Winding Up (Going Out of Business)
Winding up is a business phrase referring to the final steps a business entity takes to cease operations, comply with all financial obligations and distribute the final profits to the remaining owners.
Terminology
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.
Revenue (Sales) Codes
Revenue (sales) codes are unique identifiers for products sold or services rendered. They are used to organize information so management can better understand customer demands and the company’s profitability related to the items sold.
Overhead – General Definition
Those costs not directly tied to the production of revenue are referred to as overhead costs.
Lien – Simple, Business and Legal Definitions
A documented right to property owned by a debtor and granted to a creditor is referred to as a ‘lien’. Although relatively a simple definition, it gets much more complicated when used in various contexts. The word is most commonly used in business and is defined as the right to take property of a borrower when the borrower fails to fulfill their promise to pay the amount borrowed back to the lender.
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 differential between sales price and cost changes add to the overall profitability for the company.
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 use is with original issue discount related to bonds in the market. The second use and most common is as an incentive in business.
Economic Substance Principle
The taxpayer must prove that the underlying economic transaction was not concocted to avoid or reduce tax liability. In the Gregory Vs. Helvering case, the Supreme Court actually uses the word ‘sham’.
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. The simplest and most common is the sole proprietorship . Other forms include partnerships, limited liability company and of course corporation status (S-Corporation is a federal tax option of a corporation). However, two states actually recognize another legal format – business trusts.
Gross, Operational and Net Profit (Differences)
The word ‘Profit’ is used loosely in the business world. Profit refers to the amount earned net of costs in a transaction. The key is defining a transaction.
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 income tax rates. This article is written to explain the older and more traditional meaning of profit shifting specifically as it relates to small business.
