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What are the Different Types of Illegal Businesses?

By Gregory Hanson
Updated May 16, 2024
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An illegal business is one that breaks the laws of the nation or region in which it operates, and the laws that govern business activity vary greatly from nation to nation. There are no universal standards for business activity, but generally speaking, businesses that trade in illegal goods or services are considered illegal businesses. Businesses can also break labor laws and standards, rules on transparency, statutes governing anti-monopolistic practices, or even criminal laws.

Perhaps the most widespread forms of illegal businesses are those that relate to the sale of prohibited goods or services. Goods that are legal in one jurisdiction may be restricted in another and prohibited entirely in a third. Alcohol is strictly forbidden by law in Saudi Arabia, and so, the many businesses that sell liquor there are clearly illegal. Other nations tax or regulate the sale of alcohol, so distilleries and liquor stores can operate legally as long as they comply with laws governing the purity, strength, safety, and taxation of liquor. Some illegal businesses, such as sales of moonshine, seek to circumvent these restrictions, and operate outside of the law.

Nations and states often establish labor standards and practices. These vary widely from nation to nation. Germany offers strong protections to its workers, for example, unlike most nations in the developing world. The violation of these labor laws is another form of illegal business. Such violations include practices such as forced unpaid overtime or the hiring of workers, often illegal immigrants, who are not legally allowed to work in that country.

In other cases, illegal businesses break the law by intentionally providing false information about themselves, their assets, and their activities. Most western nations have laws requiring businesses to follow strict accounting practices. When a company, such as Enron, fails to follow these rules regarding information and transparency, it is breaking the law. Corporations may also break the law by sharing information too freely with one another. Many nations have laws that prohibit anti-competitive practices such as price fixing among rival corporations.

More extreme examples of illegal businesses exist in the world as well. In post-Soviet Russia, collusion between financial interests and organized crime was commonplace, and businesses large and small needed protection, known colloquially as a ‘roof,’ in order to operate. This is not a problem unique to Russia. Organized criminals engage in business throughout the world.

The act of business itself is illegal in some countries. In the few strictly communist nations in the world, all private businesses are illegal business, as the state maintains the sole right to engage in economic activity. In other nations, such as Cuba, only a few very limited sorts of business activity are permitted.

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