208 plain-English definitions for the language of formation and compliance. When you see a term underlined in gold anywhere on this site, hover or tap it for a quick definition, or click through to the full entry here.
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| Term | Also known as | Definition |
|---|---|---|
| Accumulated Earnings | accumulated earnings tax | The accumulation of taxable earnings inside a corporation instead of distributing them to shareholders. A corporation with excess accumulated earnings can be assessed a separate accumulated earnings tax by the IRS unless the buildup is supported by a legitimate business need, such as covering a repurchase obligation. The purpose of the tax is to discourage corporations from holding back dividends solely to reduce shareholder income. |
| Acquisition | acquisitions | Obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets. |
| Administrative Dissolution | administratively dissolved · admin dissolution · revoked | An involuntary dissolution of a corporation by an act of the Secretary of State or similar state authority, caused by the corporation's failure to comply with certain statutory requirements; especially the failure to file an annual report, to pay franchise taxes or maintain a valid Registered Agent. |
| Advisory Board of Directors | advisory board | An advisory board of directors are individuals appointed to advise an elected board of directors. This board is not bound by the duties imposed upon elected board members, and the corporation is not required to follow their recommendations. |
| Agent | Anyone who is authorized to act on the behalf of another. A corporation acts only through its agents; therefore, it is important to define what actions an agent is authorized to perform. | |
| Alter Ego | alter ego doctrine | A doctrine of law which disregards the principle of limited liability enjoyed by a corporate entity when it is proven that, in fact, no separate identity of the individual and corporation exists. |
| Amended Certificate of Authority | A document issued by a state to a foreign corporation evidencing that the corporation has amended its original certificate of authority. | |
| Amendment | amendments · articles of amendment · certificate of amendment | An addition to, deletion from, or a change of existing provisions of the articles of incorporation of a domestic corporation or articles of organization for a limited-liability company. An amendment is necessary to formally change the name of an entity or to change the capital stock structure. |
| Annual Meeting | annual meetings · annual shareholders meeting · annual shareholder meeting | A yearly meeting of shareholders at which directors are elected and other general business of the corporation is conducted. |
| Annual Report | annual reports · annual statement · statement of information | A required annual filing in a state, usually listing directors, officers and financial information. Also, an annual statement of business and affairs furnished by a corporation to its shareholders. |
| Apostille | apostilles · apostille certificate · apostilled | An apostille is an official government certification that authenticates a public document so it can be accepted in another country. In the United States it is normally issued by the Secretary of State of the state that issued the underlying document, or by the U.S. Department of State for federal documents. Apostilles are used between countries that participate in the Hague Convention of 1961. Countries outside that convention generally require consular legalization instead. |
| Application for Certificate of Authority | The form filed in many states to qualify a corporation to transact business as a foreign corporation. | |
| Arm's Length Relationship | arm's length · arms length · at arm's length | An arm's length relationship is a term used to describe a type of business relationship a corporation should have with a close associate to avoid a conflict of interest. For example, when you negotiate with your banker or your supplier, any agreement which results will likely reflect market value and commercially reasonable terms and conditions. When you loan money to your son or daughter, you may be inclined to provide much more favorable terms and conditions. The first example would be considered to be an arm's length relationship, while the second example would not. When your corporation does business with or makes loans to corporate officers and directors, the relationship must be at arm's length to avoid conflicts of interest. |
| Articles of Incorporation | certificate of incorporation · corporate charter | The title of the document filed in many states to create a corporation. Also known as the certificate of incorporation or corporate charter. |
| Articles of Organization | articles of formation · certificate of formation · certificate of organization | The title of the document filed in many states to register a limited liability company (LLC) with the state. Also known as articles of formation. |
| Attorney's Opinion | legal opinion · attorney opinion · opinion of counsel | A lawyer's written statement that a certain matter or particular action complies with applicable legal requirements and/or is duly authorized or binding. |
| Authorized Shares | authorized stock · authorized capital · authorized share | The maximum number of shares that a corporation may issue pursuant to its articles of incorporation. |
