Question

If you currently own a business or are thinking about starting a business. What are defensive actions you would take to protect your business against some of the perils over which you have minimal control (taxes, interest rate, etc.)? Please I need a mini essay thanks

Answer 1

When an entrepreneur decides to start a business then the following things should be taken care of:

a) There should be a proper business plan to start the business. The plan should be based on proper research of the existing market conditions.

b) The plan for the finances is also required. This includes the sources of finance that the company will require to fund the business. A list of the costs of the business operations should be maintained.

c) There are certain financial factors that are beyond the control of the entrepreneur. Some of them are Interest rates, Inflation and Taxes.

Interest rates: The change in the interest rates is a major challenge for companies. It can be avoided by opting for fixed rate loan. In such a situation the company will not have to be worried about the changes in the interest rate affecting their loan repayments. If a company has international trade then the company will face interest rate risk. To protect oneself from such risk, the company can opt for interest rate swaps.

Taxes: Every company has to pay taxes to the government. As a start-up, a company may not be required to pay high amount of taxes i.e. it might be given some tax concessions and tax holidays. But an entrepreneur should be prepared to pay taxes to the government. The company should be able to show all its income in an honest manner. Proper planning is required for the company to plan its taxes.