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Revision Games

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PEST Analysis

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PEST Analysis Explained: Analyzing Political, Economic, Socio-Cultural, and Technological Factors

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Changes in your business environment can create great opportunities for your organization -- and cause significant threats. For example, opportunities can come from new technologies that help you reach new customers, from new funding streams that allow you to invest in better equipment, and from changed government policies that open up new markets.

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Intro to revenue and demand

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Macroeconomic issues in business

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Macroeconomics Defined

Betty is a small business owner of a successful coffee shop in a large metropolitan city. She is thinking about expanding her operations by opening a new shop in another part of town. However, before she takes the plunge, she needs to examine the current macroeconomic conditions to determine whether expansion is a good idea right now.

Macroeconomics relates to how an overall economy works and performs. In other words, it looks at the big picture instead of focusing on individuals. Let's take a closer look at some key macroeconomic factors that Betty should consider before expanding her business.

Unemployment Rate

Betty needs to pay special attention to the unemployment rate, which is the percentage of people in the workforce that are unemployed and actively looking for work. A high rate of unemployment is a mixed bag for Betty but is generally not good for her expansion plans.

A high rate of unemployment may mean that Betty will be able to hire employees at a lower wage. This will save her money and improve her profit margins. However, Betty needs customers with paychecks so they can spend some of that money on espressos, lattes and cappuccinos. In other words, generally speaking, since people that are unemployed don't have much, if any, disposable income, high unemployment tends to lower demand for goods and services, which hampers economic growth and business expansion.

Inflation

Betty also needs to pay attention to inflation, which is the general rate of price increase in an economy. If the inflation rate is high, the costs for goods and services will increase. If the inflation rate is too high, people may decide to change their purchasing decisions.

For example, if the price of the premium coffee beans Betty buys increases significantly, she'll have to either increase her prices or take a hit on net revenue. If she increases her prices too much, she may lose customers who decide to purchase cheaper java elsewhere or make it at home.

Economic Output

Betty will also want to pay attention to the rate of growth or decline in the economy's economic output, which is measured by the gross domestic product (GDP). GDP is the total value of all goods and services produced in an economy during a specific period of time. If an economy's output is growing, this means that people are employed and spending money and businesses are investing. If an economy is declining, unemployment tends to increase and investments decline. Betty wants to see economic expansion so there's more money and customers in the market to buy her coffee.

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macroeconomic issues in business - video & lesson transcript | study.com

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Macroeconomic Issues in Business - Video & Lesson Transcript | Study.com

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Betty is a small business owner of a successful coffee shop in a large metropolitan city. She is thinking about expanding her operations by opening a new shop in another part of town. However, before she takes the plunge, she needs to examine the current macroeconomic conditions to determine whether expansion is a good idea right now.

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How the stock exchange works

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How The Stock Exchange Works (For Dummies)

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Shares

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What are dividends?

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Dividends

Corporations have owners. The owners are known as shareholders or stockholders because they each own shares of stock in the corporation. Stock is a type of security that represents ownership in a corporation. A shareholder can own one share of stock or many shares. The stock signifies a claim on a portion of the corporation's profits and assets. When a corporation earns profits, it can keep those earnings and reinvest the money in the corporation in order to promote growth. Many small or new companies reinvest profits.

Otherwise, the corporation can distribute all or some of the profits in dividends. A dividend is a distribution of corporate profits to the corporation's shareholders. Dividends are normally paid on a quarterly basis; however, a distribution will be dependent on profits and must be approved by the corporation's board of directors. Dividends can be paid in the form of cash or a deposit directly into a shareholder's brokerage account. These are known as cash dividends. Dividends can also be distributed by issuing additional shares of stock. These are known as stock dividends.

Note that dividends are usually distributed to shareholders per share. This means that shareholders receive varying amounts depending on the number of shares each owns. Dividends can also be distributed as a dividend yield. These dividends are paid as a percentage of the current market price of the stock.

For example, let's say that Andrew owns 20 shares of stock in ABC, Inc. The ABC board of directors approves a dividend distribution. It will be paid in the form of cash dividends, paid at a rate of $5.00 per share. ABC will therefore issue payment to Andrew in the amount of $100.00. Now let's take a look at the two main types of stock. Stock is most often issued as either common stock or as preferred stock.

Common Stock

Common stock is ordinary, everyday stock. The majority of stock is common stock. Common stock simply represents an ownership in the corporation and a claim to a portion of the corporation's profits. Common stock shareholders typically receive one vote per share at annual meetings. The corporation's board of directors is elected at these meetings. The board of directors represents the shareholders and oversees major corporation decisions. Common stock shareholders may also vote on other corporate issues, like stock splits.

