Business Law: Regulation of Business – Essay Example

Business Law: Regulation of Business – Essay Example

The problem of efficiency of state regulation of small and medium businesses in developed economies indicates the main instruments of state regulation of the economy.

Small businesses play an essential role in solving problems of unemployment. In 1980’s, 80% of all new jobs were created by small firms. More than 100 million Americans earn a livelihood with the help of small businesses directly or indirectly. The state gets billions from taxes on small firms’ profits. In early 1990-ies, due to the rapid technological changes and discoveries, new markets have led to profound changes in all economic sectors. Growing labor productivity, reduction of production costs, pressure on the cost of labor – all these circumstances forced large companies to change their structure to establish their position in the world.

The prosperity of small businesses in the U.S. provides largely by regulation from the state. Back in 1953, U.S. Congress created the Administration for Small Business (AMB) on behalf of federal agencies. Its remit is information, advice, and financial support of small private businesses, including start-ups of reference books, pamphlets, responses to practical issues related to business activities. It also shares the experience of most successful existing firms about legal conditions of production, sales, foreign trade and the conditions obtaining preferential loans for home projects.
U.S. President makes an annual report to Congress on the state of small business, based on which lawmakers are developing various programs to assist small businesses. Similar programs are also developed by other government departments (ministries of trade, agriculture, etc.).

In accordance with the federal regulation programs for small businesses, they provide direct and guaranteed loans. Small and medium-sized firms receive direct loans for a certain period of time, but at a lower interest rate than receiving a credit for private sector capital. In granting secured loans, AMB provides government guarantees on the part of borrowed capital (90%) to the lenders (private banks, trading companies, insurance companies, pension funds), which reduces the risk of loans.

There are three main types of corporations that can be created according to the US Law. The closed corporation is often suitable for individuals who want to set up a company by themselves or in a small group of people, most of whom will be involved in managing and owning shares. Open Corporation (General Corporation) is designed for business people, creating a corporation, which will have more than thirty shareholders or offer shares to the public subscription on a significant scale. The third type is S-Corporation, which has become very attractive lately in terms of taxation. The income is counted as if the owners were partners. Losses of the corporation are always transferred to its shareholders.





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