Business Law Overview
Business law, as the name suggests, is a branch of law that deals with the rights and obligations of individuals related to business. It is designed to regulate the operation of business organizations, including corporations and other enterprises. Business law covers a range of issues, including contracts, agency relations, employment, environmental regulations, real and personal property, intellectual property, and sales and debt collection. Business law is not the same as commercial law and corporate law, although they have many components in common.
State law governs most of commercial law, although every state has enacted provisions based on UCC (Uniform Commercial Code), which is adopted (entirely or in substance) in every state except Louisiana.
It’s important that corporations, shareholders, shareholders, officers and directors understand business law, even if for no other reason than the fact that a company’s potential liability exposure primarily depends on how well they structure their relationships with employees, contractors, customers, suppliers, other companies and professionals to avoid and mitigate disputes .
Business law also provides the framework within which most companies must operate. For instance, business law governs the formation of a company, and essentially describes how a company should be organized, manage its assets and deal with shareholders. While LLC and Corporation requirements vary from state to state, the general principle of the business law is that shareholders are generally not liable for corporate debts, litigation or liabilities, unless specific exceptions apply.
Business law also regulates day-to-day activities of companies, such as how to avoid or limit liability, how to enter into contracts, how to collect on debt, how to issue stock or seek investors, and how to respond to any legal action. Business law even provides a framework for closings, financial transactions, mergers and acquisitions.
Contract Law
In the context of business operations, contract law plays a vital role in governing the formation and enforcement of agreements made between two or more parties. It delineates the legally binding aspects of these agreements, which are generally entered into as part of a business transaction. Essentially, business law consists of the rules, statutes and regulations that address the rights and obligations of entities (and in some cases, individuals) that engage in business activities.
The bulk of contract law is concerned with the elements that must be present for an agreement to be considered acceptable and legally enforceable. From the moment a deal is proposed to be made, parties are examining the offer for components that will eventually be used to form a valid contract. For example, when presented with an offer or a proposal of terms, there are key components that must be present for the contract to be enforceable under the law, such as:
If any of these elements are missing, then the contract could be invalidated unless they are found and remedied before an agreement is reached. However, if all elements are in place, then the agreement can be signed and enforced under the law.
Corporate Governance Law
Businesses are required to meet a variety of governance responsibilities as they build their capacity and continue their expansion. Corporate governance refers to the system of rules, practices and processes that regulate how a business is controlled and managed.
Depending on the size and structure of the business, its officers and directors may have a variety of legal obligations to their investors. For example, shareholders of a public corporation usually elect individuals to serve on a board of directors, creating a governing body.
All corporate officers and directors have a fiduciary duty of care in that they must act in good faith and in a manner that they believe to be in the best interest of investors or people to whom a duty is owed. Direct and indirect shareholders should be ensured that the board of directors is committed to performing these duties.
Good corporate governance can help increase the investor confidence and create a better climate for the company while also fostering accountability among the officers and directors. Corporate governance regulations generally require public companies to meet various disclosure requirements and comply with a variety of reporting provisions, underscoring the role that proper corporate governance can play in complying with all federal and local laws.
Employment Law
Employment law is another major aspect of business law. Central to the relationship between companies and workers are labor rights and safety regulations, which both serve to protect workers, government employees, and on occasion volunteers to ensure they’re not taken advantage of or suffering because of negligence from their employers. Workplace safety can cover everything from the air quality in the building to the condition all the equipment to the way breaks are scheduled and how fire escapes are maintained.
Many employment laws also provide for the rights of employees not to have their careers or livelihoods damaged by discrimination or harassment. Employment and anti-discrimination law covers the rights of employees to not be subjected to sexual harassment by supervisors, or subjected to racial discrimination, and ensures that companies have the required policies and procedures in place to ensure those rights are protected.
Though not directly part of employment law, the terms of nondisclosure agreements (NDAs) and other contract clauses can also overlap with employment law, providing employees or other contractors with some means of recourse if they feel as if their employers have violated their rights.
For example, if an NDA requires an employee to be terminated after a certain number of years, the company is obligated to pay that employee severance per the contract terms, or else the employee can file suit for breach or non-performance of contract.
