Under Article 2 of the Civil Code, entrepreneurial activity is independent activity, carried on at one's own risk, aimed at the systematic receipt of profit from the use of property, the sale of goods, the performance of work or the provision of services. The statute therefore states directly that negative legal or economic consequences, or both, may follow from carrying on business. Such risks may be formally defined or abstract. They may be objective or subjective, that is, they may or may not depend on the will of the entrepreneur. They also differ in how likely they are to materialise. This note deals with the subjective risks connected with the choice of a counterparty and with modelling how it may behave in the performance of the transaction, and with assessing how likely those risks are and how they can be reduced.
The first task is to settle a common understanding of what it means to choose a counterparty and to check one. A view has unfortunately formed in the business community that one should choose whoever offers the most advantageous terms. The laws of economics, and the aims of business itself, dictate that approach. An equally important part of choosing a counterparty, though, is to model how the counterparty may behave while the transaction is performed. If the counterparty that offered the most attractive terms turns out to be an unscrupulous participant in the market, the probability that the entrepreneur will receive what he was entitled to count on when he entered into the transaction falls substantially, and sometimes falls to zero. The point applies not only to the civil-law side of the transaction, but also to the tax relations that arise from it.
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