| Basis | tax basis · cost basis | Basis, a tax and accounting term, is the measuring rod against which gain or loss is measured. With stock, basis is what you pay for stock or the fair market value of property you contribute in exchange for the stock. |
| Bearer Instrument | bearer instruments | An instrument is payable to its bearer when by its terms it is payable to 1) a bearer or the order of a bearer; 2) a specified person or bearer; or 3) "cash" or the order "cash," or any other indication that does not purport to designate a specific payee. Bearer shares are a common example of a bearer instrument. |
| Bearer Shares | bearer stock · bearer share | Shares of capital stock issued payable to "bearer" rather than to a named holder, so ownership transfers by physical delivery of the certificate. Bearer shares are heavily restricted or prohibited in most U.S. jurisdictions today, and publicly traded corporations may not issue them. Because bearer shares obscure ownership, they also interact with federal beneficial ownership reporting. Whether any bearer instrument is permitted depends on the current statutes of the state of formation. |
| Beneficial Ownership Information (BOI) | BOI · BOI report · BOIR | Information about the individuals who ultimately own or control a company, reported to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act. A report generally identifies each beneficial owner and, for newer companies, the company applicant, along with identifying details and an identification document. Who must file, and by when, has changed through rulemaking and litigation since the requirement took effect, so current FinCEN guidance controls. The report goes to FinCEN, not to a Secretary of State, and it is separate from any state annual report. |
| Benefit Corporation | benefit corporations · public benefit corporation · PBC | A for-profit corporation formed under a state statute that expressly allows or requires its directors to weigh a stated public benefit alongside shareholder return. It is still a taxable for-profit corporation, not a nonprofit and not automatically tax exempt. Most benefit corporation statutes require a periodic benefit report. This is different from third-party B Corp certification, which is a private credential rather than a legal status. |
| Blue Sky Law | blue sky laws · blue-sky law · blue sky | A term used to describe state laws and regulations governing the issuance and sale of securities to residents of a state and the licensing and regulation of securities brokers and dealers as well as anti-fraud provisions. These laws protect the public from deceptive securities transactions and vary from state to state. |
| Board of Directors | boards of directors · the board | The governing body of a corporation who is elected by shareholders. The directors are responsible for selecting the officers and the supervision and general control of the corporation. |
| BOC-3 Filing | BOC-3 · BOC3 · Form BOC-3 | The federal form on which a motor carrier, broker, or freight forwarder designates process agents for every state in which it operates. It must be filed with the Federal Motor Carrier Safety Administration before operating authority becomes active, and only a process agent or the carrier itself may file it. One BOC-3 covers all states through the designated agents named on it. |
| Bond | bonds | A long-term debt secured by a mortgage on real property or a lien on other fixed assets. A certificate evidencing indebtedness. It is a legal contract sold by an issuer promising to pay the holder its face value plus amounts of interest at future dates. |
| Business Corporation Act | business corporation acts · corporation code · business corporation law | A business corporation act is the collection of laws in each state that governs corporations. |
| Business Entity | business entities · entity type · entity types | A legally recognized organization through which business is conducted, such as a corporation, limited liability company, limited partnership, or general partnership. Each type differs in how it is formed, who manages it, how owners are exposed to its debts, and how it is taxed. A sole proprietorship is a way of doing business rather than a separate entity, since there is no legal separation between the owner and the business. |
| Business Judgment Rule | A judicial doctrine which shields corporate officers and directors from personal liability for actions taken in good faith and with reasonable care. | |
| Business License | business licenses · business licensing · state business license | Government permission to conduct business, issued separately from entity formation and often at more than one level: state, county, and city. Some jurisdictions require a general license of every business, while others license only particular activities or professions. Forming an entity does not obtain any license, and licenses typically must be renewed on their own schedule. |
| Buy-Sell Agreement | buy sell agreement · buy/sell agreement | An agreement between shareholders of a privately held corporation and the corporation itself, made to govern the operations of the corporation and to define how shares of stock will be transferred. In small corporations, such an agreement can be used to set estate tax value of stock, define what happens if a shareholder is disabled, restrict the transfer of stock to outsiders and other conditions. It can also protect the corporation against a disqualifying act and provide other mechanisms for maintaining and ending S corporation status. |
