Answer to Question #293671 in Management for solly

Question

Discuss the significance of law in a business environment 

Answer 1

Entrepreneurs are often experts in specific industries, but certain business decisions may require expertise in areas outside a business's core market, such as finance and law. Small businesses must comply with the same rules and regulations that apply to large companies and thus need someone with legal expertise from time to time. Business laws establish guidelines for what companies can and cannot do, as well as certain things they must do. Law is a broad discipline with several fields that serve important functions in business. The rule of law establishes rules that people and businesses must follow to avoid being penalized. The rule of law not only allows people to understand what is expected of them in their personal capacities but also sets forth rules for businesses so that they, too, know what is expected of them in their dealings and transactions. In addition, it restrains government and others from infringing on property rights. Should disputes arise, the rule of law provides a peaceful and predictable means by which those disputes can be resolved.

• The rule of law provides a sophisticated system of federalism, where state and federal laws coexist. This allows people and businesses to determine which system of government pertains to them and which jurisdiction they belong to.
• Employers know the rules of the game regarding their relationship to employees, and employees know the rules with respect to their obligations to employers. Likewise, business partners, members of boards of corporations, and members of limited liability companies all know what is expected of them in their roles. When someone does something that is not permitted, there is legal recourse.
• Businesses rely on the rule of law to govern their debtor and creditor relationships. And, if financial matters do not go as anticipated, legal system allows businesses to ask the court for protection from creditors under bankruptcy law. This allows businesses to protect their property from creditor repossessions or foreclosures while they get back on track financially.
• The law also protects businesses from government. Since everyone is subject to the rule of law, this means that government itself may not overextend its reach when regulating or investigating businesses. Government must play by the rules, too.