The American Legal System in Relation to Business
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The American Government, through its legal system, imposes different rules and regulations on businesses which helps shape the functionality of the business environment. The legal system governs commercial matters in America by use of business laws. There are several different aspects of business law ranging from regulation of commercial transactions to regulation of commercial entities. One single most important aspect of these laws is consumer goods sales which deals with governing financial transactions in the United States.
Consumer goods sales are governed under the legal system by use of the Uniform Commercial Code (UCC). The Code provides extensive rules for businesses in an effort to secure commercial transactions. The rules vary from fraud to contracts to leases. The Code is a uniformly accepted state law rather than a federal law (Beatty et al., 2019). It’s the single most important aspect of the legal system for many businesses hence its name ‘the backbone of American commerce’. One important aspect of the Code is businesses can confidently conduct interstate commercial transactions because the terms in the Code are legally binding in every American jurisdiction. This has created a certainty in business relationships allowing them and the economy to thrive.
The Uniform Commercial Code covers vital aspects of consumer goods transactions, designed to protect both sellers and buyers. It recognizes that commercial transactions do not always proceed smoothly and can turn out to be complex. One such aspect is formation of contracts. Contract law is a domain of the states and therefore each American state has its jurisprudence regarding contract law (Blackburn & Klayman, 2010). The Code governs contract formation and gives a more predictable framework for contracts and enforcement to traders. This law is essential in providing an advanced mechanism to enforce contracts across the business community.
The Code also provides a statutory framework to govern the security of commercial transactions. The states enforce the strict security laws provided in the Code. In addition to secured transactions, the Code governs: negotiable instruments such as drafts and notes which can be transferred to another party and still remain enforceable against the original party, bank deposits and collections by providing policies for check processing and automated interbank collections, funds transfers by providing a comprehensive statute on the rights and obligations connected with funds transfers among others (White & Summers, 2010). The Code generally governs the rudimentary of business operations, making it the single most important aspect of the legal system in relation to business.
Another important aspect of the legal system with respect to business is taxes. The United States is largely a self-assessment taxing jurisdiction and many businesses have to comply with taxing laws, failure to which can end up in both civil and criminal penalties. The American business tax system is fairly efficient and enhances economic progress but leaves room for improvement in some areas. One area of tax laws that could most be improved is the taxation policy on capital income. Taxes on capital income exceed the corporate income tax. Corporate investment taxes such as those on capital gains and dividends, affect shareholders’ incentives to save and invest (Burman, 2020). The high tax rate makes the combined tax rate on corporate profits higher in the United States compared to other developed countries.
Another area for improvement with regard to taxation laws is double taxation of corporate income by the federal government and several states. The state corporate income taxation increases tax burden on corporate profits. Recently, the federal government reduced the corporate federal income tax rate from 35% to 21% with the objective to create a more competitive business environment in the United States. However, this goal is being strained by state-level taxes. Policymakers could initiate better policies to reduce the overall tax burden on corporate profits.
References
Beatty, J. F., Samuelson, S. S., & Sánchez, A. P. (2019). Business law and the legal environment.
Blackburn, J. D., & Klayman, E. I. (2010). The legal environment of business. Boston, Mass: Pearson Learning Solutions.
Burman, L. E. (2020). Taxes in America. Oxford University Press.
White, J. J., & Summers, R. S. (2010). Uniform commercial Code. St. Paul, MN: West, a Thomson Reuters business.