A

Report on
“The Relevance of Business Law in Business"
3rd Tri-Semester
1st Year, MBA
(2019-2021)
Vishesh Dwivedi – (M1918)

Under the guidance of

Prof. (Dr.) Manoj Kumar Padhy
(BANARAS HINDU UNIVERSITY VARANASI)

Department of Management Studies

Rajiv Gandhi Institute of Petroleum Technology Amethi,
Uttar Pradesh
 Table of contents

Page number
1. Introduction…………………………………………………………… 3
2. Types and Forms of Business……………….………………………… 4
3. Definition and sources of Business laws……………………………… 6
4. Business laws in India and its importance...…………………………...7
5. Business Law & The Different Types………………………………… 8
6. The Importance of Business Law…………………………………….. 11
7. Purposes and Functions of Business Law……………………………. 13
8. Conclusion...…………………………………………………………...15

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 INTRODUCTION
In the current world business are playing an important role in every aspect of life. Standard of
living, one’s life style are determine by business, also education and even cultural standard
(Cheesemen, 2004). So to lead a better life we need to understand business and study business.
Coping with both predictable and unpredictable events can be easier, more efficient, and less
traumatic if we understand business. Study of business will help us to understand that today,
national economies are no more independent entities rather dependent and taking an uneven
global shape. Economic depression in U.S.A. has an impact on the whole world, business and
global warming are not different issues, war in Iraq or Afghanistan has some kind of link with
business, China becoming a factor in the world economy because of excellent business skill and
the system known as “Free Enterprise”. However the road to success will be easier for those who
understand how business works.

Business is a crucial part of life, there should be some kind of rules and regulations to control
and operate it in a disciplined way (Cheesemen, 2004). In order to do so, business laws have
been introduced. And in the present world business firms must operate within the boundaries of
laws and government regulation. Laws have been developed not only to protect consumers but
also to preserve competition. Government agencies enforce these laws at different administrative
levels. Business firms that do not comply with the laws face fines, penalties and in consequences
fail to run. So, knowing business laws are very important to operate a business.

DEFINITION OF BUSINESS:
Business is nothing new in human society. Ancient Business is a part of our social life in
different forms (Judge 1999). Presence of business proves that we are dependent on each other
and with the passes of time this dependency is increasing. At the early stage people engaged in
exchange of goods without using money which was called trade. Over the years many things
have changed, money has been introduced as medium of exchange and through lots of forms
businesses are now in the present forms. Today business means exchange of goods, services or
money for mutual benefit or profit.

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 Types and Forms of Business
A business entity is an organization that uses economic resources to provide goods or services to
customers in exchange for money or other goods and services.
Business organizations come in different types and in different forms of ownership.

Types of Business
There are three major types of businesses:

1. Service Business:
A service type of business provides intangible products (products with no physical form).
Service type firms offer professional skills, expertise, advice, and other similar products.
Examples of service businesses are: salons, repair shops, schools, banks, accounting firms, and
law firms.

2. Merchandising Business
This type of business buys products at wholesale price and sells the same at retail price. They are
known as "buy and sell" businesses. They make profit by selling the products at prices higher
than their purchase costs.
A merchandising business sells a product without changing its form. Examples are: grocery
stores, convenience stores, distributors, and other resellers.

3. Manufacturing Business
Unlike a merchandising business, a manufacturing business buys products with the intention of
using them as materials in making a new product. Thus, there is a transformation of the products
purchased.
A manufacturing business combines raw materials, labor, and overhead costs in its production
process. The manufactured goods will then be sold to customers.

Hybrid Business
Hybrid businesses are companies that may be classified in more than one type of business. A
restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a cold
bottle of wine (merchandising), and fills customer orders (service).
Forms of Business Organization
These are the basic forms of business ownership:

1. Sole Proprietorship
A sole proprietorship is a business owned by only one person. It is easy to set-up and is the least
costly among all forms of ownership. The owner faces unlimited liability; meaning, the creditors
of the business may go after the personal assets of the owner if the business cannot pay them.
The sole proprietorship form is usually adopted by small business entities.

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2. Partnership
A partnership is a business owned by two or more persons who contribute resources into the
entity. The partners divide the profits of the business among themselves.
In general partnerships, all partners have unlimited liability. In limited partnerships, creditors
cannot go after the personal assets of the limited partners.

