Sample Research Paper on Importance of Law in Business Environment

Importance of Law in Business Environment


Law plays an essential role in ensuring a smooth operation of businesses. Law offers ethical standards that ensure disputes that emerge in the running of business are solved amicably. Without the law, it would be quite difficult to carry on business effectively. Business people normally make ethical decision in the day-to-day business, and they always utilize ethical theory to offer informed decisions. They usually encounter issues that pertain to both civil and criminal law, which requires court intervention. In the US, the law is perceived as a cultural practice, thus, ethical theories played a critical role in the creation of the American jurisprudence. Jurisprudence reflects the institutional competence in interpreting the Constitution. This paper will focus on the importance of law as well as the role of law in business environment.

Importance of Law

Business laws are fundamental in ensuring that businesses are functioning effectively. The general purposes of law seem to be quite simple, but the US legal system is very comprehensive. Government laws and regulations affect all business activities, which include hiring, firing, safety, marketing finance, and waste disposal. A pure market economy only exists as a hypothetical concept, since real markets are usually subjected to state regulations and restrictions. It is the legal duty of a business owner to achieve the financial goals, especially when the company has investors and stockholders.

Business people have a responsibility to satisfy the needs as well as the expectations of society. They cannot do so without law. The legal environment formulates rules within which businesses can operate. When a firm is in operation, the law does not state what the firm has to do or to avoid. The law creates opportunities and threats, leaving the firm to protect and promote its interests in its area of operation. The legal environment can influence how firms produce their goods and services through execution of pollution laws (Hamilton & Webster, 2012, p. 254). How firms treat their employees can also be subjected to law.

Laws establish rules that business people as well as their businesses should follow to evade penalties. Regulations allow business people to comprehend what the environment expects from them. In case the business violates the rules set by the government, the business can be sued through criminal law. Criminal law usually applies when a business violates state regulations in financial reporting, description of its services, as well as safety of its goods and services (Hamilton & Webster, 2012, p. 265). In the US, the Congress takes the responsibility of tightening the rules to enable the business to comply with tax regime, health and safety, and environmental conditions.

Businesses require guidance and direction to run effectively. The law creates a means that businesses can comply with when dealing with other parties through neutral decisions in regards to disputes. Business partners have an idea of their roles in the business in addition to what the business has to benefit them. The law permits businesses to file complaints in courts in case they experience breach of contract. In case of a civil law, the businessperson can apply the law to claim for compensation. To ensure that competition is maintained in the market, the government can formulate antitrust laws to prevent firms from merging or splitting. Competition is perceived to be healthy in a free market as it promotes efficiency in production, service provision, and low prices.

Role of Law in Business Environment

The law is indispensable in running of business. According to Mann and Roberts (2013), the principle role of law is to maintain steadiness in the collective, political, and economic arrangement while concurrently permitting change (p. 3). It creates quality control, and offers the business people a chance to evaluate whether their businesses serve their purposes appropriately. When a business or stockholders commit a crime, the government can charge the offenders in criminal law. Norms are found to exert direct and indirect influence on particular intentions (Celuch & Dill, 2011, p.206). Thus, by practicing certain norms, businesspeople can be able to maintain ethical behaviors that assist in running their businesses smoothly.

The law safeguards individuals or corporate from any harm or damage. In criminal law, the government utilizes its resources to safeguard and protect the rights of individuals and corporate from criminal acts (Miller & Hollowell, 2013, p. 97). Tax evasion is a form of crime that can amount to criminal prosecution. Rapid use of technology has increased the level of crime in businesses, thus, the government has to review its laws occasionally to cover all types of crime. Hacking of computers has been on the rise as people embrace new technology.

The law offers protection against private ownership, in addition to making contracts regarding legal exchanges of private property as well as business services. Signing a contract among business partners or corporate and tort law are incorporated in civil law. When a business partner violates a law concerning the contract, the affected partners may sue the partner through the civil law. The penalties for violating civil law involve monetary compensation to the wronged parties. The law incorporates property ownership and their disposition, contracts and forms of business associations.

