[비즈한국] Companies sometimes make decisions that are difficult to explain by money alone. Understanding the laws and systems hidden beneath the surface allows for a deeper insight into the circumstances. "Useful Business Tips (Useful Business Laws)" introduces clues to help understand the flow of business.
According to the media, the economy is currently in a recession. The state of the economy varies by sector. In my opinion, the sectors suffering the most are manufacturing and distribution, which have historically created the most jobs in Korea.
Upon reflection, this is not surprising. The domestic manufacturing industry is in a difficult situation, considering that even capital-intensive industries like shipbuilding and semiconductors face fierce competition, and costs such as raw materials, labor, and rent are rising sharply.
As seen in the vacant new commercial buildings, the retail leasing market continues to face pessimistic outlooks. With offline retail giants losing their presence and the distribution market restructuring toward online platforms (logistics centers) and consumers, traditional offline retail is struggling just as much.
In such a situation, people like me wouldn't dare start a new business. If I had extra funds, I would invest in trending stocks, real estate, or coins. However, looking around, there are people who boldly start businesses despite these difficult conditions. Seeing these entrepreneurs, I feel a sense of respect, as they seem to embody entrepreneurship while appearing reckless at the same time.
In this article, I would like to examine the roles and dispute cases of relevant personnel I have personally witnessed while assisting entrepreneurs from a legal perspective. While this is generally based on traditional manufacturing and distribution businesses, there will be cases that startups in other fields can also find useful.
When starting a new business, you need the following people. First, an investor to provide capital. While the required funding varies greatly depending on the size of the business, an investor could be a financial institution, or it could be an acquaintance or relative. If you are borrowing from a financial institution or a public financial corporation, it is already a large-scale business. If it doesn't reach that level, entrepreneurs often receive investments from individuals, which is where disputes frequently arise. For example, if an investor changes their mind and demands the return of the investment, but the entrepreneur refuses on the grounds that "investment is not a loan," the investor may sue for fraud.
Second, you need an expert who can plan and develop products or services. To sustain a business, products and services must be consistently planned or developed, and since experts are often focused on one field and may lack broader perspective, they need someone to assist them.
Experts who plan and develop new products or services are usually deeply immersed in their specific field, making it easy to overlook other elements necessary for business operations. There is a saying that "a restaurant opened by a famous chef with external investment rarely lasts long." This is because the chef develops the menu without considering the cost structure, so the more successful the sales, the more the deficits accumulate.
Third is the manager to run the business. No matter how excellent the product or service, if you cannot operate the company stably, you cannot maintain the business. To cut unnecessary expenses, one must have a sense for finance and accounting, and to respond to increasingly strict personnel and labor regulations, experience and knowledge in these areas are also required.
For example, a company can be completely dismantled just by a sexual harassment issue, known as "Me Too." In the case of small and medium-sized enterprises (SMEs), where a team might consist of one manager and five to six members, if a Me Too issue leads to reports to the Ministry of Employment and Labor, criminal complaints, or civil lawsuits, the company cannot function. The person who establishes company discipline and internal procedures and actively resolves such problems is the manager.
In particular, if a product or service requires permits and licenses, experience and networks for administrative tasks are necessary. This is why some SMEs recruit retirees from government agencies or large corporations as managers.
Fourth is the sales representative. Even if an entrepreneur develops an outstanding product or service, from an objective third-party perspective, the product or service is often not much different from what is already on the market, or is merely a slight improvement.
Therefore, the success or failure of a business can be seen as dependent on the results of sales activities. This varies wildly depending on the content, size, and nature of the business; ranging from the trivial task of handing out flyers, to getting listed on online shopping malls or responding to customer complaints. When walking through department store aisles, you have likely experienced purchasing a product inadvertently due to a salesperson's recommendation. While this occurs often with low-cost food or daily necessities, sales recommendations also play an important role in boosting revenue for luxury goods stores.
As such, sales activity is a crucial task for creating company revenue. However, because it requires special passion and experience to sustain, it is sometimes outsourced. Examples include franchise companies attracting franchisees or multi-level marketing companies recruiting sales organizations. Even if sales are outsourced, employees or executives responsible for managing those franchisees or sales organizations are essential.
I frequently meet with sales executives and staff in cases involving violations of the Agency Act, the Franchise Business Act, and the Door-to-Door Sales Act, or issues related to unfair trade practices. Sales staff often take pride in the fact that they generate the company's revenue. As a result, they may view regulations under the Fair Trade Act as unreasonable, or there may be cases where other departments in the company are unable to control the sales department. This leads to the common saying, "When sales are strong, the legal department is weak."
Investors, developers, managers, and sales representatives are all people with special passion and abilities necessary for business. They boldly jump into business even during a recession, produce results, and create jobs with their own money. While I offer them "nagging" disguised as advice, telling them they are "overlooking legal issues," I always respect the roles they play.