3. Corporation
A corporation is a business organization that has a separate legal personality from its owners.
Ownership in a stock corporation is represented by shares of stock.
The owners (stockholders) enjoy limited liability but have limited involvement in the company's
operations. The board of directors, an elected group from the stockholders, controls the activities
of the corporation.

In addition to those basic forms of business ownership, these are some other types of
organizations that are common today:

Limited Liability Company

Limited liability companies (LLCs) are hybrid forms of business that have characteristics of both
a corporation and a partnership. An LLC is not incorporated; hence, it is not considered a
corporation. But, the owners enjoy limited liability like in a corporation. An LLC may elect to be
taxed as a sole proprietorship, a partnership, or a corporation.

Cooperative
A cooperative is a business organization owned by a group of individuals and is operated for
their mutual benefit. The persons making up the group are called members. Cooperatives may be
incorporated or unincorporated.

Some examples of cooperatives are: water and electricity (utility) cooperatives, cooperative
banking, credit unions, and housing cooperatives.

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 Sources and Definition of Business Law
Law is a structure of rules, typically prescribed through a set of institutions. Politics, Economics
and Society are shaped by it in numerous ways and aids as a primary social mediator of relations
among people. In other words law can be defined as
“A standard or rule established by the society to oversee the behavior of its members”.

SOURCES OF BUSINESS LAW

Laws are basically derived from three major sources:

Common Law:
Is known when a law is created through the court decisions by judges. It’s mostly based on
tradition, usage and court rulings of early England (Bushman 2007).

Statutory Law:
A law created by parliament, constitution, law commission or agreement is called statue. Most
laws created today are statues. A statutory law is made up by various legislative endorsed bodies.
For a law to be constitutional it must be drawn up in a specific way. However, courts often must
interpret a law’s meaning (Miller 2000). Statues getting changes is sometimes due to the decision
by the court.

Administrative Law:
Laws concerned with the powers and functions of the executive branch of the government, its
organizations, their interrelations with each other, citizens and the non-governmental entities.
The intention of administrative law is to provide a legal framework for regulating the powers,
procedures and acts of public administration.

DEFINITION OF BUSINESS LAW

Business Law is the body of law that governs business and commercial transactions (Bushman
2007). In today’s complicated business world in order to operate and control a Business Laws are
a must. So, this part of law deals with businesses to keep businesses running in a disciplined way
as all the parties related to businesses get protection as well as feel responsible in their respective
positions, is known as business law.

Business law, also known as mercantile law or commercial law refers to a set of laws that govern
the dealings regarding commercial matters, namely business organizations. It encompasses all
laws that guide on how to set up a business and then how to run it. This includes all the laws that
govern on how to set up, start, manage, run, close or sell a business. It includes contracts, laws of
corporations, other business organizations, commercial papers, income tax, secured transactions,
intellectual properties, and other transactions and dealings related to the business.

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 Business Law in India
Business law and commercial law are the two laws that deal with the business and commercial
transactions. It encompasses the formation of business management, commerce and consumer
transaction. The commercial law consists of debtor Law, creditor law, sales and secured
transaction. It also has the regulations and rules for the land cargo, sea cargo, merchant shipping,
marine and accident insurance. There are various laws, which describe how the commerce
should be taken care with the compliance, privacy laws, safety laws, foods and drugs law.
Negotiable instruments and Secured transaction are the two most important areas of commercial
and business law. In secured transaction, borrower agrees on the collateral, which is owned by
the borrower will be taken by lender. If in any business, party borrows money from the bank or
from any other financial institution. In this case, the lender needs more than just promise to repay
the loan amount. Hence, the law of collateral interests formed between borrower and lender.

Importance of Business Law Regulations in India

Business law refers to the laws which are applied to business entities such as partnerships and
corporations. These are used as reference when putting up businesses whether big or small - from
sole proprietorship to corporation. Business laws specify how different business can be set up,
how taxes apply to them, registrations, documentations and requirements; define different terms
pertaining to business, making by-laws, and articles of organization among many others.

These also provide the authoritarian schemes on how commerce should be conducted. Every
country has its own regulations, laws and regulatory bodies or agencies governing the
manufacturing, sales, marketing and distribution of products within the country. Laws and
regulations are intentionally made for human beings and other institutions as a guide to bring
order and sanity into the society. Because of this, it is likely that their application will impact
upon the plans of firms; their effects on a given firm are also inevitable.