| Bylaws | by-laws · corporate bylaws | The regulations of a corporation that, subject to statutory law and the articles of incorporation, provide the basic rules for the conduct of the corporation's business and affairs. |
| C Corporation | c corp · c-corp · general corporation | The default corporate form, also called a general corporation, taxed under Subchapter C of the Internal Revenue Code. A C corporation may have an unlimited number of shareholders and more than one class of stock, which is why it is the usual choice for companies that expect outside investment or a public offering. A C corporation pays tax on its own income, and shareholders pay tax again on dividends they receive, a pattern known as double taxation. |
| Calendar Year | An accounting period that begins January 1 and ends December 31. Most S corporations are required to use a calendar year as their tax year unless they qualify for a permitted exception. A company that instead ends its year on another date is using a fiscal year. | |
| Capital Gains Tax | capital gains · capital gain | The tax imposed on the capital gains of a taxpayer. The tax treatment of capital gains and losses depends on whether the gains and losses are long-term or short-term, and on whether the taxpayer is a corporation or not. The long-term and short-term capital gains of corporations are taxable at the same rates as their ordinary income. For non-corporations, the maximum tax rate on net long-term capital gains is lower than the top rate on ordinary income. |
| Capital Stock | capital shares | The outstanding shares of a joint-stock company considered as an aggregate. |
| Carry Forward | carryforward · carried forward · loss carryforward | To offset for tax purposes one period's loss against a subsequent period's net income. Losses which are unused may generally carry over to another year. Such tax benefits may enhance the value of a target to a buyer burdened with high taxes. |
| Carryback | carry back · carry-back · loss carryback | For federal income tax purposes, the portion of a net operating loss applied against income of earlier tax years. The amount applied is absorbed in those years and any remainder is carried forward to offset income in future years. Whether and how far back a loss may be carried is set by the tax rules in effect for the year of the loss. |
| Certificate of Authority | certificates of authority | Formal evidence of qualification issued by a state to a foreign corporation. |
| Certificate of Good Standing | certificate of existence · certificate of authorization · certificate of status | A certificate issued by a state official as conclusive evidence that a corporation is in existence or authorized to transact business in the state. The certificate generally sets forth the corporation's name; that it is duly incorporated or authorized to transact business; that all fees, taxes and penalties owed the state have been paid; that its most recent annual report has been filed; and, that articles of dissolution have not been filed. Also known as a certificate of existence or certificate of authorization. |
| Certified Copy | certified copies · certified copy of articles · exemplified copy | A copy of a document on file with a state, stamped or sealed by that state's filing office as a true copy of its record. Banks, lenders, and foreign qualification filings often require certified copies of articles rather than plain photocopies. An exemplified copy, sometimes called a triple certified copy, adds further layers of certification and is used when a court or a foreign jurisdiction demands more than a standard certification. |
| Charging Order | charging orders | A court order directing that distributions otherwise payable to an owner of an LLC or partnership be paid instead to that owner's personal creditor. In many states it is the creditor's exclusive remedy against the ownership interest, so the creditor collects distributions if and when they are made but does not become a member, vote, or force a sale of company assets. How protective it is varies substantially by state and by whether the company has one owner or several. |
| Close Corporation | close corporations · statutory close corporation | A corporation that elects in its articles of incorporation to be registered under the close corporation statutes of their state of incorporation and whose stock is not publicly traded and held by only a few persons (such as those in management). The organizational structure of this type of corporation must comply with strict statutory requirements and limitations. Some state close corporation statutes provide for a maximum number of shareholders. In addition, close corporation statutes may eliminate or limit the powers of the board of directors, prescribe preemptive rights to the shareholders or relax the corporate formalities. Exact specifications vary by jurisdiction. Not all state statutes provide for a close corporation provision. |
| Closely Held Corporation | closely held company · privately held corporation · privately held company | A closely held corporation is any corporation in which the stock is held by a relatively small group of people, entities, investors, management, founders and/or their families. Stock of a closely held corporation is not publicly traded on any stock exchange. |
