How Does the Law Apply to Business Entities?

Business entities exist pursuant to state laws recognizing their existence.

Further, businesses are subject to and must comply with both federal, state, and local laws in the same way as individuals.

What effect does the legal recognition of business entities have on the conduct of business?

Business entities are efficient mechanisms through which to carry on business. They allow for greater economic productivity and this provides an overall benefit to society.

The business entity is generally considered to be a separate being from its owners or employees. The concept is commonly known as
“corporate personhood”.

Businesses have rights similar to those of individuals that cannot be infringed. Likewise, businesses cannot infringe upon the rights of others without facing criminal or civil liability.

A business acts through its agents (owners, directors, employees, etc.) and can enforce its rights or be found liable or guilty in civil or criminal proceedings.

Because of the unique nature of business entities, the government undertakes considerable efforts to prevent the use of business entities to harm individuals.

Much of the material covered in this text focuses on the laws and regulations that the government uses to control the activity of businesses and the individuals associated with those businesses.