An attempt would be made to confer specified regulations and laws with particular reference to
aviation and airline, environmental regulations, stock market regulations, banking regulations,
research (and development) co-operation regulations, stock options regulations, labour
regulations, intellectual property and social security regulations industry by industry and effects
on the plans of firms where necessary.

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 Business Law & The Different Types
Business law is the law that governs what happens with commercial matters, and there are two
main types: regulation of commercial entities and regulation of commercial transactions. Laws
have evolved over centuries, and have had to adapt to changes in technology and society.

Types of Business Law

Here are some of the most common types of business law:

Employment Law

Especially in today’s modern workplace, it is vital for any company with even one employee to
stay abreast of current employment laws. Are you required to offer health insurance or workers’
comp insurance? Has your business discriminated against an employee, or stood by while one
employee committed sexual harassment against another? There are many areas where your
company could face major financial liability, not to mention the potential loss of reputation when
treating employees unfairly.

Immigration Law
There are more and more occasions where immigration law becomes an issue in modern
businesses. Temporary employees, full-time employees, and special event workers may be from
other countries. You need to know if you are following the law when dealing with foreign labor.

Consumer Goods Sales

The Uniform Commercial Code contains the laws governing financial transactions in the United
States. The Code deals with everything from contracts to fraud to leases to secure transactions.
Ambitious in its aim to consolidate the laws in one place, the Code is actually quite complex.
Lawyers spend a lot of time learning about how to apply the UCC to actual business practice and
can give businesses advice on how to stay compliant with the laws while staying productive.

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Contract Drafting/Negotiations/Litigation
Whether for a property lease or for a product sale, contracts help make sure that the parties who
are making a deal are on the same page. Attorneys can help make sure your best interests are
represented when your business enters into a contract.

Antitrust
Antitrust laws help make sure the different businesses in a marketplace are operating on a level
playing field. Some companies use unfair or deceptive practices in order to get a larger share of
the market, and it may be difficult to identify unfair behavior in your own company. A business
lawyer can help you make sure that your business is operating ethically while helping protect
you from unfair actions by other companies.

Intellectual Property
Businesses may need to patent unique products in order to protect that work in the marketplace.
Otherwise, anyone could sell a product your company worked hard to make. Copyright laws will
protect creative work, and you will need to file for protection if your business is identified by a
unique logo

`Taxes

Businesses may have to pay and/or figure several kinds of tax:

1. Income taxes for the profits of the company, which may be paid as personal income taxes
for sole proprietorships or single-person LLCs or through a partnership business tax
return. Partners earning profit from a business must report that income personally, too.
2. Sales tax on services and/or products. Every state has different rules and there may be
further complications when sales across state lines. If your business has a state income
tax, you will probably be required to set up a system to collect, report, and pay the taxes
you collect on a regular basis.
3. Property tax on any real estate owned by your business. You may end up paying capital
gains tax if you sell a business-owned property.

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 4. Self-employment taxes, so that business owners will still pay into Social Security and
Medicare. Normally employers take those taxes out of their employees’ paychecks.
5. Employment or payroll taxes, including FICA taxes for Social Security and Medicare and
workers’ compensation taxes.
6. Dividend taxes on corporate shareholders. This is a kind of income tax based on the
profits received from the business.
7. Excise taxes on certain products your business uses, like fuel.

Bankruptcy
Sometimes businesses are forced into a bad situation because of circumstances beyond their
control. There are several kinds of options, with different requirements and filings. Business
lawyers can help find the best solution to what seems an impossible problem and will have
experience with the advantages and disadvantages of each option.

Contracts
Unless you have some experience with legal terminology, you may not understand all the
complicated terms in a contract. Sometimes parties will try to take advantage of you by inserting
clauses which are against your best interest or even changing the terms of the contract. Your
attorney will make sure your rights and interests are protected.

Lawsuits
Many businesses don’t think to get an attorney involved until there is a lawsuit, but having an
attorney assist with how your business operates can help you avoid many lawsuits. Sometimes a
lawsuit is inevitable, and your attorney will work to mitigate the damage to your business. You
may want to negotiate a settlement or go to trial and deny liability entirely, and your attorney
will help you get through the complicated process of trial litigation.

