Small Business at the Foot of the Legal Muse: Interpreting Supreme Court Cases and Their Effects

By Bardwell, Stephanie Huneycutt | Entrepreneurial Executive, Annual 2010 | Go to article overview

Small Business at the Foot of the Legal Muse: Interpreting Supreme Court Cases and Their Effects


Bardwell, Stephanie Huneycutt, Entrepreneurial Executive


INTRODUCTION AND LITERATURE REVIEW

Small businesses are less likely and less able to navigate legal complexities than multinational or large corporations for three simple reasons: A small business is less likely to have an expert legal advocate or in-house legal counselor, is presumed to be less likely to be subjected to enforcement of the governing regulations yet bears a disproportionate share of the federal regulatory burden (Crain, Hopkins 2001), and is less likely to be able to afford the time, expertise or expense of lobbying for or against legislation. In fact, the best advocate for the small business owner is typically not an individual legal advisor or attorney, but is likely the Office of Advocacy of the SBA.

The Office of Advocacy of the SBA provides extensive data and guidance related to entrepreneurship, job creation, minority and women owned business, banking, lending and credit practices, the environment, venture capitalism and many other important topics. The SBA commissions, funds and publishes research on those topics which are so important to small business interests each year. One important legal topic is the issue of regulatory burdens upon small businesses; in the research triangle of North Carolina, the private consulting firm Management Research and Planning Corporation (MRPC, 2002) investigated the means by which states attempted to piggyback states rules onto the federal Regulatory Flexibility Act. The consultants investigated whether states were effective in alleviating the regulatory burden falling on small businesses. The report concluded that only five states, Virginia, California, New York, Arizona and Illinois were effective in reducing federal regulatory burdens on their residents. However, even the passage of the federal Regulatory Flexibility Act and handmaiden bills like Executive Order 12866 and 13272 which were designed to diminish the federal regulatory burdens on small businesses, cannot fully correct the hefty and disproportionate burden of legal compliance that falls upon small businesses.

Cultivation of knowledge of legal cases related to business law requires virtual "signing up on the USSC dance card" to monitor cases under review. Small business and entrepreneurship educators who desire to further the interests of small business owners, as well as consultants, practitioners and educators can utilize a simple program to analyze the meaning of these landmark cases. It is then possible to transmit that understanding to the discipline by publishing research dedicated to the practice of advocacy for small business and all business.

Small business management experts and some scholars have recognized that familiarity with laws and regulations which have an impact upon business decisions is sometimes unrelated to decision making (Van Auken, Kauffmann and Herrmann 2009). In a remarkable study of owners' familiarity with Bankruptcy laws and their relation to capital acquisition, Van Auken et al recognized that although information is available, small firms may not have full access to the information nor perhaps do the consultants who advise them. Although the study was confined to Iowa businesses, the findings are likely to be applicable to multiple jurisdictions with similar state rules of bankruptcy exemptions, asset protection rules and states which are deed of trust states. Importantly, Van Auken et al conclude that "understanding bankruptcy laws is important to owners, consultants and policy makers." (p.35). It is significant that bankruptcy laws are exclusively federal in jurisdiction in spite of the fact that a wide variety of state customized rules on asset protection, homestead exemption amounts, etc. can lead to extreme disparity in application and results.

The data available in government repositories is a virtual goldmine for scholars who are attempting to ascertain the causes of small business success and failure and the effect of regulations on small business. …

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