Business law firms can handle both labor and employment matters.
Intellectual Property Law
The next crucial aspect of business law is intellectual property law. Intellectual property, somewhat like real property, refers to one’s property which can be protected from unauthorized use. Similarly to how a homeowner would have a gated home with a "no trespassing" sign, so would one’s intellectual property be protected, and it would be illegal for someone to meddle with or take ownership of your property.
Companies rely heavily on the legal property rights that the government provides through intellectual property law. Companies can protect things like their inventions and patents, identifiers’ for name and brand such as logos, and copyrighted things like books, art, and anything that would be considered an expression . For example, if your company invented a new kind of TV and wanted to release it to the world, an important factor would be having it patented so that other companies could not take credit for your invention. These exclusive rights are a vital business structure to a corporation; without it, any competitor could steal inventions, take away customers, and could have a significant impact on your business.
When you obtain these lawful rights and protections, you will have an advantage over those who do not have these intellectual property rights. You will have the exclusive ability to use your trademarks, patents, copyrights, and other aspects of your property without worrying about anyone else infringing on your lawful rights. It grants yourself access to monopolies and the ability to set your price because people will pay for an excellent invention.
Tax Law and Business
The intersection of taxation and business law is significant for all business entities in how they can conduct business and, ultimately, in what liabilities and obligations they have. The obligations imposed by the state and federal government in connection with tax compliance are very wide ranging in scope.
Both federal and state governments impose taxes on businesses and individuals, although the nature and amount of the taxes vary. These taxes include income (corporate and personal), real estate, personal property, sales and use, and payroll taxes, among others. Each state has its own code of laws establishing its tax download system and permitting its Department of Revenue to administer and enforce its various taxes. In addition, the federal government imposes various federal employment taxes and other federal income taxes. Many federal and state government organizations are established to administer and enforce the payment of taxes owed to the various government entities. Both the federal and state government establish complicated schedules and complicated reporting requirements for most taxes.
Business Dispute Resolution
Within business law, resolution of legal conflicts may arise from both contractual disputes and business torts. The options for resolving those disputes fall into categories of litigation, arbitration and mediation. In California, disputes can be resolved either through state or federal court systems, depending on the nature of the dispute. Arbitration is a private process, which can either be binding or non-binding and which involves one or more neutral third parties. Mediation is an informal process where parties agree to have a third party (often serving as the mediator) facilitate a private discussion of the issues between the parties. The mediator seeks to assist the parties with identifying the pertinent issues and crafting solutions that each party can accept. An advantage to mediation is that the process is confidential, so parties have more room to in which to negotiate and settle the matter. A disadvantage is that, unlike with some forms of arbitration, there is no guarantee that the matter will be settled.
International Business Law
International business law is among the most challenging and exciting of the major practice areas. The past several decades have seen a dramatic increase in the complexity of trade regulations, international trade agreements, and cross-border transactions. Today, the globalization of commerce poses many opportunities and challenges for corporations and governments. As businesses continue to expand internationally, IP infringement, antitrust regulations, bribery and corruption, and other international legal regulations have become of increasing concern.
A challenge for U.S. businesses is compliance with increasingly complex foreign and U.S. regulatory regimes. Regulatory gaps and contradictions between countries can make it hard to know where laws apply when multiple jurisdictions regulate the same product or transaction, sometimes even causing unreasonable liability or market failures. Problems arise in international businesses because of differences in regulatory systems, harmonization efforts , and cultural norms, as well as varying levels of economic development. The European Union’s (EU) efforts to establish a single market through harmonization and standardization of regulations is one example. Other European countries remain reluctant to adopt certain standardized approaches, as they do not see them in their interests.
International corporations face many legal concerns. Countries have differing laws on everything from labor and employment to environmental issues and pollution control. International trade agreements can effect sometimes major changes in the ease or cost of entry into sometimes lucrative markets. Where at one time it might have been possible to ignore foreign laws, today exporting and importing requires serious attention to U.S. law, the laws of the foreign country, and the relevant international laws that may need to be addressed. U.S. companies must consider not only the laws of the country where they are doing business, but also the rules that apply to get there.