Legal experts state that the rule of law as it relates to business is a necessary part of regulating the economy.
Why is business law important?
Laws serve an important purpose in dictating what behaviors and decisions can and cannot take place. Business laws refer to a section of code that explains what businesses can and cannot do.
There are federal business laws and individual state laws for businesses. Each state has their own set of regulations and rule of law for businesses. It is up to each business to understand what rules and regulations apply to them based on the states and countries in which they operate.
The purpose of business law
Having federal laws as well as state laws plays an important role in managing competition and antitrust. Federal laws, for example, regulate antitrust and maintain competition among different Industries, prohibiting businesses from creating a monopoly. This allows an opportunity for multiple businesses to thrive, even small businesses.
At the state level laws might impact regulations regarding employee rights, what the rules are for employees who work overtime, what the minimum wages are in that area, and how companies must create and maintain a safe workplace.
There are plenty of areas that overlap, where businesses have to adhere to federal and state laws such as environmental regulations. States and federal governments have regulations for pollution, monitoring things like pesticides, chemical usage, or water and air pollution. Violations of these rules can result in serious fines. Another area where there is overlap includes employee compensation. If the federal minimum wage is set at $12, but the state in which you operate has a state minimum wage of 15, you must pay employees $15 per hour. If you have employees in multiple states across multiple locations, some of those employees might work in an area where the federal minimum wage is higher than the state minimum wage in which case you must meet the federal minimum wage.
Violations of any of these laws can result in financial penalties or worse.
Business law not only applies to physical businesses but to online businesses. For online businesses, for example, business laws regulate how products and services are marketed, sold, and how taxes are handled. Business law protects the rights of businesses, what freedoms they have, helps maintain order, establish standards for handling business dealings with customers as well as other businesses and the government, and puts into effect rules for resolving disputes.
The importance of business law
Business laws regulate business practices.
- When a company is brand new, business law is the cornerstone for establishing a business. There are federal regulations that apply to things like trademarks, copyrights, and patents for a business. Beyond that there are permits and documents that must be filled out to properly register a business name and tax ID in the federal system as well as the states where the business plans to operate. Different states have requirements for the legal processes necessary for establishing different types of businesses, the different leases they need when renting an office space, and different permits for specific business activities.
- Tangentially, as businesses add partners, invest in different properties, or enter into negotiations of any kind, business law dictates the contracts, agreements, transactions, breaches of contracts, and penalties for violating agreements. For example, a business looking to lease a piece of land on which to drill for oil has to enter into an agreement with the property owner. A company looking to add new partners to the organization might have to change the original business agreement and add a new shareholder agreement that dictates what rights the new partners have compared to the original company owners.
- Once the company is established, and they start to take on employees, business law regulates this process. Business law explains compensation issues for individual businesses as it relates to their employees. There are state and federal laws that apply to compensation. Professional attorneys can help companies make sure they properly manage the salaries for their employees, provide a minimum wage that meets both federal and state requirements, and provides benefits dictated by business law. The rule of law for business also handles benefits such as medical benefits, vacation pay, sick days, and overtime.
- Business laws regulate technology, things like business domains and how companies have to store virtual data. Medical facilities for example have to adhere to HIPAA laws to protect the personal data for their customers just like banks using online functions have to protect the personal financial information for their customers.
- After companies become so large and profitable that they begin trading stock to shareholders, business law handles these matters as well. Business law also handles the protection of company shareholders. Shareholders have rights and experienced business attorneys can make sure companies handle conflicts with their shareholders, resolve any disputes with things like arbitration, and provide the right constitutional documents to protect the rights of shareholders when they invest in the company.
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How does the rule of law impact business and commerce
The rule of law as it pertains to business handles small and large business regulations. This naturally impacts business functions as well as commerce. Business law covers business ethics, how different members of the company have to behave, what activities are prohibited and what the punishment will be if those activities take place. Procedural law applies to the way court structures deal with business problems or business crimes.
What do business laws protect?
Business laws protect every aspect of a business from the employees, through the owners and shareholders. But business laws also protect customers, the land on which a business operates, and the government. Business law defines rules and regulations for conduct on real property like drilling rights for oil and gas companies.
Similarly, business laws that have to do with the structures of different businesses and business formation can protect the personal assets of a business owner in the event that their company goes under.
Business laws that regulate pollution protect the environment, while laws that regulate ethics protect everyone involved in the business and laws that relate to securities, finance, and taxes benefit the government.
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