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Reserves and growth - Why the first advance tax payment breaks the neck of many founders

01/02/2024 | by Patrick Fischer, M.Sc., Founder & Data Scientist: FDS

When you start a new business, you can quite easily fall into a trap. It's a trap that many founders don't realize, but that can lead them to ruin their business before they even have a real chance to make it a success. The trap is the first upfront tax payment.

From the beginning, you have to pay taxes. Most businesses pay taxes based on their profits, but it's a different story for new businesses. New businesses must prepay taxes before they even make a profit. This means that you will have to raise a significant amount of money to pay your taxes before you even make a profit.

This can be a real problem for founders who do not have sufficient reserves to make these prepayments. If they don't have the necessary reserves, they have no choice but to take out loans to pay the advance tax payments. This, in turn, can cause them to go into debt before they even have a chance to get established and grow.

Therefore, it is important that founders have sufficient reserves to pay the advance tax payments before they make a profit. If you do not have the necessary reserves, you may have to take out loans to pay the advance tax payments. However, this may result in you taking over your business before you make any money.

For this reason, it is important that founders have sufficient reserves to pay the advance tax payments before they even make a profit. If you don't have the necessary reserves, you may have to take out loans to pay the advance tax payments. However, this can cause them to go into debt before they even have a chance to get established and grow. Therefore, it is important that you have sufficient reserves so that you can pay the advance tax payments without jeopardizing your business.

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