Business law, also known as commercial law, is the generic term for the body of laws that govern entities and commercial transactions. For instance, if you wanted to start a shoe company today, business law would dictate how to organize and register your company, as well as how to pay your employees and even how to legally ship your shoe merchandise to customers overseas.
As you can tell from the above example, business law applies to many different aspects of a business. In addition, business laws will vary based on the type of business (e.g., private vs. public, for-profit vs. not-for-profit, etc.), its structure (e.g., corporation vs. general partnership), and by jurisdiction.
Some specific examples of business law include:
- The Sherman Antitrust Act of 1890: Most antitrust laws originated from this Act. Antitrust law helps to regulate the organization and conduct of businesses, to ensure fair competition, and to protect consumers from oppressive business practices. The Sherman Act in particular is used to prevent monopolies and to restrict business activities that affect interstate commerce, which in turn, could hurt consumers.
- The Lanham Act: The Lanham Act, also known as the Trademark Act of 1946, is a federal law that regulates trademarks, service marks, and unfair competition. Thus, if you created a trademark for your shoe company, you could register your unique trademark and receive certain legal protections under this Act.
- The Securities Act of 1933: This Act requires that businesses provide investors with specific financial information before they invest in a company. This Act also applies when a company wants to go public (i.e., initial public offering (“IPO”)).
- The Federal Tax Code: Although this also falls under standard tax law, not only business law, the federal tax code is just as important for your business. The Federal Tax Code will cover everything from how to tax your employees to how to file federal income taxes for your business.
- The Fair Labor Standards Act (“FLSA”): The FLSA sets the standards for employee wages and overtime pay. It applies to the majority of both public and private businesses. Thus, if your shoe company has nonexempt employees, then you will need to pay them at least the federal minimum wage and one-and-one-half times their normal rate of pay for overtime under this Act.
What are the Different Types of Business Law?
As discussed above, there are many types of business law that touch upon various aspects of a business. For example, if a business needs to figure out how to pay its employees, provide employee work benefits, or arrange employee work schedules, these tasks would all fall under the specific area of business law known as employment law.
Now, if a business owner was just starting out and needed to register and set-up their business, this would involve business laws like state statutes regarding business formation and structures, state tax laws, and the Federal Tax Code. Both federal and state laws will also apply if at this time, the business owner decides to register intellectual property, such as copyrights or trademarks of the business.
A major portion of business law deals with commercial and contract law. Commercial and contract laws govern everything from business deals to sales transactions to employee non-disclosure agreements. Due to the variety of aspects that contract laws regulate in business, this is the most important area of business law.
Whether a company wants to merge with another business, is forming an agreement with a certain distributor to sell their products, or is providing a service to its customers, contract law will regulate each one of these scenarios.
Why Does Business Formation Matter?
One of the first decisions that a business owner needs to make when forming their company is to determine what type of business structure they want to use when registering their business. They may choose from a number of different business formations, such as a corporation, a limited liability company (“LLC”), or a general partnership.
The business structure that the business owner selects can have a significant impact on the future of their company. This is because the way a business is formed will dictate things like the amount of funds they can receive from investors, how many people can sit on a board, who will be held responsible for liabilities or debts incurred by the business, and most importantly, how the business will be taxed.
Certain business formations also provide rules regarding how a company must operate. For example, in a limited partnership, there must be at least one partner serving as a general partner to the entire partnership (i.e., the person who manages the business) as well as one limited partner to exist as a valid limited partnership.
What are Common Business Law Areas?
Business law is comprised of federal, state, and local regulations. Beneath the large umbrella of business law, there are various specialized categories that pertain to businesses. Some common examples of different areas of business law that may apply to individual and entities include:
- Business formation and dissolution;
- Commercial law and contracts;
- Investing and securities law;
- Intellectual property law;
- Antitrust and white collar;
- Corporate law;
- Employment law;
- International business; and
- Tax law.
Within each of these categories are even smaller categories. Given the intricacies of such laws, it is important to consult a local business lawyer for further advice or concerns.
What are Common Disputes Implicating Business Law?
There are countless ways that a dispute can arise in the course of running a business. However, some business disputes tend to be more common than others. For example, business partners may argue over how to manage a business. When business partners get into a dispute, something as simple as what color product to sell can end up becoming a lawsuit.
Another common dispute that arises when doing business is when a third-party supplier and a business have a disagreement over goods that were shipped or the price of those goods. These types of disputes are typically governed by commercial or contract law. This means that the parties can usually just refer to their contract to settle a conflict.
Businesses can also be in dispute with their customers. A customer may claim that their items arrived damaged, and may cite to the business’s guarantees or warranties to obtain a refund.
While many businesses in this scenario will usually send the customer a new item to resolve the issue, a customer may decide to take a business to court. Thus, some customer issues can be solved by reading a business’s return policy, others can get a bit more complicated.
For example, if a customer purchases an item that has an express or implied warranty and the business breaches this warranty, the customer may bring a lawsuit against the business for sending them a defective product. In this instance, both commercial law and state products liability laws would apply.
Finally, a business may also get into a dispute over their intellectual property (e.g., copyrights, patents, trademarks, etc.). One common issue that arises is the stealing of trade secrets. If another company steals or an internal employee gives away a trade secret (e.g., a secret recipe or formula that belongs to the business), the business may sue that party for damages. This type of business dispute deals with both contract and intellectual property law.
Should I Consult a Business Lawyer for Questions about Business Law?
As is evident from the above discussion, business law and related business disputes can become fairly complicated. There are many different areas of business law and not every business question will come with a straight-forward answer. Although it may not be necessary to hire a lawyer in every situation, there are certain times when it may be in your best interest to speak to a local business lawyer for further guidance.
For instance, you should consider retaining a lawyer for advice on the best way to structure your new business and for information on how to protect your intellectual property rights. You should also hire a lawyer if you are dissolving your company or are being sued by another party and need to appear in court.
An experienced business lawyer will be able to offer you advice for any of the above scenarios. Your lawyer can also help you navigate the procedures and requirements for starting or dissolving a company. In addition, if your business is being sued or you need to file a lawsuit, your lawyer can assist you with this process and provide representation in court.
Finally, if you have questions about filing business taxes or selling a business, business lawyers are usually connected to a wide network of business contacts, such as accountants, real estate agents, and of course, other successful businesses.