When people run their businesses they expect that different external factors can affect their business. Legal factors may also influence business and affect how a company operates. There are various legal factors that affect businesses, including laws and regulations on taxation, employment, contract, securities, immigration and more. The law affects the way businesses operate and customers behave. That is why any business should have a clear understanding of the legal environment in which it has to function because these factors may determine its success or failure.
Here are the most important laws that affect businesses.
Organizational Law
Perhaps one of the most fundamental legal factors affecting businesses is the organizational law. The type of entity the business has chosen before registration will determine the whole scope of its activities. For example, a business may decide to register as a corporation, limited partnership, limited liability partnership or a limited liability company. Its legal status will determine not only the types of activities but taxation, customs, and employee relations.
Employment Law
Let’s take employment law. This law operates differently in different countries, for example, when it comes to the minimum wage. A business in the USA needs much more financial resources to pay its employees than a business in South Africa. Moreover, rules in the USA are stricter when it comes to discrimination or dismissal.
Consumer laws
Consumer laws are another good example. These laws are designed to regulate legal relationships between consumers and businesses, and protect consumers from fraudulent behavior. As part of this right, companies are required to provide detailed information on the products they produce. Some of the laws affecting businesses are the Weight and Measure Act, Trade Description Act, Consumer Credit Act, and the Sale of Goods Act.
Securities Law
Securities law is a group of laws that regulate the issuance of securities. Security is a financial instrument designed to raise money for business from investors. In other words, securities law regulates investments in a business. Securities law manages what a company should do in order to offer their investment to the public. As you can see, this law also can affect your business. For instance, if you decide to offer promissory notes, this will be subject to state and federal regulations and security laws.
Health and Safety at the Workplace
Laws regarding health and safety in the workplace are very controversial. When something like noise pollution may pose tremendous fines on business in one country, it may not be so critical in another country. Similarly, states differ in safety regulations in the workplace. For instance, in the workplace, employees should receive clothing and equipment that meet the highest safety standards. For a business, this means financial resources and administrative costs.
Taxation
Whether a business will flourish, or putting it another way, whether a business will exist or not, depends on the tax regulations in a state. For instance, some states are more tax-friendly than others. Wyoming, for example, has no corporate or individual income tax. Montana has no sales tax. Florida has no individual income tax. In a nutshell, what profits a business will make, how consumers will behave are largely determined by the legal factors. Since these factors are external to businesses, they are several times more important than internal business regulations that may be adjusted at the will of the business owner.