| Commercial Registered Agent | commercial registered agents · noncommercial registered agent | A registered agent that has filed a listing statement with a state and appears on the state's roster of agents serving many entities, as opposed to a noncommercial agent such as an individual serving one company. States that maintain the distinction let a commercial agent update its address once for all of its represented entities rather than filing separately for each. The underlying duty, accepting service of process and official notices, is the same either way. |
| Commingle | commingling · commingled · comingle | Commingling, is the sharing and pooling of personal and corporate assets. For example, rather than maintain separate corporate and personal bank accounts, you choose to use one account for personal and corporate purposes. This is considered commingling and an easy way to become personally liable for corporate acts. |
| Common Shares | common stock · common share | A class of shares that has no special features and possesses no greater rights than any other shares except for Preferred Shares. All capital stock except for preferred stock is considered Common Shares. |
| Compliance Calendar | compliance calendars · filing calendar | A schedule of the recurring filings and payments an entity owes in each jurisdiction where it is registered, such as annual or biennial reports, franchise tax, license renewals, and registered agent renewals. Due dates vary by state and by entity type, and several states key the date to the anniversary of formation rather than to a fixed month. Keeping one is how companies avoid drifting out of good standing and into administrative dissolution. |
| Compliant | in compliance | As used in InCorp's Compliance Watch suite of services, this term refers to how completely a legal entity has met the responsibilities that maintain its formal existence under the laws of the jurisdiction where it is formed, such as filing annual reports and maintaining a registered agent. It is not intended to mean or imply conformity with every federal, state, or local regulatory or tax requirement that may apply to operating your business. |
| Consent Resolution | consent resolutions · written consent · unanimous written consent | A consent resolution is any resolution signed by all of the directors or shareholders, which authorizes a particular action. This act eliminates the need for face-to-face meetings of directors and shareholders. |
| Consideration | Something of value, such as money, property, or personal services, given by one party to another in exchange for an act or a promise. In the corporate context it most often means the amount paid to the corporation for its stock. More generally, consideration is what makes a promise part of a legally enforceable contract rather than a gift. | |
| Consolidation | The statutory combination of two or more corporations to create a new corporation. | |
| Constituent | constituent corporation | A party to a transaction; a corporation involved in a merger, consolidation or share exchange. |
| Contract Creditors | contract creditor | Contract creditors are people or businesses which you owe money or property to because of a written or verbal contractual agreement. If you buy 30 widgets from Widget World, Widget World becomes a contract creditor. |
| Contribution to Capital | capital contribution · capital contributions | A contribution of cash or other property that a shareholder makes to a corporation that increases the corporation's paid-in capital but for which the shareholder does not receive stock. The contribution increases that shareholder's basis in stock. |
| Controlled Group | controlled groups · brother-sister controlled group | A group of corporations treated as related for one or more tax purposes. Control may run through a parent and subsidiary chain, or through common ownership in what is called a brother-sister controlled group. Control generally means ownership of a threshold percentage, commonly at least 80 percent, and sometimes as little as 50 percent, of the combined voting power of all classes of voting stock or of the total value of the shares. |
| Convertible Security | convertible securities | A security that may be exchanged by the holder for another type of security. |
| Copyright | copyrights · copyrighted | The exclusive right of the creator of an original work, such as text, images, software, music, or video, to reproduce, distribute, display, and adapt it. Protection attaches automatically when the work is fixed in a tangible form, and registration with the U.S. Copyright Office is optional but is generally required before suing for infringement and before certain damages are available. Copyright covers creative expression, while a trademark covers names and marks that identify a source of goods or services. |
| Corporate Formalities | corporate formality · entity formalities · corporate housekeeping | The routine practices that keep an entity recognizable as separate from its owners: holding and documenting meetings, adopting resolutions, keeping minutes and an accurate ownership ledger, maintaining separate bank accounts, and signing on behalf of the entity rather than personally. State law requires some of these and good practice supplies the rest. When owners ignore them and blend personal and company affairs, that record is what an opposing party uses to argue for piercing the corporate veil. |
