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What Happens If Your Business Becomes Illegal?

By Daniel Taylor, Esq. | Last updated on

You have a great idea for a business. You may even have found a great location. Everything's going great until your local, state, or even federal government passes a law making your business illegal.

Although the last thing that small business owners need is something new to worry about, changes in the law can have an effect on your business. This is especially true in new or emerging areas of commerce, as those looking to capitalize on Washington State's new marijuana legalization laws are finding out the hard way.

So what can you do if your business becomes illegal?

Fight the New Law in Court

Tedd Wetherbee is a Washington business man who had rented out a location and was preparing to open a marijuana retail store pursuant to Washington's 2012 law making the sale of marijuana legal in the state.

However, the city council of Fife, Washington, the Tacoma suburb in which Wetherbee had planned to set up shop, changed the city's zoning laws to prohibit marijuana businesses within the city, essentially putting Wetherbee out of business before he even started.

Wetherbee's only option, other than shutting down or operating in defiance of the zoning ordinance was to take the city to court. Although the city's prohibition was upheld at the lower court level, the state's attorney general told The Seattle Times that the case would likely end up at the State Supreme Court.

Tweak Your Business Model

But what happens if you take your court challenge all the way to the U.S. Supreme Court and still lose? That was the problem faced by executive at Aereo, an online television-streaming service that the Supreme Court ruled was violating copyright laws.

In response to the court's ruling, Aereo decided to rebrand themselves as less of a rebroadcaster of television content -- which the Supreme Court said they couldn't do without a license -- and more of an online cable company offering a DVR service, which the Supreme Court specifically noted that it was not ruling on.

While these are just two of the options available, the best way to avoid problems regarding the legality of your business is to do your homework ahead of time. A business lawyer can help explain the laws in your state and help you avoid the costly and time-consuming process of going to court.

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