Business Factors: Location, Size, Global Reach & Taxes

Enterprise and Environment

The company is the central and most important institution of the economic machinery of our society. As such, it requires objectives (e.g., maximizing profit at minimum cost), functions (financial, production, and commercial), and an appropriate organizational structure.

Business Location Factors

• Market Demand: Examine whether the area has interest in the product being offered and investigate the competitive situation.
• Communications and Transport: Consider the available means of transport and whether the location is easily accessible to other companies and customers.
• Labor Market: Check the availability of necessary manpower, whether specialized or not.
• Supply of Raw Materials: Assess the quality, cost, and availability of necessary raw materials.
• Supplies: Gather information on the availability and cost of essential utilities like energy, water, and telecommunications.
• Cost of Construction and Land: Recognize that the price of land and construction varies significantly by location.

Business Dimension

Production capacity is determined by factors such as technology, the number of workers, and market size.

• Internal Growth: Occurs when the firm increases its production capacity through its own resources and operations.
• External Growth: Achieved through acquisition, control, or merger with other companies.

Globalization Considerations

Globalization: Refers to the extension of economic relations between different countries, leading towards the creation of a single global economy.

• Internationalization: The process of opening up business operations to international markets.
• Multinationals: Companies that operate in two or more countries.
• Relocation: The movement of production activities from industrialized countries to developing countries, often seeking lower costs.

Tax Law and Obligations

Fees

Payments made to a public entity in exchange for receiving a specific service.

Tributes

Mandatory payments made to the government as required by law, not necessarily tied to a direct service received by the payer (this category often includes taxes).

Direct Taxes

Taxes levied directly on the income or wealth of individuals or companies.

• Income Tax (Personal): Paid on income derived from work, movable and immovable capital (investments), economic activities, and capital gains.
• Corporate Income Tax (IS): Paid by commercial companies based on their profits.
• Tax on Economic Activities (IAE): A municipal tax paid by those operating a business, artistic, or professional activity.

Indirect Taxes

Taxes paid indirectly when purchasing goods or services, included in the price.

• Value Added Tax (VAT): Applied to the purchase of most goods and services. Different rates (standard, reduced, super-reduced) may apply based on the necessity of the item.
• Transfer Tax (ITP): Paid typically when purchasing property from another private party (as opposed to a new build from a developer, which usually incurs VAT).
• Special Taxes: Excise duties levied on the consumption of specific goods such as alcohol, tobacco, hydrocarbons (fuel), and electricity.