Difference Between Commercial Law and Business Law
The difference between commercial law and business law is that the former specifically governs how corporations are administered and managed.3 min read
The difference between commercial law and business law is that the former specifically governs how corporations are administered and managed, while the latter comprises different practice areas associated with business; such as employment, tax, contract, and transaction law. Commercial law can thus be considered a subset of business law. It covers the formation and administration of business entities including sole proprietorships, limited liability companies (LLCs), partnerships, and corporations.
How Firms Define These Terms
Despite the definition above, many law firms have practice areas for both corporate and commercial law. How these terms are used often varies firm by firm. Corporate law is often dedicated to mergers, acquisitions, and other transactions that affect the life cycle of a business. Commercial law provides a legal structure in which business is conducted and governs a wide range of areas, including but not limited to:
Commercial law and business law often overlap in certain areas. For example, both involve various aspects of contracts.
Looking at each legal category separately may help you understand the distinctions. Some of the areas covered by corporate law include management duties, shareholder rights, corporate operations, and other guidelines that are primarily associated with corporations. In U.S. law, corporations are considered a legal business entity separate from their owners. A corporation can file a lawsuit, enter a contract, or be used. Shareholders are the owners of a corporation.
If a corporation has excess profit, management and directors can decide whether to distribute these funds to shareholders as a dividend. Owners and shareholders have the right to dividends and can sue a corporation if the funds are not distributed as promised. This is one issue that may arise in corporate law. Capital increases and liquidation also fall under corporate law as do shareholder agreements, types of shares, investor agreements, and the taxation and distribution of corporate assets.
Business law details the ways in which all workers are affected by employment law, including aspects of employment such as hiring and firing and maintaining a fairly managed and safe workplace. Businesses that do not follow these regulations can be sued.
Tax law is also an important part of business law. This discipline includes the advantages and obligations associated with different types of business entities.
Product defects and delivery delays are also covered by business law. Most guidelines in this area govern interactions between a business and a third party such as a customer, vendor, or supplier. This includes terms and conditions, reselling, and licensing. Intangible items are also covered by business law.
When considering the difference between business and corporate law, think of business as an activity and a corporation as the entity itself. This can help you figure out the area into which a specific issue should fall.
Business laws are set by both state and federal governments. The latter controls safety and security in the workplace as well as stock purchase guidelines. States then make additional laws as needed. Corporate law is created and administered by the Uniform Commercial Unit (UCU), which controls the sale and purchase of goods in the U.S. Most states use this document as a guide for their own laws, although most areas are substantially modified.
Corporate law tends to be more concerned with goods and services in the market. Many legal issues stem from elements of corporate law. Business laws have a broader legal influence and are more commonly used.
Banking and finance law are closely related to corporate and business law and cover activities such as payment instruments and credit. For most financial issues, both banking and finance play a role. These laws determine who gets money when a check bounces and in other situations where one party must be reimbursed for losses.
Finance law comprises regulations for the financial industry and its lenders, banks, and institutes. These laws govern financial transactions and vehicles. For example, they ensure that you are able to collect collateral if you provide a loan that is defaulted upon by the borrower. Mortgages and securities agreements are covered under finance law.
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