Grandad, what’s a business? This kind of is a straightforward question but like many simple questions the answer is a lttle bit more complicated than you might expect. Complicated but easy to understand if you let Grandad clarify.
Simply put, a business is a group of folks who are joined together to sell something to bring in money, referred to as “income”. Benny Cenac Business
A business can be extremely small, even just one person. This small business can have a legal form or the person can just consider himself (or herself) to be “self-employed”. Even an one-man business must bring in enough money to pay for his living costs. Otherwise he will need to get work in another business or go on social security paid out by the govt and that is no fun by any means.
The size of business that we meet most often is as small as two or three up to as many as mixture. These companies are often referred to as small , and medium-sized enterprises (SMEs). That they normally have a legal status such as “partnership” or “limited company”.
The big beasts in the industry new world can be very large indeed, often with hundreds of employees and many millions of pounds income and are usually “Public Limited Companies” (PLCs). Every these businesses are important and Grandad will notify you more about all these businesses in the next day or two.
Let myself tell you now about the cash earned by a business, called “income”. This kind of money must be enough to cover what are called costs or “expenditure”. Costs are all the expenses that the business incurs: the materials the business might have bought, rents, wages and money paid to other people. Costs range from a total lot of other things such as computer cost, telephone bills, insurance, heat, transport etc.
The idea of a business is the fact income should be more than expenses, If income is increased than expenditure, the big difference is referred to as a “profit”. In the event that income is less than expenditure then the business is said to make a “loss”.
Making a loss is a poor ISSUE. If losses continue then the business cannot continue to keep is said to be bankrupt. The business is without money to pay its bills.
Revenue therefore must be a GOOD THING. Not everyone agrees but Grandad will make clear as we go on why profit is a VERY GOOD FACTOR.
There exists an in-between end result which is sometimes called “break-even”, which is not a loss and not a profit. Normally an enterprise can survive in a break-even state but it brings problems that we can speak about later.
Grandad has not yet described the greatest contribution that businesses make to all existence – TAXATION. Businesses are a rich source of TAX, which our government needs to purchase schools, the National Well being Service, roads, police, firemen, the Army, Navy and Air Force, old age group pensions and so up Our politicians have great ideas how to spend money nonetheless they have no money to spend except if businesses create TAX.
We have a tax called CORPORATION TAXES which is charged as a percentage of the profit the organization makes. On the other hand businesses create tax for the government in many other ways. Everyone who gets wages or an income from a business pays TAX and the business pay NATIONAL INSURANCE for every single person earning a living for the business. No business, no wages, no income duty, no national insurance. Businesses charge VAT (Value added tax) on most things they sell They pay what they accumulate (less what VAT they have paid to other businesses) to the government. Owners of a business can take money out of the business in the form of what are called “dividends”: INCOME LEVY is paid as a percentage of these benefits. Finally owners can sell a business to a person else and if they do, they pay CAPITAL GAINS TAX on the sale. If a business buys insurance, it compensates INSURANCE TAX. If it buys goods from in foreign countries, it often must pay TARIFFS to the us government.