Business Law

Business law provides the framework under which all business associations operate. State business law typically regulates the creation, dissolution, and operation of business entities. Each state offers myriad entity choices for business start-ups. Sole proprietorships, partnerships, S corporations, and most limited liability companies offer pass-through taxation where the business is not taxed as an entity separate from its owners. Limited liability partnerships, limited liability companies, and all types of corporations offer certain liability protections to their owners or members. If all formalities of the entity are honored and no fraud is present, the owners or members of the entity are not personally liable for the contracts and torts of the business. If the formalities of the entity are disregarded, the veil of the corporation or entity may be pierced and personal liability may be imposed upon its owners, stockholders, or members. An incorporator can choose to start a business in any state, so long as the specific requirements of that state are met. More than half of all publically traded American companies are incorporated in Delaware. Consequently, Delaware business law sets the standard for other states, and decisions from the Delaware courts are highly influential in all jurisdictions.

Federal business law-specifically the Securities Exchange Act of 1934 (15 U.S.C.S. § 78d) and the Securities Act of 1933 (15 U.S.C.S. § 77a)-governs the issuance and trading of corporate securities. The Sarbanes-Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745), also administered by the Securities and Exchange Commission, set new standards for financial disclosures, corporate governance, and annual reports. Stiff penalties accompany violations. Federal business law also prohibits monopolies and others unfair business practices. The Sherman Antitrust Act, 15 U.S.C.S. §§ 1-7, declares that every contract in conspiracy or restraint of trade or commerce is illegal. The Clayton Act, 15 U.S.C.S. §§ 12-27, criminalizes discrimination in price between different purchasers of commodities of like grade and quality.