Business Law

About Business Law

As a rule of thumb, any law that affects how a business is run in America can be considered part of business law in the US.

This area of the law draws on a variety of legal disciplines, including, amongst others: tax law, intellectual property, real estate, sales, employment law & bankruptcy. Many business law attorneys specialize in transactional work, meaning they do not represent clients in court. In fact, business lawyers are oftentimes hired for the purpose of avoiding future litigation.

The role of business law is best understood by viewing businesses as separate from their owners and employees. Businesses are subject to legal rules designed to give every participant in the marketplace a fair opportunity to succeed.

Key topics that form the core of U.S. business law are as follows.

Business Organizations

Business associations are the laws that regulate the formation, functioning and demise of a business. The key focus in business organizations is with publicly held companies, including the requirements of formation, the role and duty of directors and company officers, and the power of shareholders.

Business organizations also include the laws surrounding partnerships, limited liability corporations, and closely held companies.

Corporations

A corporation is a legal entity created through the laws of its state of incorporation. Individual states have the power to enact laws relating to the creation, organization and dissolution of corporations.

Many states follow the Model Business Corporation Act. Thus, state corporation laws require articles of incorporation to document the corporation’s creation and to provide provisions regarding the management of internal affairs. Most state corporation statutes also operate under the assumption that each corporation will adopt bylaws to define the rights and obligations of officers, persons and groups within its structure.

There has also been a significant component of Federal corporations law since Congress passed the Securities Act, which regulates how corporate securities are issued and sold.

The law treats a corporation as a legal “person” that has standing to sue and be sued, separate from its stockholders. The legal independence of a corporation prevents shareholders from being personally liable for any corporate debts. It also allows stockholders to sue the corporation through a derivative suit and makes ownership in the company easily transferable. The legal “person” status of corporations gives the business perpetual life; deaths of officials or stockholders do not alter the corporation’s structure.

Corporations are taxable entities that fall under a different scheme from individuals. Although corporations have a “double tax” problem. Both corporate profits and shareholder dividends are taxed, corporate profits tend to be taxed at a lower rate than the rates for individuals.

Corporate Finance

Corporate finance deals with the fundamental principle of what a company and its stock worth. The law outlines what financial tools are used to determine value, the duties that directors have to ensure value and the legal rights that various parties, including shareholders, have in regard to securities and dividend payments.

Intellectual Property Law

Often, a company’s main source of revenue is the result of a product or process that it exclusively designed or manufactured on its own. Intellectual property law regulates how a company can protect itself from the theft or unauthorized use of its creations. Key areas include copyright, trademark and patent law.

Securities Regulation

Securities regulation focuses on how stocks or securities are issued and managed. Specifically, the Securities Act of 1933, which details, among other points, what a company must do in preparation to offer stocks (initial public offering), and the Securities and Exchange Act of 1934, which created the Securities and Exchange Commission and regulates what companies report and how they manage their stocks after the initial public offering.

Tax Law

Tax law deals with all the rules, regulations and requirements as set forth in the US federal Internal Revenue Code as well as specific state tax codes. Without a deep understanding of tax laws, a business may find itself in violation of the law, whether underpaying corporate income tax or unable to take advantage of a benefit allowed in the law such as the “pass through tax” of an S-corporation.

What Do Business / Corporate Lawyers Do?

The role of a business / corporate lawyer is to advise clients of their rights, responsibilities, and duties under US Federal & State law.
When a corporate lawyer is hired by a corporation, the lawyer is representing the corporate entity, not its shareholders or employees or management.

Corporate lawyers tend not to go to court. Rather most of the work they do is considered “transactional” in nature. That means they spend most of their time helping a corporation to avoid litigation.

Specifically, corporate lawyers spend their time on the following:

• Contracts Reviewing, drafting, and negotiating legally-binding agreements on behalf of the corporation, which could involve everything from lease agreements to acquisitions.
• Corporate Governance Helping their clients create the framework for how a corporation is directed and controlled, such as by drafting articles of incorporation, creating bylaws, advising corporate directors and officers on their rights and responsibilities, and other policies used to manage the company.
• Mergers & Acquisitions Conducting due diligence, negotiating, drafting, and generally overseeing “deals” that involve a corporation “merging” with another company or purchasing another company.
• Securities Advising on securities law compliance, which involves the complex regulations aimed at preventing fraud, insider training, and market manipulation, as well as promoting transparency within publicly-traded companies.
• Venture Capital Helping startup or existing corporations find capital to build or expand the business, which can involve either private or public financing.