Legal and Regulatory Factors Affecting Business
The legal and regulatory environment plays a very crucial role in determining the success of any businesses. The government imposes taxes among other regulatory measures to promote economic growth and to cushion consumers from exploitation. Therefore, before establishing or when running a business, it is imperative to understand the role of regional tax measures and regulatory measures to determine how they affect your business.
Understanding legal and regulatory measures also help you to adapt to your business environment and to account for all your regional economic analysis.
Tax is one of the legal and regulatory factors that affect business. Tax codes may vary from one country to the other and from one region in a country to the other. They can support a business while other tax restricts certain business operations. The government can also increase or reduce taxes to promote or control economic growth. Increase in tax can affect a business negatively because it reduces consumer spending and vice versa.
It is also essential to note that tax come in form of income tax, individual income tax, corporate income tax, gross receipts tax and fiscal balance tax among others. Therefore, as a business person, it is wise to understand the kind of tax imposed in your location, population and the criterion used to run your business smoothly and profitably.
Trade policies also affect business. They include tax policies, monetary policies, fiscal policy, government policy, regulatory policy and property rights policies. These policies can allow for business growth or prevent growth of business. For example trade policies can prevent free trade in a specific area. Establishing a business under strict trade policies can mean trading in losses.
Politics can affect a business a great deal. This is form of government where political environment determines whether a business will be stable or not. A stable political environment builds investor confidence and boosts the growth of a business.
It is also essential to note that parliament can exert pressure on the government to allow for establishment of certain businesses and closure of others. As a business person, it is therefore, imperative to keep in mind the role of government in creating a stable political environment.
A good government does not allow for politics to affect business. Instead it creates rules and regulations that cushions businesses from political interferences.
What’s more, there are governments that encourage diplomatic events that promote growth of business for the benefit of its people. Such a government creates a good business environment thus, allowing for increased productivity and profitability.
Economic policy of the government also affects business. It is a legal and regulatory factor that helps to promote economic growth in a country. With favorable economic policy, a business can grow enormously without any problem. However, a bad economic policy that restricts businesses and free trade cripples much business.
Other legal and regulatory factory includes high costs of business operations to prevent establishment of certain business. Therefore, before running a business, it is important to consider legal and regulatory factors in your country or location. This will enable you to operate a successful business.
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