Question

2) Analyze the project’s return in the initial business plan. Discuss the effect of possible legal constraints.

Answer 1

A project's return in initial business plan can also be termed as rate of return. It means the amount of return that is earned on the amount of investment made in the business. Setting up a new business plan involves substantial amount of investment. Even if the business starts to earn profit, it takes time to recover the amount initially invested. A project's return helps an investor in estimating the time that will be taken for him to break-even. Analyzing the return helps investor to determine the amount of profit to expect after breaking even.

Many startups undermine the importance of legality in planning the business. Few of the legal constraints are given below :-

1. Business Licensing - Depending upon the type of business there may be need of licensing / permits. At least a business license is needed to keep the business running. The licenses should be obtained through proper means and before starting a business so that the business can run smoothly.

2. Written Agreements - A written agreement is needed to clarify the terms and conditions and rights and obligations of the parties engaged in running the business.

3. Employment Law - Before starting a business the entrepreneur must be aware of several federal and state laws in relation to hiring workforce. They should also comply by the wage rules and rates to be paid to the workforce.