Business Ownership and tax guide
Sole traders are people who run their business by themselves. Although they may employ people the business is managed by one person. People her provide services like plumbers are usually sole traders. An advantage of being a sole trader is that you can make your own decisions and you can keep a lot more of the profits if not all of them, it is easy to set up, and less money needed. A disadvantage is that sole traders usually work longer hours.Unlimited Liability-if money is not repayed, your things can be reposessed, costs are higher, hard to take a day off.
Partnerships(similair to sole trader)
Partnerships are businesses owned by two or more people. An advantage of this is that the work is shared between the separate parties however this also means that the profits will be shared between everybody, more money can be put into business. A disadvantage of this is if a disadvantage between the owners occur it could jeopardise the business.
A limited company is incorporated, this means they have their own legal identity and can sue or own assets. The ownership Is usually divided up into shares and people who buy these shares are shareholders.These shareholders run the business. The majority shareholder will run the business(50%or more of shares).An advantage of being a limited company is that they can sue against copyright issues as they have their own legal identity. A disadvantage is that it could be very costly if you only have a short term contract.The shareholders are not personally liable for the company’s debts, they can only lose the money they put into the business.You can sell shares to make money.Days off do not affect the business.not all decisions are made by one person so you have more business ideas.
Public limited company:--can sell shares on the stock exchange.
Private limited company:--can only sell shares to friends and family.
A franchise is a joint venture between a franchisor and a franchisee. A franchise is where the franchisee pays for the rights to use the name and methods of the company in their own business. The franchisor usually helps run the business. An advantage is that it would be less risky as people already know about the business and you get help running the business.A disadvantage of franchising is that it is a very high risk investment economically are putting a lot of money forward and paying even more every year, the chief company could go bust and you would lose your entire investment.
Reasons for business start up:
To make profit
Doing what i’m interested in
Cut the commute
Being my own boss
The dream becomes reality
Work to your own deadlines
Allows you to have a 2nd career
What Kind Of Records Does A Company Keep?
It is important for a business to keep records. But what would they keep a record of?
Customer Records-e.g. name and address of customer,what work they did
Financial records-e.g. income/revenue, cost and profit/loss
Where does the money come from to run these?
It is a compulsory contribution to state revenue, set by the government on workers’ income and business profits, or added to the cost of some goods,services,and transactions.
There are a few types of tax you need to know for your exam;
VAT(value added tax)
Added to goods and services and is currently 20% -different governments charge different percentages of tax
Taken off an employee’s salary. This results in less money to spend in the shops.
If you earn less than £10,600 a year then you will not have to pay tax.
national insurance tax
Payments are made by both the employee and the employer. They pay for the cost of a state pension and the national health service. An increase in this tax raises a company’s costs.
Is a tax on company profits. A rise in this tax means companies keep less of their profits leading to less company investment and the possible loss of jobs. Currently 20% You only pay corporation tax if you are a LIMITED COMPANY!