Running businesses can be challenging as you’re in the constant state of trying to satisfy customers and meet their demands, leading to different ways for you to get in legal trouble. These legal issues are more common than you think, making it even more crucial to keep them in mind to avoid paying for costly cases.
With that in mind, here are things that can get your business in trouble.
Defrauding Customers
Fraud is the most common occurrence in most businesses since it’s easy to claim ignorance or accidental happenings. However, if a pattern is established, then you’ll likely get prosecuted. Defrauding customers include baiting or switching tactics like advertising a product and selling something else or providing inaccurate warranty coverage.
For instance, a customer who shopped for electricity rates and signed a contract with an energy company can sue for a fraud case if the provider does not deliver the specific benefit/s they were supposed to get.
Tax Fraud
Any problems regarding paying and withholding business taxes are likely bound to be scrutinized by the state and federal government. The most common tax fraud that business owners make is sales tax. That’s because many cash-only organizations only track a certain percentage of their sales rather than declaring all sales and making the needed tax payments. Sales tax needs to be paid monthly or quarterly, depending on the option you’ve chosen beforehand—and if you don’t pay on time, this will result in expensive late fees and penalties.
Meanwhile, staying off the radar and avoiding paying any taxes will leave you getting charged with tax evasion. Another tax issue that businesses face is when business owners declare non-business-related costs or exaggerate expenses to reduce taxable income. The federal government will likely audit firms more frequently than individuals, requiring proof of deductions in business costs.
That’s why when they conduct audits, and you don’t have any proper paperwork like CPA-certified income statements or other viable receipts, you’ll likely face hefty fines and serve some time in jail.
Selling Stolen Products
Selling stolen goods is one of the most illegal things you can do as a business, and it’s pretty much common sense to avoid if you want to run a reputable company. Any customers walking into your store where prices may be ‘too good’ to be true, especially if they’re way below their actual costs, will likely raise some red flags and lead to possible police involvement.
Under the Table Employees
Labor expenses can be one of the most costly aspects of running a business, and as such, it’s sometimes tempting to give employees off the book. Companies considering these options do so to prevent paying for additional costs such as making workers compensation to their state government or paying federal taxes through employee salaries. Some smaller firms also use ‘under the table’ payment for employees, which aren’t legally able to work in the United States.
Doing this not only deprives the state and the federal government of employee benefits and taxes but also severely under the industry-standard salaries due to fear and abuse. These “illegal” employees typically have no legal courses and often get threatened with deportation.
Discrimination and Sexual Harassment Against Workers
It’s no secret that employment discrimination, regardless of the scale, is unacceptable and unlawful. However, even with the laws stated on books and displayed in several court cases, some businesses still show discrimination towards employees, but less out in the open. But then again, regardless of where you do it, discriminating against a worker based on their gender, race, religion, and age is patently illegal.
Another common-sense situation that businesses should avoid at all costs is conducting sexual harassment against any employee or encouraging a hostile work environment.
Illegal Pricing Fixing and Collusion
Illegally pricing products and services is one of the most significant ways businesses can get into legal trouble, and this practice is commonly known as price-fixing or collusion. This approach is where several merchants agree to charge the same inflated prices for different goods and services, which is the opposite of competitive marketplaces where pricing pressures are made to drive down costs to increase its overall quality.
Price-fixing was common back in the day but was made illegal by Congress in recent years. Meanwhile, price discrimination is another unlawful practice typically done against minorities and other individuals whose business owners don’t like or are specifically targeting it—an example of this a landlord charging more for minority tenants than native ones.
There are several ways businesses can get into legal trouble—and those mentioned are some of the most common ones you need to remember as a business owner, helping you avoid expensive misunderstandings and lawsuits.