Additionally, common shareholders sometimes have preemptive rights regarding new stock offerings. When a corporation issues new stock, these shareholders may have the first right to purchase new shares. This helps protect a shareholder's proportional ownership of the corporation.

The main advantage to common shareholders is that common stock often yields a higher return than other types of investments. The main disadvantage is that common stock is a risky investment. Also, in a corporate bankruptcy, common shareholders won't receive proceeds until creditors and preferred shareholders are paid.

Preferred Stock

Now let's turn to preferred stock. Preferred stock also represents a shareholder's ownership in a corporation. However, these shareholders are normally assured a fixed dividend distribution throughout the life of the corporation.

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what are dividends? - investing in stocks - video & lesson transcript | study.com

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What Are Dividends? - Investing in Stocks - Video & Lesson Transcript | Study.com

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Corporations have owners. The owners are known as shareholders or stockholders because they each own shares of stock in the corporation. Stock is a type of security that represents ownership in a corporation. A shareholder can own one share of stock or many shares.

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Shareholders, boards of director and officer roles

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Corporations

One of the most popular business structures is the corporation. A corporation is a complex business structure where the business is a separate entity from the individuals that run the business. A corporate structure involves various individuals working in several different management roles.

For the most part, a corporation must have shareholders, directors and officers. These individuals form the corporate hierarchy. The shareholders elect the directors, and in turn, the directors employ the officers. Let's take a separate look at each of these corporate positions.

The owners of an incorporated business are known as shareholders. The corporation must be operated in a manner that best benefits its shareholders. A shareholder can be a person, company or other entity. It's any entity that owns at least one share of a company's stock.

Although shareholders don't play an active role in the everyday business operations, they do have certain rights and duties that will be defined in the company's bylaws. Generally, shareholders have the right to:

Attend the corporation's annual meeting

Inspect the corporation's books and records

Vote on the appointment of directors and other corporate matters

Sue the corporation for wrongs committed by directors or officers

Approve the sale of company assets

Share in the proceeds if the company liquidates

Agree to merger or consolidation deals

Receive a portion of any dividends issued by the company

Since the corporation is an independent entity from the shareholders, the corporation is held legally liable for its own business debts, taxes and liabilities. The shareholders typically don't bear these burdens as individuals. As owners of the business, shareholders do well if the company does well. Conversely, shareholders lose money when the company loses money.

For example, let's say that Damon buys three shares of stock in his favorite company, Doughy's Donuts. That makes Damon a shareholder in Doughy's Donuts. Damon is now invited to attend the annual meetings, can vote on the board of directors and enjoys several other shareholder rights.

Board of Directors

Now let's take a look at the board of directors. The directors are the managers, or trustees, of the corporation. The shareholders elect the board of directors. Generally, the corporation's bylaws will set out how many directors the corporation should have.

The directors aren't agents of the shareholders, but they do owe the shareholders a fiduciary duty. This means that the directors are required to act in the best interests of the shareholders. As the managers, directors serve as the major decision makers for the company. They work as a committee and decide such key things as what executives will be hired or fired and when corporate dividends will be issued. Unlike shareholders, directors can be held individually liable for corporate activities for which they had some responsibility.

For example, let's say that Darcy and Doug are elected to serve on the board of directors at Doughy's Donuts. They then hire their cousin Daniel to serve as president of Doughy's. Daniel has no experience and no idea what he's doing. Doughy's loses so much money that it must file for bankruptcy. Shareholders, like Damon, lose money as a result. Darcy and Doug can be held personally liable for their negligence.

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board of director & officer roles - video & lesson transcript | study.com

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Shareholder, Board of Director & Officer Roles - Video & Lesson Transcript | Study.com

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One of the most popular business structures is the corporation. A corporation is a complex business structure where the business is a separate entity from the individuals that run the business. A corporate structure involves various individuals working in several different management roles. For the most part, a corporation must have shareholders, directors and officers.

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Why go limited?

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http://www.cliqvid.com As a sole trader you may wonder what the benefits are of setting up a limited company. When you trade as a limited company your personal liability is limited. This means if your company goes bust the maximum you can lose is the amount you put into the company or have guaranteed for the company.

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Social enterprise (not for profit

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Interview with Big Issue founder - John Bird

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Interview with an Entrepreneur - Meet the founder of the Big Issue John Bird.

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Business structures revision

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Different types of business

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Choosing the right business structure

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Startups.co.uk: Starting a business advice and business ideas

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You're ready to start your new business, but have you considered how the decisions you make now will affect its growth? One of the earliest is company structure: we look at the pros, cons, ongoing filing and tax associated with the four main start-up structures, to help you decide which is right for you.

