Grandad, tell me about a business. Although this is a straightforward question, the answer is more complex than you think. Grandad will explain the complex but straightforward answer.
A business, simply a group of people working together to make money, is called “income.”
One person can own a business or a tiny one. A legal form can be created for a small business, or the owner can consider himself self-employed. Even a single-man business must provide enough income to cover his daily expenses. He will have to find work in another company or live on the social security benefits paid by the government. This is not fun.
We meet businesses of all sizes, from a few to several hundred. These businesses are sometimes called “small and medium-sized enterprises” (SMEs). These companies usually have the legal status of a “partnership” (or “limited company”).
These giants can often be huge in the business world, with thousands of employees and millions of pounds of income. They are called “Public Limited Companies” or “PLCs.” These businesses are all important. Grandad will be sharing more information in the coming days.
Let me now tell you about “income,” the money that a business makes. This money must be sufficient to cover costs or expenses. These are all expenses that the company incurs. They include rent, materials, wages, and money paid to others. Other prices include telephone bills, computer costs, insurance, heating, and transport.
A business’s goal is to make more income than it spends. If payment is higher than expenditure, it is called a profit. A company with less revenue than it expends is called a “loss.”
A loss is terrible. The business will become bankrupt if it continues to lose money. The company has no money to pay its bills.
Profit must therefore be a GOOD THING. Grandad will be able to explain why profit is a perfect thing.
The in-between result is known as “break-even,” It is neither a loss nor a profit. A business can typically survive in a break-even state, but this can bring problems that we will discuss later.
Grandad has yet to speak of the essential contribution businesses make to our daily lives: TAXATION. Our government relies on taxes from businesses to fund schools, roads, police, and firemen, as well as the National Health Service, National Health Service, roads, police, firemen, and the Army, Navy, Air Force, and old age pensions. Although our politicians may have brilliant ideas about spending money, they only have the money to spend if businesses create taxes best site.
CORPORATION TX is a tax that is added to the profits of businesses. Businesses can also create a tax for the government through other means. Every person who receives wages or a salary from any business pays INCOME TX. The company also pays NATIONAL INSURANCE to each employee. No trade, no wages, no income tax, no national insurance. Businesses add VAT (Value Added Tax) to most items they sell. They pay the government what they collect, less any VAT they have paid to other companies. The owners of a business can take money from the industry through what are known as “dividends.” INCOME TX is produced as part of these dividends. Finally, owners may sell their business to another person and pay CAPITAL GAINS TAX. If a company buys insurance, it must pay INSURANCE TX. It often pays TARIFFS to the government when it purchases goods from overseas.
Corporation Tax, Income Tax, and National Insurance contribute to paying for things we value, such as schools, police protection, defense, and the National Health Service. These taxes are essential to the government’s ability to pay for these services. Businesses also pay COUNCIL TX, which helps fund local services like street cleaning, parks, and playgrounds, as well as many other things we take for granted.