Top 10 Ways to Get Into Legal Trouble in Small Businesses

Top 10 Ways to Get Into Legal Trouble in Small Businesses

1) Not turning in taxes

Taxes, social security, etc., must all be turned in and on time. Sales tax can be paid monthly or quarterly. If you wish to do it quarterly, you must apply for that privilege. If you do not pay your taxes on time, a late fee will be applied. If you never pay your taxes, you risk being charged with something like tax evasion.

2) Writing off non-business expenses

If you are audited and it is discovered that you have been writing off expenses that aren’t business related, you will have a problem. An example would be to write off a dinner as if it was with a client, when it was really with your mother.

3) Selling stolen merchandise

If you buy merchandise from someone at a substantial markdown, it may be cheap because the person needs to get rid of it. If it seems too good to be true, it probably is. If you are caught selling stolen merchandise, you could be charged as an accessory, even if you did not know it was stolen.

4) ‘Under the table’ transactions

When you pay cash so there isn’t a paper trail, this is considered an ‘under the table’ transaction. If an employee requests to be paid in this manner, something is probably wrong. This is done usually when you have employees who aren’t allowed to work legally in the U.S., when buying merchandise of a questionable origin, or someone wants to avoid paying taxes on the money.

5) Scamming customers

Some common scams that businesses use include overcharging customers and not giving them the correct change. Some places will go as far as not to hand the customer all of their bags deliberately. Another version of this is for the cashier to place your items in a different shopping cart after ringing them up and leaving heavy items like dog food on the bottom of the other cart.

6) Illegal pricing practices

There are four types of illegal pricing strategies. First is price fixing, which is a conspiracy among firms to set prices for a product. Price fixing was made illegal under the Sherman Act.

Second is price discrimination. Price discrimination is the practice of charging different prices to different buyers for goods of similar grade and quality.

Next is deceptive pricing, which is a price deal that misleads consumers. An example of this is bait and switch, which occurs when a firm offers a very low price on a product, the bait, to attract customers to a store. Once in the store, the customer is convinced to purchase a higher-priced item, the switch, using a variety of tricks. Some tricks include degrading the promoted item, not having the promised item in stock, and refusing to take orders for it.

Last is predatory pricing. Predatory pricing is charging a very low price for a product with the intent of driving competitors out of business.

7) Accepting or giving payoffs

In some countries, giving a gift to a prospective business partner is customary. In the U.S., however, such an action may be viewed as a bribe. Other types of illegal payoffs are kickbacks, which is money paid after the business deal has taken place.

8) Pyramid schemes

If you are thinking of starting a business that is considered a pyramid scheme, you might want to reconsider since those are illegal in the U.S. and the U.K. A pyramid scam is where a business makes money only by signing people up to be representatives for their ‘business’ and then those people make money by signing up others. In a pyramid scam, no one ever buys or sells anything but a membership. There may be an actual product to hide the fact that it is a pyramid scam, but no one will actually be buying it.

9) Discrimination and sexual harassment

Some people feel that they can hire whomever they wish. When hiring employees, however, it is illegal to discriminate based on the applicant’s age, sex, race, religion, etc.

Sexual harassment is another illegal practice that some businesses do not take seriously. Sexual harassment happens when someone, usually a superior, makes unwanted sexual advances to an employee. When it is made clear that the feelings aren’t mutual, often the employee doesn’t receive a promotion, raise, or something similar.

10) Illegal international selling practices

When starting to sell internationally, it is easy to make an illegal mistake. For example, selling a product in a foreign country below its domestic price or below its actual cost is an illegal practice called dumping. Another example of an illegal practice is selling products internationally on the gray market. This entails selling items through unauthorized channels of distribution.

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