| Corporate Indicator | corporate indicators · entity designator · corporate suffix | A word or an abbreviation of a word that must be included in a corporation's name to indicate that the named entity is a corporation. Valid corporate indicators include: incorporated, corporation, limited, company, inc., corp., ltd. and co. The list of acceptable corporate indicators will vary depending upon the jurisdiction in which the corporation is registered. |
| Corporate Kit | corporate kits · corporate record kit · corporate record book | A Corporate Kit is a binder usually containing essential items for the routine maintenance and administration of a corporation or limited liability company. Corporate kits commonly include sample minutes and bylaws, stock certificates, a corporate seal and stock ledger. |
| Corporate Seal | corporate seals · company seal | A Corporate Seal is a device made to either emboss or imprint certain company information onto documents. This information usually includes the company's name and date and state of formation. Corporate seals are often required when opening corporate or LLC bank accounts, distributing stock or membership certificates or conducting other corporate business. Custom-made corporate seals are commonly included as part of a Corporate Kit. |
| Corporation | corporations | An entity formed and authorized by, created under and governed by the laws of the state of incorporation to act as a single person even though it is constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession. |
| Corporation Law | corporate law | The statutory provisions of a state relating to domestic and foreign corporations. |
| CROP (Commercial Registered Office Provider) | CROP · commercial registered office provider | A company listed with the state that supplies a commercial registered office address which entities may use in place of their own street address. Pennsylvania is the best-known example, where an entity may name a CROP instead of providing a registered office of its own. Functionally the CROP receives the entity's official mail and service of process at that address. |
| Cumulative Voting | A procedure used for electing directors in which shareholders are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates. | |
| DBA (Doing Business As) | DBA · d/b/a · doing business as | A name other than its true legal name under which a business operates. Depending on the state it is called a doing business as name, an assumed name, a fictitious name, or a trade name. A DBA is a registration, not a separate entity, so it creates no liability protection and no new tax status of its own. Most states or counties require the DBA to be registered, and many require periodic renewal. |
| Debenture | debentures | A long-term debt issued mainly to evidence an unsecured corporate debt. |
| Debt Financing | A method of raising capital in which a corporation borrows money. | |
| Delayed Effective Date | delayed filing · delayed effective date filing · future effective date | A request that a filing take effect on a later date rather than when the state accepts it, permitted in many states within a limited window. Companies forming late in the year commonly use it so the entity's existence begins on January 1, which can avoid a short first tax year and an extra annual report or franchise tax cycle. The available window and the rules differ by state. |
| Derivative Suit | derivative suits · derivative action · shareholder derivative suit | A lawsuit brought by a shareholder on behalf of a corporation to protect the corporation from wrongs committed against it. |
| Director | directors · board member · board members | The individuals who, acting as a group known as the board of directors, manage the business and affairs of a corporation. |
| Disqualifying Act | An act by the corporation or shareholder that causes the corporation to cease to be an eligible corporation and that generally results in termination of S corporation status. | |
| Disregarded Entity | disregarded entities | A business that exists as a separate legal entity under state law but is ignored as separate for federal income tax purposes, so its income and deductions are reported by its owner. The most common example is a single-member LLC that has not elected corporate taxation. Being disregarded for tax purposes does not undo the entity's legal separateness or its liability protection. |
| Dissenters' Rights | dissenters right · dissenters rights · dissenter's rights | A right granted to shareholders that entitles them to have their shares appraised and purchased by the corporation if the corporation enters into certain transactions that the shareholders do not approve of. |
| Dissolution | dissolve · dissolved · dissolving | The statutory procedure that terminates the existence of a domestic corporation. |
| Distribution | distributions | A transfer of money or other property made by a corporation to a shareholder in respect of the corporation's shares. |
| Dividend | dividends | A distribution of a corporation's earnings to its shareholders. |
| Domestic Corporation | domestic entity · domestic LLC · domestic corporations | An entity viewed from the state where it was formed. From every other state's perspective the same entity is a foreign corporation. The distinction has nothing to do with international borders, only with the state of formation. |
