Legal Underpinnings of Business Law

Welcome to week 1!  This week deals with the legal and constitutional underpinnings of business law, the application of ethical theories to business law situations and how to identify how to interpret and apply case law to business situations. This week’s assignments include reading chapters 1,4, 27-29, 30 and Appendix A of the textbook, two (2) discussion board questions, your introduction discussion and an assignment. As for the discussion boards, I expect you to post your initial posting by Thursday and respond to at least 2 of your classmates posts.  I think that the material to be learned in this class with be useful to every day issues that can arise.  As for the discussion questions, you can use your textbook as a reference as well as other outside academic references.   The rubic for the discussion boards can be found in the class room.  Please email me with any questions. 

As you read the chapter of the textbook, be sure to pay particular attention to the various types and classifications of law.  Law is defined as the set of enforced rules under which a society is governed (Farber, et al., 1998). Law is one of the most basic social institutions and one of the most necessary in order to provide for an orderly society.  Society could not exist if all people did just as they pleased without regard for the rights of others.  Many individuals would consider themselves first before the greater good of the society as a whole. The law, thus, establishes the rules that define a person's rights and obligations not only to oneself but also to the community. The law also sets penalties and/or punishments for people who violate these rules/laws, and states how government shall enforce the rules and penalties. However, the laws enforced by government can be changed. In fact, laws frequently are changed to reflect changes in a society's needs and attitudes as well as the overall belief system of society.  In societies of the past, people often viewed law as unchanging rules that deserved obedience because they were part of the natural order of things (Farber, et al., 1998). Most lawmakers today, however, treat laws as a flexible tool or instrument for the accomplishment of changing viewpoints and new or better laws.

There are three (3) common classifications of law. These classifications involve      distinctions between (1) criminal law and civil law; (2) substantive law and procedural law; and (3) public law and private law (Farber, et a., 1998). One type of law might be classified under various classifications. For example, a burglary statute would be criminal, substantive, and public; a rule of contract law would be civil, substantive, and private.

 There are also several different types of laws:  constitutional, statutory, common law, equity, administrative decisions and regulations, treaties, executive orders, and ordinances (Liuzzo, 2013).  Each type of law follows a hierarchy.   Below is a brief description of each type of law:

Constitution Law = laws or principles found under the Federal U.S. Constitution or state constitutions

Statutory laws = laws provided for by statute passed by Congress or by state legislatures

Common Law = the body of recorded decisions that courts refer to and rely upon when making later legal decisions

Administrative Law  = The body of laws, regulations, and decisions created by administrative agencies

Treaties = a writ agreement between two or more countries at serves to establish terms of an international relationships

Executive Orders = is a legally binding directive issued by the President with the intent to change the manner in which federal agencies and officials operate so as to improve the practices of the federal government

Ordinances= a law that is passed by a local government

(Liuzzo, 2013). 

Additionally, there are three (3) branches of our federal government.  They are the Executive, Legislative which consists of the Senate and House of Representatives and Judicial which consists of the Supreme Court and lower Federal Courts.

The President of the United States administers the Executive Branch of our government. The President enforces the laws that the Legislative Branch makes. Also, the executive branch of the government includes many departments and agencies.

The Legislative part of our government is called Congress. Congress makes our laws and is divided into two (2) parts: the Senate and the House of Representatives. Overall, there are 100 Senators; two (2) from each of our states. As for the House of Representatives, there are a total of 435. As you may know, the number of representatives for each state is determined by its population. The House of Representatives is charged with meeting and discussing bills which may later become our laws.

The Judicial branch of the government includes the Supreme Court and nine (9) Justices. They are special judges who interpret laws according to the Constitution (Liuzzo, 2013).   These justices only hear cases that pertain to issues related to the Constitution. The federal judicial system also has lower courts located in each state to hear cases involving federal issues. Those lower federal courts are called Circuit Courts, District Courts, Bankruptcy Courts, Claims Courts and Tax Court (Liuzzo, 2013). 

If you are a manager, business owner, employee, or entrepreneur, the law will impact your daily decision making and have far-reaching consequences in all your business activities (Liuzzo, 2013).   Ethics has several different meanings. However, one definition is the study of general nature of morals and of specific moral choices to be made by the individual in his relationship with others; the philosophy of morals (Schwartz, et al, 2001). Another meaning is the rules or standards governing the conduct of the members of a profession  (Schwartz, et al, 2001). Business ethics has become one of the most important and timely topics for today’s businesses.  Ethical inquiry centers on concepts such as good and evil and right and wrong.  Ethics plays a role in business as ethical ideas have been the foundation of much of recent legislation enacted by federal, stage and local governments on how a business is to operate (Liuzzo, 2013).  The law requires individuals and businesses to behave in specified ways, which either requires certain act or prohibits certain acts (Liuzzo, 2013). 

We also need to review the various types of business organizations.   It is important that the business owner seriously considers the different forms of business organization types prior to formation. The most well known business organization is the corporation. However, there are alternative to the corporation such as sole proprietorship, partnership, limited liability companies, and limited liability partnership (Hurst & Gregory, 2000). Which organizational form is most appropriate can be influenced by tax issues, legal issues, financial concerns, and personal concerns (Hurst & Gregory, 2000).   A corporation is by far the most structured and regimented of all the business entity types (Hurst & Gregory, 2000).  A corporation is considered an entirely separate entity from its owners, with legal rights and responsibilities (Liuzzo, 2013).  Corporations are owned by shareholders and have its own rights and responsibilities separate from its shareholders (Liuzzo, 2013). 

   A sole proprietorship is the simplest type of business to form. A sole proprietorship is a business owned and operated by one (1) person (Liuzzo, 2013).  In fact, many states do not even require a formal filing, unless the business name is something other than your own. As a sole proprietor, you have complete control over all the decisions of your business and all profits are directly considered your income. 

The partnership is a business owned and operated by two (2) or more individuals (Liuzzo, 2013).  Partners of a partnership have joint and several liabilities.  However, a limited liability partnership is a business in which there are one more general partners and one or more limited partners (Liuzzo, 2013).   The limited partners has limited liability meaning his or her personal liabilities for all of the legal obligations and debts of the business are limited to his or her investment into the business (Liuzzo, 2013). 

 A limited liability company (LLC) is a company formed as a combination partnership/corporation in which profits of the business pass through and are taxable to the owners. The owners of an LLC are shielded from personal liability.