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Business Law and Its Importance to Corporations, Partnership Essay

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Updated: May 12th, 2022

Business law is crucial to all corporations, partnerships, and LLCs. The law creates vital structures through which members can associate and operate in a beneficial and amicable manner. Concurrently, it is easy to make decisions on critical matters despite the challenges. This is possible provided the law is followed to the latter. For instance, corporations, partnerships, and LLCs should consider the implications of buying and selling ordinary shares. Most of the business laws indicate clearly whether any liability in the business is limited. In this context, ordinary shareholders also have liquidation rights and they remain liable for dividends within the company. There are preemptive rights attached for shareholders and shareholders have the right to vote in matters affecting their companies. Given the fact that all the partners have equal shares in all corporations, partnerships, and LLCs, they have equal rights in management of the company, equal right to the company capital and also equal rights to the dividends. This indicates why business law and its importance to corporations, partnership (limited and general) and LLCs.

Accordingly, the law creates critical provisions to direct the conducts of partners and shareholders. For instance, some chapters of the general business law talks about partnership books and the right of inspection by members. This is beneficial to most corporations, partnerships, and LLCs. The law requires that partnership books should be accessible to all partners throughout. Some sections talks about the rights of partners to formal accounting and the wrongful exclusion from partnerships or forceful repossession of the shares by the partners in the business. In other contexts, the Corporations Act imposes restrictions on the issue of transferring shares by shareholders. Some of the reasons for these restrictions include the fact that a company needs to restrict the transfer of shares in order for the current members to be able to control the activities of the business. Accordingly, the business also needs to be able to maintain its corporate matters without disruptions due to the transfer of shares. Basically, business law allows corporations, partnerships, and LLCs to manage their affairs in a legalized manner.

Depending on the number of shareholders determining the major and minor shareholders, the influence of minor shareholders varies according to the business law. This indicates the differences that exist amidst the business laws embraced by corporations, partnerships, and LLCs. In cases where the numerical difference between the majority and minority shareholders is large, then it becomes difficult for the minority shareholders to have influence in the company management. They are simply relegated to passive roles in the company. However, in situations where there are two major groups of shareholders and some minor shareholders, the significance of the minor shareholders becomes more evident according to the law. This is because the minor shareholders end up with great power of influencing the outcomes of voting processes since their few votes can determine who between the major shareholders wins in voting. Accordingly, the minor shareholders can also acquire veto powers which give their votes more weight in decision making.

Accordingly, the main restriction that corporations, partnerships, and LLCs face in business organizations is the issue of voting and decision making as provide by the law. Some shareholders normally have few shares which limits their voting power during decision making processes. It therefore becomes difficult for minority shareholders to be able to determine the individuals that they would prefer in the management positions as required by the business law. Minority shareholders also have little impact in determining the future of business organizations and they only are passive players within the company unless they seek to have veto powers in voting.

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