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МИНОБРНАУКИ РОССИИ

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Санкт-Петербургский государственный электротехнический университет «ЛЭТИ»

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Е. И. БЕСЕДИНА Н. И. ФИНИОНОВА

BUSINESS ENGLISH

Учебное пособие

Санкт-Петербург Издательство СПбГЭТУ «ЛЭТИ»

2014

УДК 811.111 (07) ББК Ш.143.21

Б53

Беседина Е. И., Финионова Н. И.

Б53 Business English: учеб. пособие. СПб.: Изд-во СПбГЭТУ «ЛЭТИ», 2014. 48 с.

ISBN 978-5-7629-1603-5

Представляет собой вторую часть пособия «Business English» и содержит оригинальные тексты на английском языке, предназначенные для чтения, устного и письменного переводов, а также задания на понимание и обсуждение прочитанного.

Предназначено для студентов 2-го курса экономических специальностей.

УДК 811.111 (07) ББК Ш.143.21

Рецензенты: кафедра теории языка и переводоведения СПбГЭУ; д-р филол. наук А. Г. Минченков (СПбГУ).

Утверждено редакционно-издательским советом университета

в качестве учебного пособия

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1. BUSINESS STRUCTURE BASICS

Lead-in:

1.What types of company do you know?

2.What are the most common in your country?

3.Are there complex reporting requirements?

4.What do you think is the greatest problem when setting up a new business?

Complete the text with the appropriate forms of verbs from the box:

think about elect limit use make provide set up tax classify adopt

Understanding the differences among the different business forms is important. This is a good time 1. ____ professional help, commonly lawyers and accountants, as they will understand some of the unique differences of each time and be able 2. ____ you with the structure that best meets your goals. When 3. ____

this area, most owners have one to five thoughts in mind. The slide shows those common ideas. Prospective owners want a form that is easy to set up, minimizes taxes, limits liability, and 4. ____ the business transferable to others.

How easy is it 5. ____ and operate? Some forms of business are easier to set up and operate than others. This may be an important factor if start-up funds 6. ____.

What are the tax advantages and disadvantages? Different forms of business are taxed differently, and it is important for you to understand how your business will 7. ____. In 1997, the IRS simplified classification of business entities for tax purposes by 8. ____ “check-the-box” regulations. Un der these regulations, a business entity with two or more members 9. ____ either as a partnership or as a corporation. A business entity with one member is classified either as a corporation or as a sole proprietorship. An entity can elect its classification for federal tax purposes by checking the appropriate box. However, some entities, such as corporations, do not have the option of 10. ____ their tax classification.

2. COMPANY TYPES

Of all the decisions you make when starting a business, probably the most important one is the type of legal structure you select for your company.

Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money.

The most common forms of business are sole proprietorship, partnership, corporation and S corporation. A more recent development to these forms of business is the limited liability company (LLC) and the limited liability partnership (LLP).

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Because each business form comes with different tax consequences, you will want to make your selection wisely and choose the structure that most closely matches your business's needs.

If you decide to start your business as a sole proprietorship but later decide to take on partners, you can reorganize as a partnership or other entity. If you do this, be sure you notify the IRS as well as your state tax agency.

Sole Proprietorship

The simplest structure is the sole proprietorship, which usually involves just one individual who owns and operates the enterprise. If you intend to work alone, this structure may be the way to go.

The tax aspects of a sole proprietorship are appealing because the expenses and your income from the business are included on your personal income tax return, Form 1040. Your profits and losses are recorded on a form called Schedule C, which is filed with your 1040. The "bottom-line amount" from Schedule C is then transferred to your personal tax return. This is especially attractive because business losses you suffer may offset the income you have earned from your other sources.

As a sole proprietor, you must also file a Schedule SE with Form 1040. You use Schedule SE to calculate how much self-employment tax you owe. In addition to paying annual self-employment taxes, you must make estimated tax payments if you expect to owe at least $1,000 in federal taxes for the year after deducting your withholding and credits, and your withholding will be less than the smaller of: 1) 90 percent of the tax to be shown on your current year tax return or 2) 100 percent of your previous year's tax liability.

