Business & Corporate Law
Business formation, corporate governance, mergers, acquisitions, and commercial transactions.
Overview
Business and corporate law governs the formation, operation, and dissolution of business entities, as well as the legal relationships among owners, managers, employees, creditors, and other stakeholders. This area encompasses entity formation (LLCs, corporations, partnerships), corporate governance, securities regulation, mergers and acquisitions, commercial contracts, and business disputes.
Business entities are primarily creatures of state law. Delaware, Nevada, and Wyoming are popular incorporation states due to their business-friendly laws. The most common entity types are sole proprietorships, partnerships (general and limited), limited liability companies (LLCs), and corporations (C-corps and S-corps). Each offers different combinations of liability protection, tax treatment, and governance flexibility.
Corporate governance involves the internal rules and practices by which companies are directed and controlled. Key issues include fiduciary duties of directors and officers (duty of care and duty of loyalty), shareholder rights, executive compensation, and compliance programs. For publicly traded companies, federal securities laws (Securities Act of 1933, Securities Exchange Act of 1934) impose extensive disclosure requirements, insider trading prohibitions, and corporate governance mandates.
Key Statutes
Delaware General Corporation Law
Del. Code Title 8
The most influential state corporate statute, governing the formation and operation of corporations in Delaware — where over 60% of Fortune 500 companies are incorporated.
Securities Act of 1933
15 U.S.C. § 77a et seq.
Requires registration and disclosure for public securities offerings and prohibits fraud in the sale of securities.
Securities Exchange Act of 1934
15 U.S.C. § 78a et seq.
Established the SEC and governs ongoing reporting, proxy solicitation, tender offers, and insider trading for publicly traded companies.
Sarbanes-Oxley Act
Pub. L. 107-204 (2002)
Enacted after corporate scandals, imposing enhanced financial disclosure, internal controls, and criminal penalties for corporate fraud.
Uniform Commercial Code (UCC)
Adopted in all 50 states
Comprehensive statute governing commercial transactions including sales of goods, secured transactions, and negotiable instruments.
Key Cases
Dodge v. Ford Motor Co.
170 N.W. 668 (Mich. 1919)
Established the principle that a corporation's primary purpose is to generate profits for shareholders.
Smith v. Van Gorkom
488 A.2d 858 (Del. 1985)
Landmark duty of care case holding directors personally liable for approving a merger without adequate deliberation.
Revlon, Inc. v. MacAndrews & Forbes Holdings
506 A.2d 173 (Del. 1986)
Established that when a sale of the company is inevitable, directors must seek the highest price reasonably available.
SEC v. W.J. Howey Co.
328 U.S. 293 (1946)
Defined 'investment contract' (the Howey test) used to determine what qualifies as a security under federal law.
Key Regulations
SEC Regulation S-K
Securities and Exchange Commission
Prescribes non-financial disclosure requirements for public company filings including business description, risk factors, and management discussion.
SEC Regulation D
Securities and Exchange Commission
Provides exemptions from securities registration for private placements, including Rules 504, 506(b), and 506(c).
FTC Franchise Rule
Federal Trade Commission
Requires franchisors to provide prospective franchisees with a Franchise Disclosure Document (FDD) before any sale.
Common Forms
Frequently Asked Questions
What is the difference between an LLC and a corporation?
An LLC offers liability protection with management flexibility and pass-through taxation (profits taxed on owners' personal returns). A corporation has a more formal structure with a board of directors, can issue stock, and is taxed separately (C-corp) or can elect pass-through taxation (S-corp). LLCs are generally better for small businesses; corporations are preferred for companies seeking investment or planning to go public.
Why do so many companies incorporate in Delaware?
Delaware offers a specialized Court of Chancery with business law expertise, a well-developed body of corporate case law, flexible corporate statutes, strong liability protections for directors, and efficient filing processes. These advantages make Delaware the preferred jurisdiction for large companies and startups alike.
What are fiduciary duties?
Fiduciary duties are legal obligations of loyalty and care that directors and officers owe to the corporation and its shareholders. The duty of loyalty requires acting in the company's best interest rather than personal interest. The duty of care requires making informed decisions with reasonable diligence. Breach of fiduciary duty can result in personal liability.
What is a Series A funding round?
Series A is typically the first significant round of venture capital financing after seed funding. Companies usually raise $2-15 million by selling preferred stock to institutional investors. This round typically involves significant due diligence, negotiation of investor rights (board seats, anti-dilution protection, liquidation preferences), and a formal valuation of the company.
Recent Developments
Business law is rapidly evolving with the rise of ESG (Environmental, Social, and Governance) considerations, beneficial ownership reporting requirements under the Corporate Transparency Act (2024), increasing SEC enforcement around cryptocurrency and digital asset offerings, and new rules on climate-related disclosures. The growth of SPACs, the evolution of remote corporate governance (virtual shareholder meetings), and AI's impact on corporate compliance are also reshaping the landscape.
State Variations
Business entity law varies significantly by state. While Delaware dominates for corporations, states like Wyoming and Nevada offer competitive LLC and privacy-friendly formation laws. States differ in their treatment of benefit corporations, series LLCs, professional corporations, and franchise regulations. Tax considerations also vary — some states (Texas, Nevada, Wyoming) have no state corporate income tax, while others (California, New York) impose significant taxes and compliance burdens.