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Why study Business Law? Is it limited only to aspiring lawyers? But wait, what is business law, and what are its essential functions anyway?
You have these questions in mind. And you’re searching for the answers to help you decide your next steps in education. If you’re feeling unsure of the direction you want to take, you’re not alone.
Our Law summer school students feel the same. That’s why they sign up. Because they want 1:1 personalised tutorials with expert law tutors to help them decide their future goals.
In addition, we’ve gathered the essential functions of Business Law. And why you would want to study it. Ready to have more clarity on your next steps? Read on!
What is Business Law (a.k.a. Commercial Law?)
Business Law governs business organisations and commercial transactions between persons. What are two major areas of Business Law?
- Regulation of Business Organisations
- Regulation of Business Transactions
Business Law, in a few words, oversees business operations. Learn more about the different types of law.
Why is Business Law Important? 9 Essential Functions
Business Law is important to protect the liberties and rights of business organisations and business transactions. The goal is simple: make business as easy as possible for the benefit of the suppliers and consumers.
Without proper business codes, rules, and regulations in place, it would be dangerous to run businesses. Or buy from them. Because fraud, theft, and dishonest transactions would be rampant.
Here are 9 essential functions of Business Law:
1. Legally establishes business entities (e.g. permits, leasing)
Establishing a business involves several legal processes.
The first step is usually registration. The owner must register their business name for permission to sell her products and/or services. Why is it important to register the business name?
Mainly to protect the consumer from harmful products and services. And to ensure that the business organisation pays taxes.
Is there a need for an office space on which to conduct operations? Then the owner needs to rent an office space if they don’t own one. Regulations are in place to ensure their agreement with the landowner is abiding.
Otherwise, the landowner can raise prices unfairly to the tenant’s detriment. On equal measure, if the tenant trashes the place, they will have to pay penalties to protect the landowner’s interests.
Are you beginning to see how Business Law strives to protect each stakeholder?
2. Defines business entities, sole proprietorships, partnerships, corporations, and liability companies.
What type of business structure does the owner envision building?
A sole proprietorship has one owner who operates under their name. They pay a personal income tax based on the profit they earn from their business. Typical here are consultants, self-contractors, and solo freelancers.
A partnership is a business structure where two or more individuals come together to run a business and share profits and liabilities.
One common type of partnership is the Limited Liability Partnership (LLP.) Who often uses this type of setup? Lawyers, architects and accountants. Here, liability is limited. So when one partner gets sued, the other partners’ assets remain safe.
A corporation is a separate legal entity. For instance, say Anne, James, and Frank come together to form a corporation, and they call it “AJF Corporation.” Legally speaking, AJF Corporation is a legal “person.”
That is, they have the same rights as individuals. As such, AJF Corporation can
- Borrow money
- Enter contracts
- Pay taxes
- Hire employees
What happens if AJF Corporation gets sued? Only AJF suffers the blow. But the personal assets of Anne, James, and Frank remain safe.
This is yet another instance of “limited liability.” But instead of “Limited Liability Partnership,” we have “Limited Liability Corporation (LLC).”
Both LLP and LLCs enjoy the benefits of limited liability. But they have unique rights and tax benefits. Hence why, if you’re an entrepreneur, you know it’s common for business owners to weigh whether they want to be an LLP or LLC.
Famous corporations include
- and Apple
Where a Business Lawyer Comes In
If you’re aspiring to become a lawyer then know that every business owner has their respective personal and career goals. The question is, what business structure will help them best achieve said goals?
Whatever business structure one chooses, each has its rules and tax systems. The rules are set in place to protect owners/shareholders, investors, and consumers.
This is where a business lawyer comes in. A business lawyer advises clients on what type of business structure will serve them best according to their circumstances. And what responsibilities they will have in running the business.
One standard policy to safeguard shareholders is “Shareholder Protection.” This right allows business owners to buy back shares from a recently deceased or terminally ill co-shareholder.
This way, surviving business owners can continue business operations with minimal disruptions.
There are already existing articles dictating shareholder rights. But business owners need to modify said articles according to the corporation’s values and objectives.
4. Ensures business owners compensate their employees justly (e.g. employee rights and benefits, workplace safety)
Business Law also encompasses employee rights and protection. To ensure that they receive
- Just Compensation
- and Protection in return for their service.
5. Establishes the ground rules for Business Ethics
Business Law and Business Ethics are closely intertwined. You can call Business Ethics the “soul” of Business Law. Though businesses won’t incur legal penalties when they fail to follow Business Ethics, it remains an essential standard for smooth business operations.
So what are Business Ethics? It’s the moral principles that guide how a business ought to behave in its interaction with
- and Other businesses
The quality of a company’s Business Ethics plays a huge role in fostering customer loyalty.
Hence, Business Law is grounded on Business Ethics. When businesses follow the laws, they also comply with ethical basics.
6. Checks business compliance with applicable tax laws
Business Laws ensure that business entities comply with applicable tax laws. When companies pay their taxes, it benefits the whole of society. Which, in turn, helps the businesses it holds.
Taxes are used to
- Cultivate economic growth and development
- Fund social programs
- Provide education and health infrastructure
- Finance public investments
When businesses prosper and follow Business Laws, society benefits!
7. Protects consumers by enforcing business transparency
How does Business Law protect consumers from dishonest business practices? One way is through the Consumer Protection Laws, which safeguard consumers from
- Harmful goods and services
- False advertisements
- Defective products
- Deceptive business practices
Do you know it’s because of the Consumer Protection Laws that you get nutrition facts and ingredients when you buy food and drink products?
Business Law plays a vital role in creating a reliable and stable market economy by providing consumer protection. Where honest sellers abound, and consumers are unafraid to purchase or invest.
8. Alleviates environmental impact of business production and transaction
Environment Protection Laws related to business have been one of the fastest growing in the UK. These ensure that every business, whether from the chemical or agricultural sector, meets requirements to ensure environmental safety.
The three major risks environmental regulations watch out for are
- Waste management
What happens when two businesses disagree over agreement terms? This is the question Business Law aims to answer when settling disputes. Do you now that business disputes are almost an unavoidable part of running a business?
The goal is to settle disputes as speedily as possible to save time and money.
Without proper business laws in place, two businesses can bicker over a disagreement without ever attaining a fair resolution. Thereby disrupting the business operations of both, inconveniencing everyone involved.
Why Study Business Law?
You now have a better idea of the functions of Business Law. Without it, businesses could not reach the heights of efficiency you witness today. And yet there is still much to do.
Interested in studying Business Law? We highly encourage you to do so if you want to accomplish any of the following:
- Be an entrepreneur and launch your own business
- Pursue a career as a Business Lawyer
- Widen your career opportunities, especially if you want to take business-related careers
By studying Business Law, you’re better equipped to accomplish any of the above with confidence.
There you have it! You’ve learned more about the essential functions of Business Law and why you would want to study it. Need an individualised tutor to help you out further? Check out our Law summer school!