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 How is Business Law important?
For both business owners and people who work in the field of business law, it’s important to
understand all sides of the project you’re working on. Sure, business owners might have a full
understanding of the way digital marketing works, but if they can’t understand the legal practices
at work that revolve around the company they’re trying to build, they only know half the store.

The importance of business law extends beyond the people that practice it—it’s incredibly
important for business owners, new and old, to understand the fine details of business law, and
how it will affect their company, as well as the people they intend to employ.

The Importance of Business Law: The Basics

For starters, let’s review what business law is. Business law serves as a way to maintain order
among businesses, brands, and companies alike. They protect the rights of the company, and of
the people who work there, as well as help to establish a certain standard for how things should
be run. It’s important that businesses have their own field of law to protect them for a multitude
of reasons. For starters, these laws dictate and define what’s acceptable, and what’s not in a place
of work. Additionally, they provide a sense of stability that helps businesses maintain that
scheduled order, as well as giving them protection to easily settle any disputes that might occur.

The importance of business law stretches beyond what people might assume, which involves the
livelihood of the employees that work for the business. A business, as a whole, can come under
heat in tough times—people can sue businesses for wrong doings, businesses can commit crimes
that put them on the chopping block, and businesses can move and sell the property if they wish
to relocate.

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Anyone of these circumstances calls for protection, aid, and help from the field of business law,
and it’s important that the business owner in charge of the company is well aware of what they
are, and are not, allowed to do.

The Importance of Business Law: What Business Owners Should Know

It’s safe to assume that lawyers who have studied and practiced in this field for a very long time
have a deep understanding of what they do. Therefore, when looking to start a business,
entrepreneurs should be willingly reaching out to learn what they can, or build upon the
knowledge they might already have. First-time business owners might not know the complete
in’s and out’s of business law, and that’s all right. Not everyone knows everything they need on
the first try. In fact, most people are still learning to this day—operating a business is something
that takes time, energy, and a lot of trial and error when it comes down to the nitty-gritty.
For starters, the importance of business law hinges on what you’ll be protected from, how your
business will also maintain a sense of independence and stability, and how you can provide that
protection for the people who will be working alongside you. You need to understand what rights
your business has against other businesses and individuals as well.

There are commonplace terms that businesses owners often talk about without maybe
recognizing how it’s tied to business law. For example, standards are set in every workplace
surrounding things like sexual harassment, or discrimination. It’s illegal to make others feel
uncomfortable in the workplace or to discriminate against hiring any single person due to a
variety of personal things. These are business laws, and they’ve been put in place to protect the
rights of everyday people that want to make a living.

The Importance of Business Law: Study, Prepare, and Take Action

Having even the most basic of knowledge when it comes to the importance of business law can
drastically improve your life as a business owner, as well as your own company. Knowing what
you’re allowed to do, how your business can defend itself against any legal issues that may come
your way, and what your employees are entitled to be part of the process of becoming a business
owner.
When it comes down to it, the importance of business law provides you with a bevy of
information that you’ll certainly need in the long run. Businesses, large or small, all fall under
the same rule set. For first-time business owners, long-standing businesses owners, and self-
starters who maintain their services as a business in and of itself should be aware of the basics
revolving around business law. It will help your business thrive, it will make you a better
business owner, and it will give you a leg up on people who don’t know their stuff as well as
they should. Learn as much as you can, and apply it to your business to see the results.

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 Purposes and Functions of Business Law
The purposes and functions of business law include maintaining order, protecting rights and
liberties, establishing standards, and resolving disputes when it comes to businesses and their
interactions with individuals, government agencies, and other businesses.

