What is Business Law?
Business law is a field of law that regulates how people start and operate businesses. This very broad field of law includes or intersects with many subfields, such as employment law, commercial and corporate law, contract law, property law, tax law, banking law, and environmental law.
While many business owners sometimes feel that they are constricted or limited by the wide variety of laws they must abide by in operating their business, these laws exist for good reasons. Business law protects businesses, as well as their customers, clients, suppliers, and creditors, from problems or outcomes they might be negatively affected by. For instance, in addition to laws that regulate how businesses can operate, there are also laws that protect business from being harmed if they’re affected by illegal acts carried out by competitors, suppliers, employees, or customers.
In general, business law has many roles and objectives, including:
- Regulating the rights and obligations of people and business organisations when they conduct business transactions, in order to ensure all parties are treated fairly;
- Regulating transactions between businesses and their suppliers;
- Ensuring that businesses treat their employees fairly and without discrimination, and that employees are able to work in a healthy and safe environment;
- Providing protections for a business’s investors, creditors, and consumers;
- Protecting people from harm caused by defective products or services;
- Ensuring that businesses in competing markets compete fairly;
- Minimising environmental harm caused by business and industrial operations.
Essentially, business law provides guidelines and protections for businesses and the people who interact with them in all sorts of ways. These guidelines and protections ensure that everyone involved in the interaction is treated fairly, and that the risk of harm, whether financial or otherwise, to any party is minimised or eliminated.
Processes Involved in Business Law
As the field of business law is a very broad one, the range of processes and procedures associated with business law is similarly extensive. Some examples of processes that involve business law include:
- Starting a sole tradership, partnership, or limited company;
- Negotiating contracts for sale and purchase of businesses or business assets;
- Obtaining a loan or investor financing;
- Resolving disputes with suppliers or customers via arbitration or litigation, and resolving disputes with employees via disciplinary or grievance procedures;
- Restructuring a business entity, for instance a sole trader becomes a partnership or limited company;
- Listing a private company on the stock exchange;
- Registration of a trade mark, design, or patent.
Registering and running a business
The steps you need to take to start a new business depends largely on the type of business you’re starting, and whether you plan to hire employees to work with you.
Sole traders: the simplest way to set up a business is to register as a sole trader, which requires registering for Self Assessment and Class 2 National Insurance. Once the business is up and running a sole trader must keep records of their business’s income and expenses, pay income tax on profits, and complete a Self Assessment tax return every year.
Partnerships: a partnership must be registered with HM Revenue and Customs, and must designate a nominated partner—someone who is responsible for keeping the partnership’s business records, and completing and filing tax returns.
There are additional requirements depending on whether the partnership is set up as a limited or a limited liability partnership.
Private limited companies: this requires a process called incorporation, which requires that the company is registered with Companies House. This involves appointing one or more company directors and a company secretary, and creating a memorandum and articles of association, which are the written rules of the business.
Most types of business entities have multiple options for obtaining financing, although for a sole trader, partnership, or small business it’s typically easiest to take out a bank loan or overdraft for day-to-day cash flow or long-term financing solutions.
Other options include equity investment, where capital is raised by selling shares in the business, or by working with an angel investor, who provides a loan in exchange for equity or debt which is later converted to equity. Some small and medium businesses may also have the option of obtaining government-funded grants or loans. A private company may raise funds by restructuring to become a public company and list on the stock exchange. A public listed company has the option to raise funds by selling additional company shares.
Most businesses have to deal with disputes with its suppliers, customers, employees, or creditors from time to time. Depending on the nature of the dispute and who it’s with, the process for resolving it involves different procedures. When the dispute is with an employee, the process follows the Advisory, Conciliation and Arbitration Service (ACAS) code of practice.
In most other cases, dispute resolution involves mediation or arbitration, or litigation as a last resort option. For businesses, arbitration is typically the most desirable option, as it results in a legally binding decision, but the details of the case remain private.
How can a Solicitor Help?
With few exceptions, everyone who owns a business will need the advice and assistance of a law firm or solicitor at some point. Even sole traders and those who are otherwise self-employed may need to take legal advice at times.
Because the field of business law is a vast one that encompasses many different legal subfields, larger companies often work with or hire solicitors who specialise in one or more areas of business law, and might therefore work with multiple solicitors on special projects or during day-to-day operations.
Some examples of tasks that solicitors can do in business law include:
- Help new businesses get started by assisting with form completion and registration and drafting business documents.
- Providing legal advice on aspects of business law to sole traders, partners, and other business owners.
- Drafting business documents such as letters, contracts, and disclaimers.
- Helping businesses ensure they comply with relevant legislation and regulations.
- Helping businesses negotiate contract terms and draft legally binding contracts that incorporate the terms.
- Performing due diligence in contract work and other situations where a business enters into an agreement with another party.
- Representing a business or providing advice and assistance for the purposes of dispute resolution, such as in mediation, arbitration, or litigation.