Understanding commercial law vs corporate law can help business owners avoid breaking the law and eliminate unnecessary costs and hassle.3 min read updated on January 01, 2024
Understanding commercial law vs corporate law can help business owners avoid breaking the law and eliminate unnecessary costs and hassle. While these two types of law both have a significant impact on the way businesses operate, they have distinct differences.
Difference Between Business Law and Corporate Law
Many people are confused about the difference between business law and corporate law. Corporate law is a legal field that governs the formation of companies, shareholder rights, mergers, and acquisitions, while business law or commercial law deals with the sale and distribution of goods. Businesses need people with profound knowledge of both of these laws.
When it comes to regulating corporate law, the federal and state governments play different roles. The federal government has laws to control stock purchases and workplace safety and security, while the states impose additional laws when necessary.
Commercial law, on the other hand, is established by the Uniform Commercial Unit (UCU). This body has a set of laws to govern the sale and purchase of goods in the U.S. It is used as a benchmark by the states for designing additional laws to regulate trade. Most states have UCU laws that are significantly modified, so it is important to have a lawyer who is familiar with a particular state's business laws.
One major difference between commercial law and corporate law is that the former is focused on providing guidelines for the sale and purchase of items. Commercial law affects business organizations significantly. Numerous companies have been involved in legal battles that revolve around the violation of vital elements of commercial law. Corporate laws, on the other hand, influence businesses on a broader scale. Corporate law attorneys deal with areas such as contracts, taxes, and employment law. This kind of law is more common than business law.
What Is Corporate Law?
Corporate law is a field of law that governs the establishment and operations of corporations. It is related to contract and commercial law. A corporation is a business entity formed in accordance with the laws of a state. Different states have different laws regulating the formation, organization, and dissolution of corporations. A corporation is a legal, artificial entity separate from its shareholders and has standing to enter into contracts, sue and be sued, and perform other tasks necessary to keep a business running.
A corporation is a taxable entity that protects its owners and shareholders from being personally liable for its liabilities and debts, with certain exceptions such as unpaid taxes. This business structure is frequently used in tax structuring, because it is subject to a lower tax rate than individuals. Until it is formally dissolved, a corporation is a perpetual entity, meaning that the termination or deaths of its shareholders or officials will not change its structure. States have imposed registration laws to make it mandatory for corporations formed in other states to obtain permission to conduct in-state business.
The federal government also has laws that govern corporations. Corporations in some industries, such as public transportation and communications, are required to comply with federal regulation and licensing laws. The federal government passed the Securities Act of 1933 to regulate the issuance and sale of corporate securities, such as stocks and bonds.
Role of a Corporate Lawyer
A corporate law professional is an expert in the legal establishment of corporations. Corporate lawyers engage in a wide array of practice areas, including:
- Joint ventures.
- Mergers.
- Acquisitions.
- Licensing arrangements.
- Business formations.
- Venture capital financing.
- Securities law.
- Business tax consultations.
- Business agreements.
- Internal forms.
Corporate attorneys also work with many different types of clients, including:
- Closely held companies.
- Publicly traded companies.
- Multinational companies.
- Banks.
- Investment banks.
- Insurance companies.
- Mutual fund investors.
- Pension fund investors.
- Private equity fund investors.
- Hedge fund investors.
As capital markets become increasingly globalized, there is a greater need for corporate attorneys to have international expertise. An in-depth understanding of global capital markets enhances a corporate lawyer's ability to provide good advice for clients and meet the demands of capital markets in the U.S. Corporate law attorneys mostly deal with transactional work and seldom appear in the courtroom. Others are in-house lawyers at financial institutions and corporations, where they perform transactional work and solve legal problems faced by the corporations and their employees.
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