What Is the Function of Law in Business?
Entrepreneurs are often experts in specific industries, but certain business decisions may require expertise in areas outside a business's core market, such as finance and law. Small businesses must comply with the same rules and regulations that apply to large companies and thus need someone with legal expertise from time to time. Business laws establish guidelines for what companies can and cannot do, as well as certain things they must do. Law is a broad discipline with several fields that serve important functions in business.
Just like individuals, businesses are responsible for paying taxes on income that they earn, and tax law determines how businesses pay taxes to the government. The Internal Revenue Service lets business owners choose from one of several business structures that that affect taxation. Common business types include single owner operations called sole proprietorships and multi-owner businesses called partnerships and corporations, which are businesses owned by a group of stock shareholders. Owners of sole proprietorships and partnerships report business earnings on individual income tax returns, while corporations are considered tax entities that are separate from the owners.
Antitrust law is a field designed to promote business competition by curbing anti-competitive behavior such as price fixing and monopolization. Competition is considered healthy for an economy because it tends to lead to better products and services and fairer prices. The government can potentially prevent companies from merging or force companies to split into different divisions to promote competition.
Intellectual property describes creations of the mind, like art, literature, inventions and company logos. Intellectual property law grants legal protection to the creators of various types of intellectual property, which gives creators the right to profit from their work and take legal action agonist anyone who copies their work without permission. Intellectual property protections let businesses prevent competitors from stealing and using their ideas -- a protection that gives businesses the incentive to innovate.
While many small businesses start out as solo operations, successful business owners often hire employees as a business grows. Employment laws govern how employers and employees interact. They require certain businesses to pay employees a minimum wage and to pay workers at a rate of one and a half times their normal pay for overtime work. The government also sets various workplace safety rules to ensure that businesses provide safe working conditions.
Environmental laws establish rules that seek to limit the negative impact businesses can have on the environment. For example, laws force businesses to use certain practices to limit air and water pollution, and the government can penalize companies that don't follow environmental guidelines. Some laws require companies to obtain permits to engage in activities that release pollution into the environment. Environmental law also regulates the use of chemicals and pesticides.