Grandad, What’s a Business?

Grandad, what’s a business? This kind of is a straightforward 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. telegram members buy

Simply put, 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 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 mixture. These companies are often referred to as small , and medium-sized enterprises (SMEs). They will 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). Most these businesses are important and Grandad will notify 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 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 better than expenditure, the big difference is known as a “profit”. In the event income is less than expenditure then the business is said to make a “loss”.

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

Earnings therefore must be a GOOD THING. Not everyone agrees but Grandad will make clear as we go on why profit is a VERY GOOD ISSUE.

There is certainly an in-between consequence which is sometimes called “break-even”, which is not a loss and not a profit. Normally a company 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 spend on schools, the National Well being Service, roads, police, firemen, the Army, Navy and Air Force, old time pensions and so on Our politicians have great ideas how to spend money nonetheless they have no money to spend until businesses create TAX.