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Contractual and Legal Issues Impact on the Management for Small Businesses Essay

The difference between the USA and the UK in legal structures and contractual law is very pronounced. The continental European legal systems are very different from the US federal/state legal systems (the only US state with a legal system similar to the continental European systems is Louisiana). From that view, one is bound to face a lot of differences and hardships in transitions of doing business or growing a company by introducing branches in either of the regions if currently based in one.

In the United Kingdom, there are many legal obligations that may not be mentioned in the contract documents that a small growing company may have to face both in the national and EC region. The big difference comes with the EU lawyers while processing the business documents, they can find the USA business contracts super-long and have difficulties as the European provisions of relevant statutes do provide for all the legal implications of contracts. Unlike the USA where it has to be well established in the contract documents, the UK follows already established legal framework.

The first major step in a document for business across these two regions then would be to put down the choice of law. Although it might seem minor, it will turn out to be of utmost importance when disputes arise. Again, since there are well established law provisions that affect business contracts, the management has to be careful because some terms in the contracts may be overruled by some provisions in the law. Systematic regal requirement is also very important in the USA but in UK, most businesses just carry out deals then do contracts later.

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The culture of modesty in lifestyle has affected the honesty and influenced procedures in business, especially upcoming firms, where new contracts are important to increase clientele. Another major area the gives a huge difference between the two regions in law and business is electronic data handling. In the UK, there has been a lot of encouragement of use of e-commerce to facilitate the growth of SMEs. The legal framework is very strict though on electronic data transfers. Labor laws are also very tricky to review in the American contest if one has to do business in the UK.

The UK labor laws are strict and more demanding, with the best option being to have a lawyer review them for the company before hiring anyone from the region with a contract. In terms of working contracts, small firms may rely on employees’ hard work on holidays and after work hours in the USA. Well, in the UK, the culture is not established that way and if the company wants to benefit from the employees’ performance, then contracting on deliverables rather than time would be a good legal and contractual thought.

The ICT facilities are quite well established with minimum regulations in the USA. SME’s are using the established ICT facilities to expand and management becomes easy for business in e-commerce. The ease in management is what leads to effective growth of small companies to huge online malls and services providers. The UK SME sector is not that much enlightened in terms of ICT and campaigns are quite high to encourage entrepreneurship and use of technological infrastructure for the growth of the sector.

With this situation in mind, it is possible to perceive that regulation in the UK is and will be less than in the USA for some time. Therefore, small businesses may enjoy support from the government in the UK and EC region than it might in the USA. In the UK, the burden faced by the management of small and medium sized businesses was debated in the March 2005 strategy for better regulation. In November 2005, a new small business policy was presented by the European Commission.

The policy was entitled ‘Think Small First’, aimed to promote entrepreneurship and skills via education and training, improve market access for SMEs, simplify legislation and improve SMEs’ participation in the EU’s major plans in frameworks that promote research and development of the economy. SMEs are taken to be a huge potential for the UK economy for they can form a huge source of employment and therefore are being encouraged in terms of support in training people to ensure a source of labor, as well as ease of legislation.

This brings about a huge difference in the legal requirements and general business environment governing the growth of business in the UK and USA. In the EU, one of the most contested proposals is a potential directive on reduced VAT rates for locally-supplied and labor-intensive businesses, which the Commission presented following intensive lobbying from member states. It would allow all member states to apply a reduced VAT rate of as low as 5% for labor-intensive services – such as hairdressing, house cleaning and renovation, vehicle repairs and restaurant catering – which are mainly provided by SMEs.

In order for small businesses to develop, they have to have the right establishment in legal and contractual form. In this sense, if a small business does not have well established legal conformity and the law of the country does not protect the business against cases like delayed payments, it may face huddles in development. In another sense, the intellectual properties of small businesses can sometimes be under threat from well established enterprises, inhibiting its establishment and future development. The European Commission has looked at this as one of the key areas of promoting the development of SMEs.

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