Functions of Business Law

Businesses large and small must comply with the same legal regulations. Often, this involves the
expertise of a specialist who can help entrepreneurs succeed in an area such as law or finance.
Some of the largest legal areas necessary in business include the following:
• Legal basics such as ethics, court system structure, substantive law, and procedural law
are foundational.
• Contract law includes drafting, rights assignment, work delegation, transactions,
agreements, breach of contract, and remedies for a breach. The Uniform Commercial
Code (UCC) is part of contract law governing sales.
• Intellectual property law (IP), including trademarks and patents, prevents others from
profiting from your ideas and creations.
• Corporate law governs the formation of corporations and sale of corporate equities.
• Tax law determines how different types of businesses are taxed.
• Antitrust and competition are also included.
• Employment law governs how employers interact with their employees and the rights and
responsibilities of each, minimum wage law, workplace safety, and overtime rules.
• Environmental law strives to mitigate the impact businesses have on the environment by
limiting water and air pollution, regulating pesticide and chemical use, and establishing
penalties for violating these laws.
• Business organization laws define major business entities, such as partnerships, limited
liability companies, sole proprietorships, and corporation.
• Property law governs personal and real property.
• Negotiable instruments law includes governance of secured transactions and bankruptcy.
• Computer law analyzes and governs the impact of computer technology on other areas
of business law.

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Purpose of Business Law
The prime purpose of business law is to maintain order, resolve disputes, establish generally
accepted standards, protect rights and liberties when it comes to business and its relation to other
businesses, government authorities, and the customers.

A Universal set of standards: Earlier, the customer had to suffer a lot due to the absence of a
proper law that could safeguard their interests and money invested in a particular business. As
there was no such law regarding maintenance of order, rights, and liabilities, etc., the business
owners made their own standards and made the customers suffer just because of the greed to
make more money. With the establishment of business law, many standards have been
established which have to be followed by businesses worldwide.
Maintenance of Equilibrium: This creates a sense of satisfaction among customers. In the
absence of the law, different countries had different laws regarding the business dealings which
made it difficult for the customers as well as the seller to establish a deal. But now every country
has the same standards, and the deal between buyer and seller is easily established. This brings
ease in business dealings and transactions all across the globe.

Less chances of frauds: Business law helps the owners itself to get aware of the laws against
other businesses and individuals. It also helps the individuals, to be aware of the rights against
the businesses so that they can use them in case they fall prey to the frauds and misery of the
business.

Presence of Ethical conduct: With the help of business law, business owners may make better
decisions, and also know when to seek legal help. Every business has to maintain an ethical
conduct but most businesses, in the greed to earn more profits; do not follow such conducts.
Business law makes it mandatory for all the businesses to maintain an ethical conduct which in
turn pleases the buyers and they form a good image of the business.

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 CONCLUSION
Laws are affecting business in numerous ways. Laws protect the business men as well as the
customers which is essential to have a good relation between these two parties otherwise
business firms will not run. Laws are necessary to incorporate a business firm, to run a business
firm and to dissolve it.
We don’t realize the importance of law in business. But with all the factors that come with
business, come some legal factors that managers must be aware of.
Here are some tips for business managers, about a wide range of topics including contracts,
indemnity, bankers and banking and arbitration.

1. Business managers must have a good understanding of the fundamental principles of

contracts, both general and special, and try to appreciate their application in different
jurisdictions. At times, it has been observed that realistic application is very well guided
by the norms and practices evolved over decades and centuries and the theoretical
reading simply may not be very helpful.
2. Managers have to be extra cautious while dealing with contracts of special nature as they
may have certain peculiar features, very different from general contracts. For instance,
there is only one-sided consideration in a gratuitous bailment, whereas the bailee is
responsible for a safe keeping and taking reasonable care of goods handed over.
3. Business managers need to be realistic in borrowing and using borrowed money. Lavish,
unnecessary expenditure doesn’t help. It sounds clichéd and old-fashioned, but it is the
bitter truth that mostly leads to a financial crunch.
4. Bank officials should consider decision-making as an objective task, with information
applicability making subjectivity minimal.
5. Getting subject matter experts as arbitrators are one of the most important characteristics
of arbitration as a dispute resolution method.

The business law plays a very vital role in the growth and development of any form of business.
Its effect on business dictates the future and current survival of commercial affairs. Although it
has been realized that the legal systems have been the root cause of all sorts of business problems
experienced in the commercial industry, the fact remains that if reforms are made on governing
business laws then positive growth and expansion will be realized. Most societal problems such
as poor living standards due to low income are as a result of legal systems that have been
manipulated hence, making it difficult enough to gear forward on business affairs. The problems
discussed above will be minimized if only the possible suggested solutions will be implemented
and adhered to without other negative interventions.

In a nutshell, business law is of immense importance to both the business as well as

consumers in protecting their rights and gets a better service.

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