Ethical Theory and its Role in the Formation of American Jurisprudence

Business people are usually compelled to formulate ethical decision in order to harmonize their decision-making processes. Most business theorists believe on the notion that a businessperson may hold some ethical commitments beyond self-interest. Ethics are crucial because laws and government regulations cannot offer total protection to society. An ethical theory strives to predict an outcome to arrive at an ethically correct verdict. Greenberg (2014) stated that legal institutions have a responsibility of changing moral obligations through changing the pertinent facts and circumstances. Thus, the resulting moral commitments become the legal obligations, which can be incorporated into the jurisprudence.

Ethical theories offer a structure under which individuals judge what is right or wrong. According to Hinman (2013), ethical egoism is an ethical theory that compels individuals to act in their own interest since right actions encourage self-interest while wrong actions distract individuals from self-interest (pp. 106-107). Focusing on universal ethical egoism, each individual should act in a way that would satisfy his/her own personal interest. For instance, when playing soccer, each team tries their best to win the game, and they also expect their opponents to try the same.

Ethical theories challenge the legitimacy of decisions that individuals make in particular situations. Rules are made according to what individuals find ethical. Jurisprudence in the US expresses what the judges ought to do while interpreting the Constitution. It also interprets statutory text, in addition to applying legal codes to factual questions. Although numerous schools of thoughts have contributed to the American jurisprudence, ethical theories have taken a significant part in its formation. Natural law theorists have accepted that law is usually planted on moral truth. The moral foundation, such as those expressed in ethical theories, is free from subjectivity, as well as political impulse, thus, and has a legitimate claim for legal principles that led to American jurisprudence.

Legal theories are generally evolutionary. The social approach towards legal theories is that the law has never been an autonomous system. Instead, the law is a fundamental part of the societal life. As the society’s culture, language, and economic system evolve, the law adjusts with them. Ethical theories offer a basis for decision-making process. When combined together, they can offer solution to business problems. The best that an ethical theory can do is to evaluate different features that contribute to the rightness or wrongness of actions under different situations (Arnold, Audi & Zwolinski, 2010, p. 564). Thus, the formation of American jurisprudence has benefited vastly from ethical theories.


Laws in business environment are fundamental in ensuring that businesses are run effectively. Laws are required to eradicate confusion and to settle disputes among business partners and corporate. Laws create quality control in businesses, and offer the businesspeople an opportunity to assess whether their businesses serve their purposes appropriately. The US legal structure appreciates the essence of law in business operations as it creates fairness and order in business environment. Lack of laws could land some businesses and businesspeople to civil or criminal law courts. Ethical theories are utilized in business environment to evaluate whether decisions made by businesspersons are morally right. Thus, businesspeople should strive to maintain order in their premises to avoid reprimand from the government and society.


Arnold, D. G., Audi, R., & Zwolinski, M. (2010). Recent Work in Ethical Theory and Its Implications for Business Ethics. Business Ethics Quarterly20(4), 559-581.

Celuch, K., & Dill, A. (2011). An Extension of the Theory of Reasoned Action in Ethical Decision Contexts: The Role of Normative Influence and Ethical Judgment. Journal of Education for Business86(4), 201-207. doi:10.1080/08832323.2010.502913

Greenberg, M. (2014). The Moral Impact Theory of Law. Yale Law Journal123(5), 1288-1342.

Hamilton, L., & Webster, P. (2012). The international business environment. Oxford: Oxford University Press.

Hinman, L. M. (2013). Ethics: A pluralistic approach to moral theory. Boston, MA: Wadsworth Pub Co.

Mann, R. A., & Roberts, B. S. (2013). Essentials of business law and the legal environment. Mason, OH: South-Western Cengage Learning.

Miller, R. L. R., & Hollowell, W. E. (2013). Business law: Text and exercises. Mason, Ohio: South-Western.