Recent Articles


Business terminology is similar to a dictionary with the exception that the usage imparts the correct meaning on the word. Business terms generally have more than one meaning and depending on the context, determines the correct definition.

Economies of Scale


Of the basic business principles, economies of scale has the greatest impact on profitability over any other business principle.   As an enterprise’s investment is spread over higher volume the cost per unit of production decreases.   The [...]

Discounts – Various Meanings in Business


The term ‘discounts’ is a broad and varied meaning word when it comes to use in business.  It literally has four distinct definitions.  Each definition is used within a certain context of business.  The first and most dollar expensive [...]

Economic Substance Principle


The Internal Revenue Service uses an economic substance test to identify sham transactions that exist solely to reduce or eliminate taxes.    In addition,  the courts use this same doctrine to rule on the legitimacy of activity between two or [...]

Business Trusts


The common law definition of a business is an investment of capital or property by individuals which creates the means to carry on towards the goal of generating a profit.   Every state recognizes different legal formats to conduct business.   [...]

Gross, Operational and Net Profit (Differences)


The word ‘Profit’ is used loosely in the business word. Profit refers to the amount earned net of costs in a transaction. The key is defining a transaction. There is the direct transaction whereby a customer purchases a product and so it [...]

Profit Shifting in Small Business – Internal Shifting


Profit shifting in business is a term with two different interpretations.  The more modern use of profit shifting refers to large multinational U.S. based companies shifting their respective profits to other nations with a friendlier and lower [...]

Leverage in Business


In the simple lever and fulcrum machine the force is magnified onto a load.  The machine creates a mechanical advantage, a form of force amplification.  In business the principle is exactly the same.  Except here we are not moving a physical [...]

Owner’s Draw in Business


When an owner of a small business operation transfers money from the business bank account to their personal bank account the transaction is commonly referred to as a ‘Draw’.  There are other terms but this is the traditional term used.   The [...]

Negative Basis in Business – Tax Shelters


Almost one third of all the small businesses I’ve seen in my career had negative basis.  Most of the owners, actually almost every one of them did not understand what I meant by negative basis.  In private, I would lower my head and shake it in [...]

Capital Gains – Introduction to Fundamentals


When an individual or business sells an asset, the gain or loss is classified into one of two distinct tax groups – ordinary or capital.  The tax classification is strictly tied to the nature of the asset sold.  For most businesses, the assets [...]
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