In any civilized society, the law is one of the most significant pillars. Business is an integral part of every society and the importance of business law is undeniably certain. In truth, a country’s civilization is based on its laws. In every part of life, the law sets limits for each one of us. Every day, it springs into action for us, from getting out of bed to going back to sleep at night.
Many of our actions are governed by law, whether they are personal, financial, political, social, religious, or economic in nature. As we all know, the law protects everyone’s rights and assigns responsibilities to everyone in society, but today we’ll focus on one area where the law has a considerable impact, namely commercial activities.
What is Business?
Before we get into the legal side of things, it’s necessary to understand what the business is all about. “A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities.”
According to the dictionary. ” A business is an organization or entity that sells goods or services for a profit.” A business, in simple terms, is an activity that is carried out with the purpose of making a profit, but the activity must be lawful. As a result, the law is a crucial aspect of any business.
Article: What is Business Activity?
What is Law?
Black’s Law Dictionary says that law is “a body of rules of action or conduct prescribed by controlling authority and having binding legal force. That which must be obeyed and followed by citizens subject to sanctions or legal consequence is a law.”
What is Business Law?
We understand commercial law, also known as business law or corporate law, as the body of legislation that governs the rights, relationships, and conduct of individuals and organizations engaged in commerce, merchandising trading, and selling. Any country’s whole economic or commercial system is governed by laws.
People want to manage their own businesses, but they are not free to do so without abiding by certain laws, rules, and regulations established by the country’s legislative system. When we join into a commercial enterprise with another, the law of the land protects the rights of both parties while defining the obligations that both parties must fulfill.
For example, the law determines the minimum age at which we can enter into a contract (a legally binding agreement), as well as how we can cancel/revoke the contract and change it as needed. The age at which we can form a commercial partnership is also determined by law, and it varies depending on the demands and conditions of each country.
The law also safeguards the rights of a genuine buyer. According to the demands and conditions of the time and place, each state has its own set of laws, rules, regulations, and general principles controlling commercial activities.
Why is Business Law Importance
Why is law important in business? Well! every business is intended to make profits and enhance wealth. This profit maximization, however, must not come at the expense of the legitimate interests of stakeholders associated with or dealing with the business, firm, or organization. The interests of customers, buyers, employees, sellers, organizations, governments, and service providers, among others, are protected by business laws, often known as commercial laws.
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We must survive in society with our heads held high, and that is why business activities are carried out by most of us. However, any business that follows rules and regulations becomes more disciplined, structured, systematic, and most often remains a going concern. The rights and responsibilities of all the parties involved in the business process are defined by business law. The following are some of the most important classifications of business laws.
Contract law requires firms to create a legally binding contract when they offer jobs, deliver services, or procure services, among other things. The contract must incorporate relevant and advantageous terms and conditions for both parties. Contract laws also spell out the consequences of breaking a contract.
The purpose of employment laws is to protect the rights of workers and employees. Working hours, duties, employment tenure, safety, and working conditions, among other things, may be covered by legislative regulations. It is critical to protect the rights of employees in any business organization so that they are not exploited in the pursuit of wealth maximization.
These regulations impose obligations on firms toward their employees, such as minimum salary rates, maternity or paternity leaves, insurance coverage, retirement benefits, etc. In addition, such laws establish statutory procedures in the context of labor disputes and labor unions. Furthermore, the acts allow for a compromise agreement to be reached.
Government is always a key shareholder in any business, no matter how small or huge it is. To generate tax revenue, the government enforces tax regulations on business enterprises. To ensure that the actual picture of the financial affairs of any business venture can be discovered, a company must maintain a certain amount of documentation, transaction records, and accounting reports. Governments frequently impose tax regulations on companies through the legislative process.
Corporate laws are enacted to guarantee that organizations’ governance and management are transparent. These rules describe the responsibilities of company directors, protect shareholders’ interests, and reinforce the accountability mechanism in executive positions.
Corporate governance regulations require directors to carry out fiduciary duties by exercising their powers without allowing extraneous pressures to influence their decisions.
The rules establish governance mechanisms for all types of companies, including public, private, and limited liability companies. They also outline the procedures for forming, merging, and dissolving a company. The main documents that any corporation must submit in order to establish and begin operations legally are the Memorandum of Association (MOA) and Articles of Association (AOA).
The role of law in the operation of businesses is critical. There is no proper foundation for any business setup or an agreement without the application of relevant laws in letter and spirit. Such rules are often beneficial to both business firms and customers (clients), as they safeguard the rights of both parties involved in the transaction or delivery of service.
Furthermore, following the law allows a company to avoid legal consequences and save money on account of legal costs. To achieve the goals of profit maximization and wealth creation, any business must focus on reducing costs. Therefore, laws assist businesses in achieving their goals.
What are your thoughts about the importance of business law and how do you ensure compliance with legal requirements as an entreprenuer or a compliance manager? Do share your views and experiences in the comment section below for the benefit of our readers.