What Is Business Law and How Does It Affect Companies?

By Dr. James Barney  |  09/16/2024

Modern companies operate in a complex legal landscape that requires compliance with various laws.

Constantly, there are stories in the news about what can happen if a business participates in unlawful actions. The past two decades have featured a laundry list of business scandals from the Enron accounting scandal in 2001 to the FTX cryptocurrency exchange collapse in 2023, illustrating how non-compliance with laws and ethics can have serious consequences.

By contrast, there are many businesses that have embraced ethical and sustainable business practices. Patagonia®, an outdoor lifestyle brand, is an example of how embracing an ethical business model may be good for a company’s bottom line.

Business law is a broad and robust field. It explores the various limitations placed on businesses and how businesses, large and small, must comply with ethical and legal obligations to guarantee longevity and long-term profitability.

Business Law in Simple Terms

Business law has relevance for anyone; it is an extremely broad body of law that addresses how companies conduct business, interact with each other, and deal with their employees. The aim of business law is to make sure that companies act in a manner that is not only lawful but also fair and ethical, while trying to make a profit. It also prevents organizations from acting in a manner that would violate the rights of employees, harm the public, or commit a wide range of unethical or unlawful actions.

What Are Foundational Business Law Courses?

Students who are interested in obtaining a better understanding of the legal areas that businesses confront should have a firm understanding of economics, marketing, and management. Also, taking a basic course in business law will provide students with some legal knowledge about the complex legal landscape in which businesses operate, both in the United States and around the world.

Typically, a business law curriculum includes many different subjects and sub-fields of law. Here is a partial list of some of the courses related to business law that a student may take in college or law school:

• Property law
• Employment law
• Securities regulation and law
• Administrative law
• Contract law
• Tax law
• Tort law
• Intellectual property law
• Environmental law
• Corporate law
• International trade
• Business organizations
• Real estate law and landlord/tenant law
• Commercial law, involving sales, payments, and secured transactions
• Dispute resolution law

Business law is strongly influenced by ethics, a subject that explores questions regarding “right” and “wrong” behavior. I recommend that students interested in obtaining a strong foundation in business law take a course focused on the ethical issues impacting businesses. For example, a business ethics course will often discuss issues related to fairness and provide students with a survey of various moral frameworks.

In my classes, I focus on how law, including business law, is an expression of ethics at its core. I teach on how small and large business decisions have ethical, moral, and legal ramifications, a message that is at the core of our school's mission.

What Are the Purposes of Business Law?

Business law has many purposes. First, business law seeks to provide students with an understanding of the importance of various regulations. Although businesses are primarily driven by profit, they must comply with many different laws that are influenced by the concepts of ethics and fairness.

Second, business law provides insight into how businesses are organized and explores issues related to corporate structure and foundation. For example, there are various ways to structure and organize a business, ranging from a sole proprietorship to a corporation that does business over all the world and is traded on a public stock exchange.

Third, business law deals with issues of businesses' rights and responsibilities. For example, this type of law deals with how companies treat their employees and the public.

Fourth, business law provides a framework for resolving disputes. For example, business law discusses how organizations can handle disputes between other business entities, the public, or their employees.

Fifth, business law often explores issues related to various types of business contracts and the enforcement of rights when disputes arise.

How Business Law Can Impact a Small Business

Imagine that someone wants to start a small business to sell hot dogs on a street corner. While vendors like this one may focus on such issues like obtaining a good product to sell or a place to sell the hot dogs, they must also have a basic understanding of what laws govern their behavior when dealing with the public and how they should act.

For example, hot dog sellers likely would not be able to sell their products outside of an established restaurant or name their stand after a famous company without legal permission. Consequently, this hypothetical hot dog vendor needs a basic understanding of legal topics like the naming of a business and how marketing products must comply with local, state, and federal laws.

After that, there will be the issue of how to organize the business. Will the business be a sole proprietorship or use another business structure like a limited liability company?

Even small businesses must make sure that their products are safe for the public and they deal with the public in a fair, ethical manner. It’s usually necessary for small businesses to obtain licenses to operate and subject themselves to regular inspections.

If the hot dog seller eventually hires employees, a basic understanding of the rights and responsibilities with regard to employee treatment is essential. For instance, the employees would have to be a certain age and must be paid at least a minimum wage. Employees would also have certain benefits like breaks and mealtimes to comply with the most basic protections afforded to employees.