The federal government permits you to pay estimated taxes in four equal amounts throughout the year on the 15th of April, June, September and January. With a sole proprietorship, your business earnings are taxed only once, unlike other business structures. Another big plus is that you will have complete control over your business – you make all the decisions.

There are a few disadvantages to consider, however. Selecting the sole proprietorship business structure means you are personally responsible for your company's liabilities. As a result, you are placing your assets at risk, and they could be seized to satisfy a business debt or a legal claim filed against you.

Raising money for a sole proprietorship can also be difficult. Banks and other financing sources may be reluctant to make business loans to sole proprietorships. In most cases, you will have to depend on your financing sources, such as savings, home equity or family loans.

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Partnership

If your business will be owned and operated by several individuals, you'll want to take a look at structuring your business as a partnership. Partnerships come in two varieties: general partnerships and limited partnerships. In a general partnership, the partners manage the company and assume responsibility for the partnership's debts and other obligations. A limited partnership has both general and limited partners. The general partners own and operate the business and assume liability for the partnership, while the limited partners serve as investors only; they have no control over the company and are not subject to the same liabilities as the general partners.

Unless you expect to have many passive investors, limited partnerships are generally not the best choice for a new business because of all the required filings and administrative complexities. If you have two or more partners who want to be actively involved, a general partnership would be much easier to form.

One of the major advantages of a partnership is the tax treatment it enjoys. A partnership does not pay tax on its income but "passes through" any profits or losses to the individual partners. At tax time, the partnership must file a tax return (Form 1065) that reports its income and loss to the IRS. In addition, each partner reports his or her share of income and loss on Schedule K-1 of Form 1065.

Personal liability is a major concern if you use a general partnership to structure your business. Like sole proprietors, general partners are personally liable for the partnership's obligations and debts. Each general partner can act on behalf of the partnership, take out loans and make decisions that will affect and be binding on all the partners (if the partnership agreement permits). Keep in mind that partnerships are also more expensive to establish than sole proprietorships because they require more legal and accounting services.

Corporation

The corporate structure is more complex and expensive than most other business structures. A corporation is an independent legal entity, separate from its owners, and as such, it requires complying with more regulations and tax requirements.

The biggest benefit for a business owner who decides to incorporate is the liability protection he or she receives. A corporation's debt is not considered that of its owners, so if you organize your business as a corporation, you are not putting your personal assets at risk. A corporation also can retain some of its profits without the owner paying tax on them.

Another plus is the ability of a corporation to raise money. A corporation can sell stock, either common or preferred, to raise funds. Corporations also continue

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indefinitely, even if one of the shareholders dies, sells the shares or becomes disabled. The corporate structure, however, comes with a number of downsides. A major one is higher costs. Corporations are formed under the laws of each state with its own set of regulations. You will probably need the assistance of an attorney to guide you. In addition, because a corporation must follow more complex rules and regulations than a partnership or sole proprietorship, it requires more accounting and tax preparation services.

Another drawback to forming a corporation: Owners of the corporation pay a double tax on the business's earnings. Not only are corporations subject to corporate income tax at both the federal and state levels, but any earnings distributed to shareholders in the form of dividends are taxed at individual tax rates on their personal income tax returns.

One strategy to help soften the blow of double taxation is to pay some money out as salary to you and any other corporate shareholders who work for the company. A corporation is not required to pay tax on earnings paid as reasonable compensation, and it can deduct the payments as a business expense. However, the IRS has limits on what it believes to be reasonable compensation.

S Corporation

The S corporation is more attractive to small-business owners than a regular (or C) corporation. That's because an S corporation has some appealing tax benefits and still provides business owners with the liability protection of a corporation. With an S corporation, income and losses are passed through to shareholders and included on their individual tax returns. As a result, there'sjust one level of federal tax to pay.