Unless it's part of the business plan to raise significant funds on the stock exchange within a defined period, you probably won't want to start off as a public limited company (PLC), so it's a four-way crossroad: become a sole trader, form a partnership, or incorporate a limited liability company or partnership (LLP) at Companies House.

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There are other models, including Community Interest Companies and co-operatives, offshore companies and franchises, but here we will focus on the most commonly chosen routes. Having looked at all the options, it's a good principle to start out with the simplest structure your business plan will allow. You can easily change to a more sophisticated model as the business scales up.

The pros and cons of registering as a sole trader

An attractive option for many who start their own business without huge stashes of cash, or a strong likelihood they'll raise even bigger amounts of finance, the 'sole trader' badge is often worn by 'one (wo)man bands' such as professional photographers, independent hairdressers, or those in construction and business-related services.

Despite the name, you are able to employ staff should you so wish - but will need to make sure you adhere to the rules and regulations of employing someone as a sole trader.

As a sole trader any decisions you make will be instant, ideal if you have been frustrated by having to convince colleagues or board members while competitors steal your market advantage. More importantly, everything you make belongs to you alone (after tax).

The advantages of registering as a sole trader

If you are not going to employ anybody you will probably be best as a sole trader. This is because:

1. There are no dues or fees to register

2. You can go straight out and order your business cards.

3. Most new businesses are set up this way - it is easy

4. It is inexpensive

5. There is very little in the way of red tape.

The disadvantages of registering as a sole trader

However, on the flip side, the law makes no distinction between the business and its owner: liability is unlimited, meaning any business debt can be met from the owner's personal wealth if the business fails.

Meanwhile, the business won't usually continue in the event of the sole trader/owner's retirement or death. As a sole trader, your profits are taxed as income by HMRC, and as you are self-employed, your tax will be self-assessed. But you should be no worse off than you were as an employee.

Initially you will feel better off because many expenses such as business travel and some cost of your premises, even if you are working from home, are tax-deductible. You will have to register for self-assessment with HMRC and fill in a tax return each year, but the paperwork more or less ends there.

It's when the business starts to grow that the problems of being a sole trader emerge. Since your profits are taxed as income you will be paying 40% as soon as they top £41,865 and 45% above £150,000. So taxation is a risk, but even greater is the risk of liability.

When and why should you register as a sole trader?

If yours is a low-cost start-up and you are not likely to need to borrow to grow the business then this may not matter too much, but it can't be stated too many times that as a sole trader you alone pick up the bill for any commitments made in the name of the business.

Being a sole trader can be a lonely and exposed position. The advantage of being a sole trader or 'your own boss' is counterbalanced by not having anyone to validate your path. You are liable for debts, but also future liabilities. If you are sued you might go bankrupt: as with personal debt your assets - your house and family - are exposed.

Business legal structure checklist and comparison table

Sole trader
Exclusive owner of the business, entitled to keep all profits but liable for all losses

Low cost, easy to set-up

Full control retained

Very little financial reporting

Full liability for debt

Pay more in tax

Lacks credibility in market

Partnership
Between two or more individuals who share management and profits

The above, but with more heads

More potential to raise finance

The above, affecting all partners

Can be messy to wind up

Limited company
Private company whose owners are legally responsible for its debts only to the extent of the amount of capital they invested

Less personal financial exposure

Favourable tax regime

Ability to work for corporate clients

Administrative and regulatory demands heavier

Annual accounts and financial reports must be placed in public domain

Limited liability partnership (LLP)
Some or all partners have limited liabilities, and exhibits elements of partnerships and corporations

Flexibility: can be incorporated in members' agreement

Advantages of limited company and partnership combined

Profit taxed as income

Partners must disclose income

LLP must start to trade within a year of registration - or be struck off

Forming a partnership

A partnership is for you if you are offering services with people you know well. Many building and domestic services firms are either sole traders or partnerships, but bear in mind that if you hope to gain sub-contract work from larger companies you may need to incorporate to satisfy their guidelines.

Partnerships are a very common extension of the sole trader model, for example when two individuals or a husband and wife work together to build the business. The partnership is just as flexible, has the benefit of two or more heads, and the business won't collapse if one of you is sick or needs a holiday.

There has to be an agreement as to how the liabilities, ownership and profits of the business are split and what happens if one partner wants to leave, which should be enshrined in a partnership agreement. However, the only legal requirement, as with a one-person business, is that each partner is registered as self-employed and puts in a separate tax return.

In a standard partnership, as with sole traders, all partners are also responsible for all the debts owed by the business. This doesn't only apply to debts you have incurred as a partner but to those of any partner, so you need to pay particular care to the conduct of the people you go into business with.