| Domestication | domesticate · redomestication · conversion of domicile | A statutory process that moves an entity's state of formation from one state to another, so the same entity continues with a new home state rather than forming a new entity and merging into it. It requires that both states authorize it, and it usually involves filings in each. Where domestication is not available, companies typically achieve the same result through a merger into a newly formed entity. |
| Double Taxation | double taxed · taxed twice · double tax | Taxation by the federal government of corporate earnings once at the corporate level and again at the shareholder level upon distribution of dividends. When a corporation must pay taxes on its earnings and individual shareholders must also pay taxes on any dividends that are distributed. |
| Duration | perpetual duration | How long a business entity is recognized as existing. An entity with perpetual duration continues indefinitely unless it is dissolved by its owners or by the state. An entity formed with a stated duration, for example 30 years, dissolves automatically on that anniversary unless the duration is amended first. |
| EIN (Employer Identification Number) | EIN · employer identification number · federal tax ID | A nine-digit number the IRS assigns to a business to identify it for federal tax purposes, written in the format 12-3456789. Businesses generally need one to hire employees, open a business bank account, or file certain federal returns. It is issued by the IRS, not by a state, and it is separate from any state tax or entity number. A single-member LLC with no employees may be able to use the owner's Social Security number instead, though many banks still ask for an EIN. |
| Employment Agreement | employment agreements · employment contract | An employment agreement is a contract between your corporation and an employee. These agreements can be written or verbal; although all employment agreements should be in writing. Employers are more likely to have employment agreements with key employees. The terms and conditions of an employment agreement should be consistent with statutes, articles, bylaws, and any existing shareholder agreements. |
| Entity Conversion | conversion · statutory conversion · convert an LLC | A statutory process that changes an entity from one type to another, for example an LLC to a corporation, while the same entity continues to exist rather than being dissolved and replaced. Where conversion is authorized it usually preserves the entity's original formation date, contracts, and property. Not every state authorizes every conversion, and the tax consequences are separate from the state law mechanics. |
| Entity Management System | EMS · entity management · entity management software | Software used to track a portfolio of business entities in one place: formation details, jurisdictions, registered agent assignments, officers and directors, filing deadlines, and copies of documents received. Companies with entities in several states use one because deadlines and requirements differ by jurisdiction and are easy to lose track of on a spreadsheet. It is a recordkeeping tool and does not itself make filings. |
| Equity Financing | A method of raising capital in which a corporation sells shares of stock. | |
| Equity Interest | ownership interest · equity interests | An ownership interest; the interest of a shareholder as distinguished from that of a creditor. |
| Expedited Filing | expedite · expedited service · rush filing | An optional state service that moves a filing ahead of the standard queue for an additional state fee. Tiers and turnaround times vary by state, and some states offer same-day or one-hour handling while others offer no expediting at all. Expediting affects how quickly the state processes the document, not whether the document is acceptable. |
| Fiduciary Relationship | fiduciary duty · fiduciary duties · fiduciary | A relationship in which one party (the fiduciary) must act in good faith and with due regard to the best interests of the other party or parties. |
| Fiscal Year | fiscal years | An accounting year that ends on a date other than December 31. C corporations may elect to use a fiscal year. S corporations may generally use a fiscal year if it is a natural business year. |
| Foreign Corporation | foreign entity · foreign LLC · foreign corporations | A term applied to a corporation doing business in a state other than its state of incorporation. |
| Foreign Qualification | qualification · qualify to do business · foreign filing | The process of registering an entity to transact business in a state other than the one where it was formed, which results in a certificate of authority from that state. Corporations, limited liability companies, and similar entities all go through it, and each state requires a registered agent in that state as part of the process. States generally look at physical presence, employees, and the nature of the activity when deciding whether qualification is required. Transacting business without qualifying can lead to penalties, back fees, and difficulty enforcing contracts in that state. |
| Fractional Share | fractional shares | Ownership in a corporation in an amount less than a full share. |