In addition, owners of S corporations who don't have inventory can use the cash method of accounting, which is simpler than the accrual method. Under this method, income is taxable when

S corporations can also have up to 100 shareholders. This makes it possible to have more investors and thus attract more capital, tax experts maintain.

S corporations do come with some downsides. For example, S corporations are subject to many of the same rules corporations must follow, and that means higher legal and tax service costs. They also must file articles of incorporation, hold directors and shareholders meetings, keep corporate minutes, and allow shareholders to vote on major corporate decisions. The legal and accounting costs of setting up an S corporation are also similar to those for a regular corporation.

Another major difference between a regular corporation and an S corporation is that S corporations can only issue one class of stock. Experts say this can hamper the company's ability to raise capital.

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In addition, unlike in a regular corporation, S corporation stock can only be owned by individuals, estates and certain types of trusts. In 1998, tax-exempt organizations such as qualified pension plans were added to the list. This change provides S corporations with even greater access to capital because a number of pension plans are willing to invest in closely held small-business stock.

Limited Liability Company

Limited liability companies, often referred to as "Lacs," have been around since 1977, but their popularity among entrepreneurs is a relatively recent phenomenon. An LLC is a hybrid entity, bringing together some of the best features of partnerships and corporations.

LLCs were created to provide business owners with the liability protection that corporations enjoy without the double taxation. Earnings and losses pass through to the owners and are included on their personal tax returns.

Sound similar to an S corporation? It is, except that an LLC offers business owners even more attractions than an S corporation. For example, there is no limitation on the number of shareholders an LLC can have, unlike an S corporation, which has a limit of 100 shareholders. In addition, any member or owner of the LLC is allowed a full participatory role in the business's operation; in a limited partnership, on the other hand, partners are not permitted any say in the operation.

To set up an LLC, you must file articles of organization with the secretary of state in the state where you intend to do business. Some states also require you to file an operating agreement, which is similar to a partnership agreement. Like partnerships, LLCs do not have perpetual life. Some state statutes stipulate that the company must dissolve after 30 years. Technically, the company dissolves when a member dies, quits or retires.

If you plan to operate in several states, you must determine how a state will treat an LLC formed in another state. If you decide on an LLC structure, be sure to use the services of an experienced accountant who is familiar with the various rules and regulations of LLCs.

Another recent development is the limited liability partnership (LLP). With an LLP, the general partners have limited liability. For example, the partners are liable for their own malpractice and not that of their partners. This legal form works well for those involved in a professional practice, such as physicians.

Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws. It makes sense to reassess your form of business from time to time to make sure you are using the one that provides the most benefits.

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Vocabulary

1.Look up the meaning of the words given in the text in bold in a British English dictionary and use them in sentences of your own.

2.Find English equivalents of the following words and expressions in the text; give the context: вычеты из заработной платы, удержание; налоговые послед-

ствия; сказываться на; привлекать средства; обязательство; обладатель; декла-

рация о подоходном налоге; налоговая инспекция; предприниматель; сэконом-

ленная сумма; учет в целях налогообложения, режим взимания налогов; иметь в виду, держать в уме; акционер; оборотный капитал; особый интерес, опасения.

3.Explain: the significance of sole proprietorship, proprietorship, unlimited liability, inventory, limited life, partnership, general partnership, limited partnership, corporation, charter, stock, stockholder, shareholder, dividend, common stock, preferred stock, bond, principal, interest, and double taxation.

4.Main Ideas:

1.Discuss the advantages and disadvantages of the corporation.

2.Critical thinking: how do partnerships support the profit motive of entrepreneurs? What is the relationship between the owners and the employees of the corporation?

5. Drawing Conclusions: When a corporation wants to introduce a potentially profitable but risky product, it frequently sets up a separate company that has its own corporate structure. Why do you think the corporation does it?

