Legal Factors Affecting a Business

Legal Factors Affecting a Business
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  • 0:00 Overview of Laws…
  • 0:32 Types of Business Laws
  • 3:15 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Businesses are subject to many laws that can dictate and restrict their behavior. In this lesson, you will learn about some of these laws. You'll also have a chance to take a short quiz after the lesson.

Overview of Laws Affecting Businesses

Laws attempt to create fairness and predictability. U.S. businesses are subject to our country's laws and legal system. Additionally, if you do business overseas, you will also be subject to the laws of each foreign country where you conduct business, as well as international laws and treaties regarding such things as trade and tariffs.

In this lesson, we're going to focus on some U.S. domestic laws and regulations to which most private non-publicly traded businesses are subject.

Types of Business Laws

The first type of business law that we'll discuss is organizational law. If your business is organized as a legal entity, it will be subject to the state law which governs the operation and conduct of that type of entity. Legal business entities include corporations, partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships, and limited liability companies.

Businesses that seek to obtain financing through investors may be subject to securities law. For example, if you decide to offer promissory notes (a special type of loan) to investors, the offering will often be considered the offering of a security and will subject you and your business to state and federal securities laws and regulations.

Businesses that employ people are subject to employment law, which comprises a myriad of state and federal laws, including anti-discrimination laws, occupational health and safety laws that are meant to protect the health and well-being of employees, workers compensation laws that compensate workers injured on the job, wage and hour laws, and other labor laws regarding unions.

If you intend to enter into any agreement with another person or entity, you'll be subject to contract law. There is also a special area of law that deals directly with government contracts, often referred to as government procurement law.

Commercial laws relate to the sales of goods. This field also addresses special types of commercial instruments, like promissory notes and other forms of commercial paper, such as a check, and laws relating to certain banking transactions. The primary law governing commercial law is found in the Uniform Commercial Code as adopted by each state.

Businesses also need to ensure that they comply with immigration laws, including confirming the right of employees to work in the United States.

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