| Franchise Tax | franchise taxes · franchise fee · privilege tax | A tax or fee, usually annual, levied on a corporation, limited liability company, or similar entity for the privilege of existing or transacting business in a particular state. It is often calculated on authorized shares, capital, gross receipts, or a flat amount, and it is separate from income tax. Failure to pay franchise tax or similar fees can lead to loss of good standing, administrative dissolution, and forfeiture of the charter. |
| Fraudulent Conveyance | fraudulent transfer · fraudulent conveyances | A contractual misrepresentation of the nature, quantity, or existence of transferred assets. Also, a term denoting potential risk for sellers and lenders. |
| Fringe Benefits | fringe benefit | Employee benefits and perquisites, other than qualified retirement plans. |
| General Partner | general partners · GP | A partner who manages the business of a partnership or limited partnership and, in a standard limited partnership, is personally liable for its debts and obligations. General partners have authority to bind the partnership in ordinary business dealings. In a limited-liability limited partnership, statute reduces that personal exposure. |
| Going Public | initial public offering · IPO · go public | The process by which a corporation first sells its shares to the public. |
| Good Standing | in good standing | A corporation is said to be in good standing when it has remained current with the necessary reports and fees required by the regulatory jurisdictions under which it operates. |
| Hague Convention | hague apostille convention · apostille convention | Formally the Hague Convention of October 5, 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents. Among participating countries it replaces the older chain of consular legalization with a single standardized certificate called an apostille. A document apostilled in one member country is accepted as authentic in every other member country. Documents destined for a country that is not a member generally require consular legalization instead. |
| Hostile Takeover | hostile takeovers | A takeover that occurs without the approval of the target corporation's board of directors. |
| Incorporation | incorporate · incorporating | The act of creating or organizing a corporation under the laws of a specific jurisdiction. |
| Incorporator | incorporators | The person(s) who perform the act of incorporation and who sign the articles of incorporation and deliver them for filing. |
| Indemnification | indemnify · indemnity | Financial protection provided by a corporation to its directors, officers, and employees against expenses and liabilities incurred by them in lawsuits alleging that they breached some duty in their service to or on behalf of the corporation. |
| Initial Report | initial reports · initial list · initial list of officers | A first informational filing that some states require shortly after formation or foreign qualification, listing officers, directors, managers, or members. It is separate from, and in addition to, the recurring annual report, and its deadline is usually measured in days or a few months from the formation date. Missing it can put a brand-new entity out of good standing before its first annual report is even due. |
| Involuntary Dissolution | involuntarily dissolved | The termination of a corporation's legal existence pursuant to an administrative or judicial proceeding; dissolution forced upon a corporation rather than decided upon by the corporation. |
| Issued and Outstanding Shares | issued shares · outstanding shares · issued and outstanding | The shares a corporation has actually sold or granted and that are currently held by shareholders. This is different from authorized shares, which is the ceiling set in the articles, and different from treasury shares, which the corporation has reacquired. Ownership percentages and voting math are calculated on issued and outstanding shares, not on authorized shares. |
| ITIN (Individual Taxpayer Identification Number) | ITIN · individual taxpayer identification number | A nine-digit number the IRS issues to individuals who have a U.S. tax filing obligation but are not eligible for a Social Security number. It exists only for federal tax purposes and does not confer work authorization or immigration status. Non-resident owners of U.S. entities sometimes need one to file returns or to be identified on entity filings. |
| Legalization of Certified Documents | legalization · document legalization · consular legalization | The multi-step authentication process required when a document is going to a country that does not participate in the Hague Convention, and therefore cannot use an apostille. It typically involves certification by the state, then by the U.S. Department of State, and finally by the destination country's embassy or consulate. The result is a document the receiving country will treat as authentic. |
| Limited Liability | The principle that an owner's exposure for the debts and obligations of a business is limited to what that owner has invested, rather than extending to personal assets. It is a feature of corporations, limited liability companies, and limited partners in a limited partnership, and it comes from statute rather than from private agreement. Limited liability is not absolute and can be lost, for example through veil piercing or a personal guarantee. | |
