It is undeniable that business and the law are very much related to one another. Governments create codes and statutes to control nearly every area of commerce both within their country and internationally. Thus, the way in which companies and the individuals within them conduct themselves is very much affected by legality. Some of the most important subcategories of this relationship are detailed below.
The entangled relationship starts right from the beginning. In most areas of the world, the type of organization one legally decides to create has many implications. One of which, of course, is liability. Owners who form sole proprietorships, for instance, find themselves liable for all their organization’s debts, even if it means creditors going after their personal bank accounts and property.
In contrast, more advanced organizations such as corporations don’t need to worry about this. Their owners undergo a laborious legal process to create a separate being out of the organization. This way, they are not responsible personally for debts that the company might take on.
The second important arena in which legal and commercial realms collide is taxation. Companies pay taxes in nearly every country in the world, even though the rates they pay can differ considerably. Regardless of these differences, companies create entire divisions that deal with taxation. Often, their job is to determine methods of avoiding taxes. Some corporations, for instance, might move their official home to another country with low tax rates.
In a similar vein, financial markets are subject to legal regulation in most areas of the world. Investors must be wary of the information they obtain about their investments, and must also abide by domestic taxation codes. In the most economically advanced countries, entire government agencies are devoted to financial market regulation. It is because they are so powerful on individual wealth, and are so sensitive to manipulation and panic.
Thinking in a more theoretical way, an issue that often arises in law and commerce is ethics. Many loopholes exist in legal codes, and that the temptation to take advantage of them is always there. As a result, it is necessary for commercial leaders and participants to model their behavior after what they know laws intend.
It is pretty clear that business and the law intersect heavily and often. For as long as economies exist, organizations and rules must keep an eye over them to ensure that consumers are protected.