This post was -written by Valentina Albarran, Associate, Norton Rose Fulbright (Caracas)

The abrogated Organic Labor Law (“OLL”) defined Company and Business as follows: “Article 16: For the purposes of the Labor legislation, a Company is a business unit created for the production of goods or services in order to perform an economic activity and obtain a profit”.

In the other hand, the New Labor Law (“NLL”) gives the following definition: “Article 45: For the purposes of this law an entity of work is: a company or unit of production of goods or services made to perform an economic activity of any nature or importance”.

It is obvious that apart from the changing of the terminology, the NLL seems to have dropped the obtaining of a profit as a characteristic part of the definition of the term business. Due to that change, we intend to determine whether the characteristic of the pursuit of making a profit is an intrinsic element of the definition of business, or if on the contrary, an organization that is not pursuing a profit may still be considered a business from the general and regulatory meaning of the expression.

The classical theory of the legal nature of the business states that the employer bears the risks of the labor, due to his propriety of the labor unit. The employer is the owner of the capital, but also owns the fruits of the labor of its employees through the exchange of said work for the monthly salary. Thus, as owner of capital (for the employment contract) is logical that he will bear the profits and losses of the business.

In that regard, we find that from the standpoint of classical liberalism, obtaining a profit is a part of the legal nature of any business; since, the property is one of the essential parts of the company, which not only refers to the ownership of the means of production, but also ownership of the fruits of the work performed by the workers.

From the perspective of economic liberalism, the company has always been considered as the exploitation of labor by a capital for the increase of that capital; under this view, the obtaining of a profit is an intrinsic property of a business, since economic growth and therefore the social development of the community and the State, depends on the use of existing capital, to produce more capital and to generate more businesses and more jobs posts.

However, from the point of view of socialism, the business has a different view, since it shifts from being the exploitation of labor by a capital, to being the means of achieving the State´s objectives, as established on the Article 18 of the NLL. Labor, and therefore, the business; lose their individual character, to become a mean to reach and end, which is not necessarily economical; under this scheme, it may exist a business with a purpose that does not include making a profit.

However, we believe that regardless of the normative theory adopted, any exclusion of a business as a producer of profit is unnecessary. A business in its genesis emerges as the other end of the employment relationship, as the recipient of the productive labor force to achieve, not a social order, but an economic purpose. No law can define the core features of a business; it may simply recognize and give a normative form to a social phenomenon that preceded it widely. Based on these considerations we state that, although Article 45 of the NLL has dropped the profit motive of the definition of the term, a business remains a profit sharing organization.

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