Business Law Definition: Everything You Need to Know
Business law is the collection of legal requirements around forming, operating, dissolving, and engaging with a business.3 min read
2. What Is a Law?
3. Business Law and Legal Definition
Business law is the collection of legal requirements around forming, operating, dissolving, and engaging with a business.
What Is a Business?
"Business" refers to everything that can employ an individual. A business can occupy the labor, attention, and time of a person, for the purpose of earning a profit or livelihood. Engaging in a single act that relates to a specific business isn't considered to be carrying on or engaging in the business, but a series of acts would be considered as engaging in the business.
Work, business, and labor aren't synonyms of one another. Although labor can be business, engaging in business isn't always labor. For example, if you made an agreement to purchase a good on a Sunday, but this is prohibited in the vendor's business laws, you would be breaking the law.
What Is a Law?
A law is a recognized and enforced principle or causal link that, if violated, results in a penalty, such as injury, pain, failure, or loss. Laws are binding rules that relate to the conduct of individuals and businesses and are designed to prescribe obligation or duty and enforce justice. A law is largely derived from formal or custom enactment by someone in power within the area, such as a legislature or a ruler. Laws carry authority and power of the enactor, and anyone who violates them is subject to penalties.
Laws get their legitimacy from being based on principles that are universally accepted, such as the sovereign power of whoever is enacting them or the justness of each law. Laws describe direct links between the cause and effect of phenomena, often deduced from observations or experiments.
Some examples of the term “law” include:
- Business owners must follow all regulations and laws to avoid fines.
- Vacationers and visitors to other countries should understand and respect local laws.
- Although John wasn't a lawyer, he knew that the tenant was violating a law and called the police.
Business Law and Legal Definition
Business law, which is also referred to as mercantile or commercial law, is the group of rules that governs the dealings between individuals or companies involved in commercial matters. These laws can be enacted by:
- International or national legislation
This branch of law relates to the liabilities, duties, and legal rights of individuals or businesses involved in transactions that relate to merchandising, sales, commerce, and trade. Business law includes private and public laws as part of civil laws.
Business law may govern legal aspects such as:
- Insurance (accident, life, marine, or fire)
- Relationship between principal and agent
- Indemnity and guarantee
- Carriage by land or sea
This branch of law also encompasses laws concerning employment and agency, contracts, property, sales, business organizations, commercial paper, and bailments. You might encounter business laws when dealing with creditor and consumer protection, insurance, or will and estate planning. Other examples include managing, starting, buying, or selling a business, managing contractors, and working with employees.
The two main areas of business law are:
- Regulation of bankruptcy, partnership, agency, and company laws for commercial entities
- Regulation of contract laws for commercial transactions
In countries with civil laws, the company laws include statute laws. In countries with common laws, company laws combine statute and equity laws. The two main legal concepts under business law are the theory of limited liability and the idea of legal personality.
Legal business entities come in all shapes and forms. A sole proprietor singlehandedly bears the responsibilities and risks of operating a business, but they can also take all of the business profits. This type of business owner wouldn't be held to the same laws that apply to a multi-national corporation or LLC.
When a business is formed as a partnership, the members form an association, allowing them to participate equally in profit-sharing and management. Partners in this type of business formation are also liable for all business debts and legal action in relation to any contracts or other agreements. The owners of a business might choose to appoint an agent, who is an individual who brings their expertise to contractual relationships between businesses and any third parties with which the company interacts.
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