If you’re pursuing your undergraduate degree in business or one of the many related degrees such as marketing, human resources management, public administration, accounting, or organizational management, you’ll likely be required to take a business law course at some point in your academic career, so you ought to understand the importance of business law. If you are working toward your MBA or other graduate business degree, you will likely take business law twice: once as an undergraduate and again during your graduate program. You may wonder why students study business law–especially if you’re planning a career in business. Before diving into the meaning and importance of why we study business law, let's take a look at the reasons and benefits of studying business law.
Businesses Follow the Law
It’s important for business owners, managers, and other professionals to have a basic understanding of business law to help them make better decisions. Just as there are laws that apply to people, there is a huge body of law that applies to business. Businesses need these laws for the same reasons that people do: to define unacceptable behavior, to provide certainty and stability, to protect the public, and to provide a mechanism for businesses to resolve disputes.
Throughout a business’ existence, it can do most things that a person can do, and we need laws to control those activities. A business can buy and sell property, sue and be sued, enter into contracts, hire and fire employees, and even commit crimes.
Laws Protect Businesses and People
We need business laws to cover all of these activities so that businesses can operate with some measure of predictability. For example, suppose you wanted to open a shoe factory. You’ll need to buy a piece of property and build your factory, which will be very expensive. Without established, predictable property laws that ensure that you are the legal owner of the land, you would be very reluctant to build the factory. There would always be some risk that someone else would come along and claim your property and factory as their own.
The same is true for all other business activity. You wouldn’t ship shoes to a retailer unless you had a way to force them to pay for the goods. You wouldn’t hire employees without some means of firing them if they didn’t do their job. In other words, it’s important to enter into contracts with a means of enforcing the agreement.
It’s also important for business owners, managers, and supervisors to understand what rights the business has against other businesses and individuals. For example, if you have an employee who is not doing his or her job, you should know your options. If you make and sell tires, you must know who will be held liable if someone is injured due to a blowout. If you enter into a contract with another business, you need to know who is bound to the contract, as well as what happens if those individuals cannot perform what they legally agreed to do.
The answers to all of these situations and more are provided by business law. The course is not intended to make anyone an expert in any area of business law, but instead to make business managers, owners, and executives more aware of the many legal issues that arise in the day-to-day operation of any business. Being aware of these potential issues will help you make the judgment calls and decisions that business professionals makes on a daily basis. A basic understanding of business law can help you spot potential legal issues as they come up, make better decisions, and know when to seek legal help.
Whether you are an entrepreneur starting your own business, a manager advancing your career at a Fortune 500 company, or just starting out in the business world, studying business law will better prepare you for a successful and rewarding career in business. Learn more about applying law in business administration, law enforcement administration, or political science and government.
Written by David Mackusick, JD, CPA, former assistant professor with the Forbes School of Business and Technology™ at the University of Arizona Global Campus University.