Small business owners like our hot dog vendor must understand that they will deal with other businesses. For instance, that business owner may deal with suppliers who would provide hot dogs, condiments, and napkins, which requires some knowledge of commercial law. If the vendor wants to expand and establish a brick-and-mortar store, dealing with landlords will also be governed by business law.

It will also be necessary for our hot dog vendor to comply with tax reporting requirements and pay taxes to various government agencies. Even the smallest of businesses must withhold certain taxes from the paychecks of employees and pay these taxes to various state and federal entities. They also must make sure that employees receive benefits like Social Security, disability, and workers' compensation from multiple state and federal governments.

Disputes are unavoidable for any business owner. Even small businesses have thousands of transactions and interactions each year, and at least a small percentage of those transactions will result in a dispute. Our small business owner will have to possess an understanding of how to resolve conflicts, whether that resolution occurs by going to court or via another method of dispute resolution.

When Is a Lawyer Needed by a Business?

Although it’s tempting for business owners to believe they can handle any legal problems relating to their business, it is often essential to obtain the advice of a licensed attorney to provide legal advice within their jurisdiction. Operating a company without proper legal advice can have serious consequences, including harm to the reputation of that business, lawsuits, or fines from governmental agencies.

For example, let's assume that our hot dog seller is sued by a vendor for failing to pay an invoice or by a former employee who claims unlawful termination or a denial of benefits. In these situations, it would be prudent for the business owner to hire an attorney to provide sound legal advice to navigate the legal problems raised by such conflicts.

In the early planning stages of a business formation and at various stages of a business, legal advice is essential. For example, a lawyer can help a business owner to ensure that certain laws relating to corporate law are followed during the process of setting up the business.

A lawyer's expertise can also be useful to ensure that a business owner follows tax law, reports taxes correctly, and complies with regulatory matters like obtaining the proper business licenses. Other situations where a lawyer can advise companies includes the theft of intellectual property and violations of employee rights.

What to Expect in Business Law Courses in College

Many people become deeply anxious when the term “law” is mentioned, and many of my non-Legal Studies students are nervous about taking one of the courses that I teach.

For example, I teach a course in sports law. This course explores many issues related to how sports professionals must mitigate risk and comply with laws.

While some student apprehension is understandable, it is unnecessary. College-level courses related to business law are constructed with the understanding that most students in the class are not aspiring attorneys. Instead, these courses aim to make legal issues understandable, accessible, and relevant to non-lawyers.

Because most students in a typical introductory business law course do not want to go to law school, most business law courses have a different feel from a law school course. Instead of deeply exploring case law like what is done in law school, most business law courses seek to introduce students to a broad array of topics.

Most of these courses are referred to as “survey” courses. They are organized around a textbook or other reading materials that provide students with some basic understanding of the many legal problems that businesses confront.

Most bachelor’s degree programs in business require students to take at least one business law course. Given the increased focus on ethical issues raised by businesses, many business programs require students to take a course on ethics as part of their degree. These types of courses will often explore how ethical considerations like fairness, sustainability, and morality – which may or may not be codified by law – limit the activities of businesses.

Exploring Business Law During Law School

If a student wants to pursue a Juris Doctor degree and become an attorney who focuses on business or corporate law, there are many opportunities to do so in law school. When I was a law student, I took a series of courses and explored various areas of business law through internships.

For example, I interned for a bankruptcy law judge. This internship provided me with insight into what can happen if a business makes bad decisions or if market conditions change, making a business unprofitable or unable to pay its debts.

As an intern for another judge in the New York court system, I worked on cases involving disputes over various commercial transactions, including a handful of cross-border transactions that developed into lawsuits. Also, I took a series of courses dealing with various business transactions, including sales and payment systems, secured transactions, corporate governance, and bankruptcy law.

In fact, I spent nearly a year exploring the Uniform Commercial Code (UCC). These laws govern a wide collection of business transactions and describe what can happen if companies do not satisfy their contractual legal obligations.

In law school, students typically study a series of cases. They may also explore interesting fact patterns dealing with various hypothetical legal situations, and their instructors may also have these law students provide a legal analysis. This type of training aims to prepare law students to provide clients with useful advice.

How Business Law Protects Employees from Unfair Labor Practices

One of the most important topics explored in business law classes is the idea that business enterprises must treat their employees in a fair, lawful, and ethical manner. For example, a company in the United States cannot discriminate against employees based on various protected characteristics such as:

• Race
• Nationality
• Gender
• Sexual orientation
• Age
• Religion
• Disability

By law, companies have to provide employees with certain benefits and a safe physical workspace. These laws in the United States are enforced by numerous state and federal entities like the Department of Labor (DOL), the Equal Employment Opportunity Commission (EEOC), and other state and regulatory agencies.