A partnership like this is 'unlimited', and as such is a very different animal from a limited liability partnership (LLP), which we look at below. But in both cases your share of the profit will be taxed as income.
In addition, if your profits are over £5,885 you will have to pay Class 2 National Insurance contributions (NIC) at a rate of £2.75 per week; you can apply for an exception if your net earnings are below this.
If your profits are over £41,865 your will also start paying 9% of your profits between £5,885 and £41,865.

Incorporating a limited liability company (Ltd)

Incorporating means registering a limited company or LLP at Companies House: it's a move that will lend credibility to the business. It may also make it easier to borrow money when the time comes. But do look carefully at your motives: being the managing director of a limited company may bring status, but you may regret the move when struggling with the year-end accounts.

Once you register at Companies House as a private limited company you are letting yourself in for more administration. But it is not as daunting as it used to be - these days you can be the sole shareholder and director, and act as company secretary too (although appointing a company secretary is no longer a legal requirement).

Most private limited companies are owned by their shareholders and are limited by shares. This means that the face value of their share in the business is the most they can be called on to pay if things go wrong.

The great advantage of limited liability is that you can control your exposure to financial risk. There's a firewall between your money and the company's. This is because a limited company is a separate legal entity to the company directors, therefore it is the business itself that shoulders the financial liability if the business goes under. Your home, your family and your lifestyle are protected.

The tax regime is more favourable to a registered company than to a sole trader. Limited companies pay corporation tax on their profits and their company directors are taxed as employees in the same way as other people who work for the company. The UK small profits corporation tax rate, applied up to £300,000, is 20% for the corporation tax year beginning 1 April 2014 and 21% above this ( different rates apply to different financial years). But in a limited company profit there is also a firewall between profit and your income: you will have to pay income tax on the salary the business pays you.

Once you are trading, you will be required to submit full statutory accounts and a company tax return to HMRC each year, as well as making monthly or quarterly payments of employees' income tax (PAYE) and NICs.

You will also have to file statutory accounts and an annual return to Companies House, although small and medium-sized companies (with a turnover of less than £5.6m) can submit an abbreviated version. Here is a handy checklist to help you keep on top of your tax and accounts.

Before you can start trading, you need to officially register your limited company, decide on the company officers and choose a name for your business. Then, once you've filed the correct documents with Companies House, you are ready to go. If this sounds like the right move for you, read our step-by-step guide to setting up a limited company.

Incorporating a limited liability partnership (LLP)

LLPs are Britain's newest business vehicle especially suited to professional services companies. They may be seen as a hybrid between limited liability companies and traditional partnerships, in that they offer the limited liability available to limited company shareholders combined with the tax regime and flexibility available to partnerships. The number of partners is not limited but at least two have to be 'designated members' responsible for filing annual accounts.

Just as with a limited company the LLP model protects its members' assets, limiting their liability to however much they have invested in the business and any personal guarantees they may have given when raising loans. But it doesn't give you the same tax advantage.

As in an ordinary partnership, the members' share of profit is taxed as income - each member has to register with HMRC as self-employed. LLPs also have to register at Companies House and there should be a members' agreement stating what share of the profit each member should receive.

If the business you are starting is in the financial services space, for example, and you are hoping to grow it by attracting other professionals to join you it may be worth considering an LLP from the outset. It has been adopted with enthusiasm by some of the largest accountancy and law practices in the UK.

How to register your company and become a sole trader or limited company

We've chosen to partner with Smarta, an approved e-filing partner of Companies House. Smarta offer a number of online formation services for first-time formers and serial entrepreneurs alike.

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Sole trader or limited company? How to choose the right business structure

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You're ready to start your new business, but have you considered how the decisions you make now will affect its growth? One of the earliest is company structure: we look at the pros, cons, ongoing filing and tax associated with the four main start-up structures, to help you decide which is right for you.

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Business structures

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BBC - GCSE Bitesize - Business Studies - Business structures - Video

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A secondary school revision video for GCSE Business Studies about business structures

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Peter Jones Meets... Entrepreneurs

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BBC Two - Peter Jones Meets... - Episode guide

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Peter Jones interviews the country's most successful and inspirational business giants

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Revenue and profit

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Revenue Recognition Principle and Matching Principle

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Accounting and Finance - Profit and Revenue

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Accounting and Finance - Profit and Revenue

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Mission, aims, objectives and stakeholders revision

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Objectives

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An overview of the likely objectives of a new business

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What is a business?

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BBC - GCSE Bitesize - Business Studies - What is a business? - Video

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A secondary school revision video for GCSE Business Studies about what businesses are