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 make clear.

This means that, a business is a group of folks who are joined together to sell something to bring in money, referred to as “income”. EMI Research Solutions

A business can be quite 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 go on social security paid out by the federal government 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 blend. 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 commercial 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 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 consist of a full lot of other things such as computer cost, telephone bills, insurance, warming, transport etc.

The idea of a business is the fact income should be more than spending, If income is higher than expenditure, the big difference is known 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 POINT. If losses continue then the business cannot continue to keep is said to be bankrupt. The business does not have money to pay its bills.

Income 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 is certainly an in-between consequence 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 pointed out the greatest contribution that businesses make to all existence – TAXATION. Businesses are a rich source of TAX, which our government needs to pay money for schools, the National Overall health Service, roads, police, firemen, the Army, Navy and Air Force, old time 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.

There exists a tax called CORPORATION TAXES which is charged as a percentage of the profit the company makes. Even so 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 taxes, no national insurance. Businesses charge VAT (Value added tax) on most things they sell They pay what they acquire (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 returns. 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 pays off INSURANCE TAX. If it buys goods from overseas, it often must pay TARIFFS to the federal government.