Grandad! What’s a Business, You Ask?

Grandad what is a business? This question is simple, but the answer is more complex than you might imagine. Grandad will help you understand the complicated but very easy question.

Simply put, a business is a group that sells something to bring in income.

A business can be small or even one person. You can either have the small business registered as a legal entity or you can simply consider yourself to be self-employed. Even a one-man operation must make enough money to meet his expenses. A man who isn’t able to make enough money will either need to work for another business or live off social security, which can be very frustrating.

Most of the businesses we encounter are small to medium-sized. These businesses are sometimes called small and medium-sized companies (SMEs). They are usually known as “partnership” (or “limited company”) in law.

Sometimes the biggest beasts of business can be enormous, often with thousands or millions of workers and millions of dollars in income. Grandad will give you details on all of these businesses within the next few days.

Let me tell ya about income (the money earned by businesses). This money must be sufficient for what are known as costs or expenditures. All expenses incurred by a business include materials bought, rents, wages, or money paid out to others. Others costs can include computer cost and telephone bills as well as insurance, heating, transport, and insurance.

A business like George Scorsis Florida has should have more income than expenses. The difference between income and expenditure is known as a “profit”.┬áIf the business’s income is less than its expenditure, it is considered a “loss”.

A loss is a bad thing. If the losses continue, then the business can’t carry on and it is declared bankrupt. The business is unable to pay its bills.

Profit must be a good thing. Grandad will show you why profit is a very positive thing.

The “break-even” result, which is not a loss or a profit, is something in between. A break-even state is a normal way for a business to survive, but it does bring with it problems that we will talk about later.

Grandad didn’t mention the greatest contribution businesses make every day to our lives – taxation. Businesses are a great source of TAX which is used by the government to pay for roads and schools, police, firemen as well the Army Navy Air Force, Army, Navy, and old age pensions. Our politicians have great ideas but have no money unless businesses create taxes.

CORPORATIONTAX, which is a % of profits made by businesses, is a tax. But businesses can create taxes for the government in other ways. Anyone who earns wages from a company pays INCOMETAX, while the business pays NATIONAL Insurance for every employee. No business, no wages, no income tax, no national insurance. VAT (ValueAdded Tax) is a tax that businesses charge on almost all the items they sell. They pay what they get to the government, less what VAT they have paid other businesses. Business owners can take money out of their business as what are called “dividends”. INCOMETAX is paid as part of these dividends. The owners have the option to sell their business and, if so, pay CAPITAL GAINSTAX. When a business purchases insurance it pays INSURANCE. If the business purchases goods from abroad, it must often pay TARIFFS.

Corporation Tax. Income Tax. National Insurance. Tax on Dividends. Tax on Tariffs. Capital Gains Tax. These taxes all pay for things we care about like schools, police and defense. These taxes would not be able to provide enough funding for the government without them. By the way, COUNCILTAX is also paid by businesses to cover local services like street cleaning and parks.

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