The Legal Environment of Business: Why Should You Care?

The legal environment of business is the activities of the respective government towards the trade and commerce of that country. It also includes the current trends of economic controls, policies of taxation, historical development reports of business, and also regulating the competition of the market.

Authentic legalization, freedom of contract, relationships with investors, and providing a healthy surrounding is also the part of a legal environment of business. If the government takes a serious step against illegal participants and provides the best facilities to fair participants, a strong economy can easily grow up between the states.

Thus, it is important to understand business law and care about its legal environment to secure our economy. Only a strong economy can upraise the position of a healthy lifestyle.

The Legal Environment of Business 

The business environment is based on a set of conditions, and those are social, legal, political, economic, and institutional conditions. All of them based on two different positions and those are internal and external events.  

  1. Internal environment: The internal environment usually includes manpower, capital, machinery, raw materials, and last but not least is management. Those are generally controlled by the business internally. If the governing body of the business wants to change the policies, they can change its function and go forward to develop its profitability.
  2. External environments: The external factors of a business firm are beyond the control of a certain enterprise. Governmental policies, tax, legal factors, political factors, social events, economic functions, and also geological factors are the main external factors of a business.

Characteristics of a legal environment of business:-

  1. The legal environment of business is always free from external and internal threats. More than 23 countries implement their transport oriented rules regarding these policies.
  2. Every wing of the business sector is connected without facing any haze. For this purpose, the proper communication between the inter-department is important.
  3. The nature of business is dynamic. If the Government rules and laws are frequently fluctuating, the business environment faces several problems regularly.
  4. The loss prevention policies such as insurance are very strong in the legal environment of business of a certain country. It is mandatory to adopt this regulation for at least 1 Cr or more than 5 Cr turnover businesses. 

To develop the legal business environment of a certain country, the Government has implemented some laws and regulations such as: 

  • Contract Laws: This law deals with the mutual contract between more than one business partner. The government protects the rights of the parties from malfunctions.
  • Consumer protection laws: By implementing the consumer protection laws government protects the self of a consumer from any explosions.
    1. Weight and Measures Act (deals with measurement-related issues in an enterprise)
    2. Trade Description Act (it deals with trade-related issues)

iii) Consumer Credit Act (deals with consumer credit protection)

  • Employee’s protection laws: By implementing this act Government protects the rights of the employees and secures their jobs in any corporate house.
  • Health and security laws at the workplace In case an employee suffers any health hazard, he or she can protect himself or herself with the help of this act.
  • Security against termination By this act, the service of an employee, is secured in any Government or Private sector. Any company cannot terminate an employee without producing any proper cause.


  • How do legal environment effects on business?

The legal environment highly affected the activities of a business. If the legal environment runs properly, the business can touch its actual profitability point. The external investors feel secure if the market properly follows the business ethics. The legal environment is one of the major things to attract foreign investors.

  • Why is the legal environment is important for a business?

The legal business environment plays an important role in determining the success rate of businesses around the world. The Government of the country levied taxes on business among the regulatory activities which protect the consumers and the entrepreneurs. It also protects the economic growth of a country from explosions and other illegal issues.

  • What is the legal framework?

The legal framework is a policy that helps to develop the laws and regulations to achieve the ultimate economic goals of a country as well as a business firm. To gather the laws in a single bracket for a particular purpose Government set up some policies, and those are generally known as legal frameworks. Changing the old policies and formulating new policies is important for regional and central Governments mainly adopt their legal activities in the field of fair business.

  • What is the main objective of the Legal Business Environment study?

Throughout this discussion, we focus on legal ethics, contract procedures, court procedures, consumer law, torts, property law, environmental law, employment law, and other international laws.

The legal factors of a business are the simple factors that affect the business environment as a consequence of direct relation to the governmental laws. The government taxes are imposed among the other regulatory measures and help to promote economic growth to protect the rights of consumers from any exploitation as well as other illegal factors. It plays a vital role in deciding how to operate the business correctly, and operate the activities, what percentage of profit they receive, how the customer behaves with them, and others. If we want to make a healthy economy in our surroundings, we should care about the legal environment of business. This healthy and stable environment easily gets the economic success of a country.

Haifa Aboobacker – Author Bio

Haifa is a growth assistant at  AirTract.Com, a go-to place for all expert advice wherein people ask questions, write articles, publish and learn from paid and free online courses.
She is a communication engineering graduate but a digital marketing buff who is fascinated by the best SEO practices and content strategies. She loves to make friends and explore places, and she chooses reading in her time off.


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