Imagine that an employee, who is qualified for a certain job based on training and experience, is denied that job due to a protected characteristic. This type of discrimination in hiring, firing, or any other adverse action can expose a company to a potential lawsuit. Business law, which includes employment law, provides employers with both guidance and a warning of the dangers associated with unlawful employment actions.

Similarly, imagine that someone’s co-workers or managers alienate or discriminate against that person based on a real or perceived protected characteristic. This behavior, if it results in an adverse employment action, can constitute grounds for a potential claim against the employer, manager, and coworkers under various state and law employment laws.

Recent Trends in Business Law

Business law is in a period of transition, and this field reflects prevailing trends such as climate change and technology. In recent years, this type of law has become increasingly focused on many issues related to the environment and sustainable business practices. Climate change and the depletion of natural resources like fossil fuels, timber, fish, and minerals have resulted in calls for changes to business practices and increased sustainability.

A sustainable business practice combines the long-term consequences of business decisions with an understanding of finite resources. The impact of a business on both people and the natural environment are also considerations.

Technological tools like artificial intelligence (AI) and the internet have transformed the business landscape, which in turn will impact business law. For example, there has been significant inquiries into whether technology will fundamentally transform the nature of the employee/employer relationship or displace large numbers of workers.

Similarly, cybersecurity has emerged as one of the fastest growing sub-fields in business law. Both companies and individuals struggle to keep consumers’ private information and proprietary data like trade secrets safe and protected through technological tools.

There is an increased focus on how all businesses need to protect customers and businesses from the threats posed by bad actors who may use technology in an improper manner.

Nearly every day, the news is full of a recent breach in some company's databases that exposed customer data. In recent years, regulators in the United States and Europe have become increasingly concerned about how consumer data can be used both by bad actors and businesses in an inappropriate way. These situations have sparked both new laws as well as discussions over the need for a new regulatory framework to deal with such legal issues.

Furthermore, business has become increasingly international. Even small businesses must be cognizant of how their actions may have ramifications in foreign countries and know the relevant regulations for overseas transactions.

For example, let’s say that a company has a website and does business with customer and vendors from various countries. If the company ships or buys a product with a foreign vendor, the business must comply with overseas regulators and foreign laws.

Imagine that a company orders some products from a foreign vendor and that foreign vendor fails to produce and ship the products, violating a legally binding agreement. This type of situation raises complex international law issues over how to hold the foreign vendor responsible for a breach of contract and any potential damages caused by the contract violation.

Potential Career Paths in Business Law

While I am a licensed attorney and many attorneys advise clients on business matters, students interested in business law can pursue many different career paths. For example, students with an interest in the legal field may pursue job opportunities that involve working in a compliance department of a bank, healthcare company, or accounting firm.

Additionally, many students interested in business law end up working as human resources professionals. Human resources employees must have a firm understanding of the legal areas that govern employee-employer relations and the various laws that employees must comply with.

But regardless of the career paths that students pursue, they must have strong analytical skills. Also, they will need to identify the many complex legal problems that business organizations may confront in a rapidly changing business landscape.

Business Law Is an Ever-Evolving Field

The field of business law will undoubtedly continue to evolve. Overall, the continuous change in this field is fortunate, since it will allow students to choose the type of law and specialty according to their personal and professional interests.

Legal Studies Degrees at AMU

For adult learners aspiring to become legal professionals, American Military University (AMU) offers three legal studies degrees to provide students with a solid foundation of legal knowledge:

• An online associate degree in legal studies
• An online bachelor’s degree in legal studies
• An online master’s degree in legal studies

Courses offered in these degree programs feature topics such as introduction to the courts, legal research and writing, legal ethics, constitutional law, family law, contract law, and tort law. AMU’s online format provides convenience for adult learners balancing school with family and job responsibilities, and courses are taught by faculty members with expertise in the legal field.

For more information about AMU’s legal studies degree programs, visit our program page.

Patagonia is a registered trademark of Patagonia, Inc.

Note: Completion of the bachelor’s degree in legal studies does not award any professional paralegal or any other certification, but it may be helpful in preparing to seek such certifications. Although some states do not require a Juris Doctor for bar entry, the master’s degree in legal studies does not prepare you to practice law or gain admission to the bar of any state based solely on completion of this program. AMU is part of the American Public University System, which is an officially recognized member of the Law School Admissions Council (LSAC Member Number 5070). Contact your state's bar association for more information.