3. TYPES OF BUSINESS STRUCTURES

The following are the various types of registered company. Apart from these, a business may be set up as a sole trader (self-employed person), as a partnership or as a limited liability partnership (LLP). Each format has its advantages and disadvantages.

Private companies limited by shares

The vast majority of trading companies are private companies limited by shares. There are over two million such companies registered at Companies House. A private company limited by shares must have the word ’Limited 1 or 'Ltd1 at the end of its name. The main advantage of trading through a limited company is to have limited liability.

Many private companies are very small. There is no minimum capital requirement for a private company and it is commonly less than £100. Approximately 90 %

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of private companies arc small or medium sized companies which means that they can file modified (i.e. simplified) accounts at Companies House, rather than full accounts.

A private company may not offer shares or debentures to the public: only a public company (PLC) may do so.

Public Limited Companies (PLC)

A small proportion of companies are public companies. Such a company must have a name ending in the words 'public limited company' or 'PLC. This type of company is appropriate for larger businesses where shares are intended to be available to the general public. Most public companies are not set up as such but are converted from private ones.

A public company must have a minimum share capital of £50,000, of which at least one-quarter plus any share premium must be paid up before the company can obtain its trading certificate from Companies House and start trading. This is the only type of company which may raise capital by offering securities (shares or debentures) to the public. This is usually done by obtaining a listing on the Stock Exchange or another public market such as the AlternativeInvestment Market.

Public companies are subject to more stringent legal requirements than private companies.

Property Management Companies

A properly management company is a type of private limited company. Such a company will be set up in order to hold an interest in property which is divided into units, each unit being owned separately. A typical example is a large house divided into a number of flats, each flat being owned by one or two people. There will usually be a need for somebody to own the building as a whole, including common parts such as stairways, gardens, access paths etc. Unless there is a landlord retaining this interest, the simplest legal device is for a company to be set up to own the freehold of the property, and for each owner of a flat to have an interest in the company.

Most property management companies are private companies limited by shares with appropriate articles of association, though some are limited by guarantee.

Some property management companies will do no more than hold the title to property and so can be considered as dormant companies under the Companies Acts, allowing pro forma dormant company accounts to be registered at Companies House. This helps keep administration costs to a minimum and is useful where the property is small with little or no routine maintenance which can be arranged between the owners of the flats without involving the company.

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Companies Limited by Guarantee

A company limited by quarantee is private company, very like a private company limited by shares, but it does not have a share capital. It is widely used for charities, clubs, community enterprises and some co-operatives. The vast majority of such companies are non-profit distributing, but they do not have to be.

A company limited by guarantee is registered at Companies House, has articles of association, directors, etc., and is subject to all the requirements of the Companies Acts (except those relating to shares). There are no shares and so no shareholders, but such a company does have members, who meet and control the company through general meetings. The directors are often called a management committee or council of management, etc. but in law are still company directors and subject to all the rules that affect other directors.

Unlimited companies

Many people refer to a sole trader's business or a partnership as an unlimited company, but such businesses are not in fact companies. It is possible to register at Companies House a private company which is unlimited, that is the members accept complete liability for the company’s debts. If the company needs money to pay its debts a call can be made on each of the shareholders to contribute a fixed amount on each share held by them.

An unlimited company has all the other features of a private company limited by shares. It is registered at Companies House, has members (usually shareholders), directors, articles, etc. Its one major advantage is that it is not required to register annual accounts at Companies House.

Limited Liability Partnerships (LLPs)

The limited liability partnership is a comparatively new type of business structure which became available in 2001. It is a hybrid between a private company limited by shares and a partnership. An L.L.P is a separate legal entity conferring full limited liability on its members. It is created by registration at Companies House. There must be at least two members, but there is no upper limit. An LLP is subject to the same rules as a private limited company for the registration of accounts at Companies House, and the auditing of its accounts. The same exemptions from these requirements are available.

The Act does not impose a structure for the management of an LLP. There arc no statutory provisions for general meetings, directors, company secretary, share allotments, etc. As with a common law partnership, these are matters for the LLP

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