Methods of Government Regulation of Business & Reasons

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Hello welcome to this hall on the topic: Methods of Government Regulation of Business, Reasons for regulating business and examples.

Table Of Contents

  1. Methods of government regulation of business.
  2. Reasons for government regulation of business.
  3. Revision Questions

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Government Regulation of Business

The government lays down certain rules and regulations that will help to control and regulate business activities in the country. There is need to ensure uniformity in commercial policies and to regulate business activities so as to encourage smooth operations because of the inherent intricacies and complexities in the commercial world.

Methods of Government Regulation of Business

They are various ways by which government regulates business. These include:

1. Business license/registration: Under the company act, all business must be registered either as sole trading, partnership, public company or co-operative. In Nigeria, it is mandatory for all business enterprises to be registered with the Corporate Affairs Commission (CAC) before commencing operation. A certificate of incorporation will be issued to any business Incorporated. Such organization must abide by the provisions of the company and allied matters act.

2. Patent Rights: This is an exclusive right granted by government to a person to make use or sell and invention for a certain period of years. This gives the owner some degree of Monopoly of the invention. Nobody can make use of such invention without permission from the right owner. This is to encourage innovation and allow the inventor to recoup his research cost, e.g, rights is given to Henry Ford to produce Ford automobiles.

3. Trade marks: Trade mark is a distinctive symbol, specially Mark or design that is given to a producer to distinguished or identify its products from other products. It is a form of product differentiation. Trade mark is a legal term covering words and symbols which can be registered and protected. Once a producer has registered a trademark, any infringement will attract the wrath of the law. Examples of trade marks are JIK, Parozone; all are different trade marks for cleaning or washing materials.

4. Copyrights: This is an exclusive or sole right granted to writers of literary works (authors), musicians and artists to produce his work for a specified period of time. Another person cannot reproduce such work without a written permission from the copyright owner. Literary copyright will last for 50 years after the death of the author while musical right will last only for 50 years after it release.

5. Approval of Business location: Government can also control and regulate Business by giving approval for the location of a business Enterprise. Sometimes they do this by establishing industrial estates.

6. Publication of account: Public liability companies are mandated to publish their annual accounts for public consumption. This is to prevent fraudulent practice.

7. Taxing company’s profit: Business can also be regulated by introducing tax on the profit of some business enterprises while poor companies may have their tax reduced through concession in order to encourage them.

8. Use of standard weight and measures: All business enterprises are mandated to use standard weights and measures for the product offered for sale, e.g, in soft drinks industry, there are 25cl, 30cl, 35cl measures.

9. Ensure production of safe goods: Another way is to ensure that goods offered for consumption are safe and of high quality.

10. Regulation of disposal of waste: Businesses are also mandated to introduce measures to dispose their waste in such a way that there will be no environmental pollution.

11. Regulation over ownership of business: Ownership of business can also be regulated through some policies like indigenization, commercialization and privatization.

Reasons for Government Regulation of Business

  1. To ensure uniformity in commercial and economic policies
  2. To ensure industrial harmony between the employers and workers
  3. To ensure provision of quality products
  4. To ensure regular supply of essential goods and services.
  5. To ensure the development of the economy
  6. To raise revenue through imposition for certain purposes, e.g, in Nigeria, companies are paying educational tax are value added tax (VAT).

Quick Revision Questions for Students

  1. Explain four ways or Methods of government regulation business
  2. List six reasons for government regulation of business
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