to defend yourself in the industry while balancing the chances of competing in the market. Good business ideas are essential in the world of hospitality. Although, equally important is understanding the rules at play on the legal front in order to protect you in your given industry while ensuring you gain equal footing with your competitors.
Someone said long ago that “Small opportunities are the beginning of great enterprises”. Apply this statement to your own venture and know the environment in which you run your business like the back of your hand or otherwise, you may find yourself having to confront insurmountable obstacles on the road to success.
