Grandad, What’s a Business?

Grandad, what’s a business? This kind of is an easy question but like many simple questions the answer is somewhat more complicated than you might expect. Complicated but easy to understand if you let Grandad describe. price of gold

This means that, a business is a group of men and women who are joined together to sell something to bring in money, referred to as “income”. 

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 a career in another business or survive social security paid out by the govt and that is no fun whatsoever.

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 , 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 inform you more about all these businesses in the next day or two.

Let me personally tell you now about the bucks 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 costs, If income is higher than expenditure, the big difference is referred to as a “profit”. If perhaps income is less than expenditure then the business is said to make a “loss”.

Making a loss is a negative FACTOR. If losses continue then the business cannot continue to keep is said to be bankrupt. The business is without money to pay its bills.

Income therefore must be a GOOD THING. Not everyone agrees but Grandad will describe as we go on why profit is a VERY GOOD FACTOR.

There is certainly an in-between effect which is sometimes called “break-even”, which is not a loss and not a profit. Normally a small business 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 spend on schools, the National Overall health Service, roads, police, firemen, the Army, Navy and Air Force, old era pensions and so out Our politicians have great ideas how to spend money nonetheless they have no money to spend except if businesses create TAX.

There exists a tax called CORPORATION DUTY which is charged as a percentage of the profit the business enterprise 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 each and every person employed by 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 TAXES is paid as a percentage of these benefits. Finally owners can sell a business to an individual 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 another country, it often needs to pay TARIFFS to the federal government.

Organization Tax, Income Tax, State Insurance, Value Added Duty, Tax on Dividends, Data plans, Capital Gains Tax all assist in paying for things we value such as schools, police, defence and the National Health Services. Without these taxes the government would not have enough money to cover these things. By the way, businesses also pay AUTHORITIES TAX which pays for local services such as street cleaning, parks, playgrounds and many other things we take with no consideration.

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