Define: Business Law

Business law is an area of expression that varies in importance to societal practices and reflects the idea of buying and selling. It governs contractual agreements among employers, employees, suppliers and customers. Business law is also studied for its relation with systems theory, as legal methods are used in managing the firm’s relationship with society. Business law is so pervasive that every type of business organization, even those relying on contracts for the sale of goods, must follow some basic rules of business law.

Business law must be studied because the work of businesses that sell goods or services to the public is regulated by this area of law. The term “business” is not restricted to just commercial enterprises. Nonprofit organizations and religious institutions that raise money through the collection of donations, market goods and services, or sell goods to third parties are also subject to business law. The laws that regulate a business’s operation are considered part of the body of business law, even if there is no direct relationship between a nonprofit organization and the public, private or government persons with whom it contracts. These rules may even apply to nonprofit organizations.

What Is Business Law?

As a general term, business law encompasses the body of rules that govern how businesses operate. Business laws address such things as how a company can be formed, what kind of officers and directors it can have and what they may or may not do, as well as rights and obligations among shareholders, directors, officers and employees. Business law is an essential area of law to understand because it governs the decisions made by firms. It explains why firms get involved in contracts with other firms, with employees and customers.

Business law also relates to tax laws. This is because firms make profits by selling goods and services. When a business makes profits, it must pay taxes on its profit. Firms must pay taxes in order to provide services and to bring in income for their owners, such as dividends and interest on investments. Because government agencies regulate businesses, they are responsible for providing required permits, licenses and certifications so that firms can conduct their businesses properly.

What Are the Different Types of Business Law?

Business laws address the relationships among owners, employees, directors and shareholders. Given that these relationships have not always been clearly defined with specific rules, many of the laws have evolved over time and are continuously being interpreted through court cases. While business laws tend to be state-specific or industry-specific, there are some broad categories of business law that apply to most types of industries or companies.

Corporate Laws – Corporate law applies to any firm that is set up as a corporation. In the United States, corporations are considered “legal persons” with distinct rights and responsibilities. Corporate laws usually govern the formation of corporations, their structure and ownership, share issues and dividends, along with other financial matters.

Securities Laws – Securities laws are used in regulating the trading of corporate stocks. In the U.S., these laws have been established through the passage of federal legislation with amendments to the Securities Act of 1933. These laws are used to protect investors from fraudulent stock deals and violations of the law.

Sales and Contracts Laws – Sales and contracts law covers all kinds of sales that are made between firms or individuals. These laws also apply to agreements among businesses, such as employment contracts, supply contracts, transportation contracts and others. Contracts such as these provide the criteria for how a firm must operate. They also address services performed by a firm in return for money from another party, such as labor or parts supplied to another firm.

Why Does Business Formation Matter?

Forming a business is an important and complex decision that the potential owner must make. A company must have a proper structure in order to conduct its business. All corporations, whether for-profit or nonprofit, need to be chartered by the state in which they are located. There are also legal requirements for how a corporation’s shares must be purchased or issued, along with other business activities such as opening bank accounts and paying taxes.

For-profit corporations must also follow laws that prohibit illegal discrimination in job hiring practices and sales of goods, services or housing. In addition to hiring and employment laws, discrimination is also prohibited in the areas of credit and lending. Businesses are prohibited from denying credit to customers based on age, gender, ethnicity or religion.

Conclusion

Business law is a fascinating area of law because it governs the processes of running a business. It is also essential for all businesses, for-profit and nonprofit. Business lawyers do not only regulate the relationship of a business with society but also with its owners and employees. Business law is also important because it affects the relationship between companies and their customers. It requires firms to follow set standards of business practices, disclosure and clarity in how they conduct business with their clients.