| Limited Liability Company (LLC) | LLC · LLCs · limited liability companies | An artificial entity created under and governed by the laws of the jurisdiction in which it was formed. Limited liability companies are generally able to provide the limited personal liability of corporations and the pass-through taxation of partnerships or S corporations. |
| Limited Partner | limited partners · LP interest | A partner who invests capital in a limited partnership but does not manage it, and whose exposure for partnership debts is generally limited to that investment. The tradeoff is control: taking an active management role can put the limited liability at risk in some states. Limited partners' rights are usually set out in the partnership agreement. |
| Limited Partnership | LP · limited partnerships | A statutory form of partnership consisting of one or more general partners who manage the business and are liable for its debts, and one or more limited partners who invest in the business and have limited personal liability. |
| Limited Personal Liability | limited liability protection · personal liability protection | The protection generally afforded a corporate shareholder, limited partner or a member of a limited liability company from the debts of and claims against the company. |
| LLLP (Limited-Liability Limited Partnership) | LLLP · limited-liability limited partnership · limited liability limited partnership | A limited partnership that has also elected limited-liability partnership status, so that the general partners get statutory protection from the partnership's debts rather than the unlimited exposure a general partner normally carries. It keeps the limited partnership structure of general partners who manage and limited partners who invest. Not every state authorizes the LLLP form, and the election usually requires a specific filing and periodic renewal. |
| Majority | majority vote | More than 50 percent; commonly used as the percentage of votes required to approve certain corporate actions. |
| Management | The board of directors and executive officers of a corporation, limited liability company or similar business entity. | |
| Manager | managers · manager-managed · manager managed | The individuals who are responsible for the maintenance, administration and management of the affairs of a limited liability company (LLC). In most states, the managers serve a particular term and report to and serve at the discretion of the members. Specific duties of the managers may be detailed in the articles of organization or the operating agreement of the LLC. In some states, the members of an LLC may also serve as the managers. |
| Member | members · LLC member · LLC members | The owner(s) of a limited liability company (LLC). Unless the articles of organization or operating agreement provide otherwise, management of an LLC is vested in the members in proportion to their ownership interest in the company. |
| Membership Certificate | membership certificates · membership interest certificate | Evidence of ownership of and membership in a limited liability company. |
| Merger | mergers · merge · merged | The statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. |
| Minutes | corporate minutes · meeting minutes | The corporate minutes are the written record of transactions taken or authorized by the board of directors or shareholders. These are usually kept in the corporate minute book in diary fashion. |
| Motor Carrier Authority | DOT authority · operating authority · MC number | Federal permission from the Federal Motor Carrier Safety Administration to operate as a for-hire motor carrier, broker, or freight forwarder in interstate commerce, identified by an MC number. It is distinct from a USDOT number, which is a registration and safety identifier. Obtaining authority generally requires designating process agents on Form BOC-3 and filing proof of insurance. |
| Multi-Member LLC | multi member LLC · multiple-member LLC · multi-member limited liability company | A limited liability company with two or more owners. By default it is taxed as a partnership, filing an informational return and issuing each member a Schedule K-1 for their share of income or loss. An operating agreement matters more here than in a single-member LLC because it governs voting, distributions, admission of new members, and what happens when a member exits. |
| Name Availability | name availability search · business name availability · name check | Whether the state filing office will accept a proposed entity name, which generally turns on the name not being the same as, or deceptively similar to, an existing registered name and on including a required corporate indicator. Availability is decided state by state, so a name that clears in one state may be rejected in another. Clearing a name with the state is not a trademark clearance and does not by itself establish the right to use the name as a brand. |
| Name Registration | The filing of a document in a foreign state to protect the corporate name, often in anticipation of qualification in the state. | |
| Name Reservation | reserve a name · reserved name · name reservations | A procedure that allows a corporation to obtain exclusive use of a corporate name for a specified period of time. |
| Natural Business Year | A fiscal year that is permitted for an S corporation because the corporation can show that 25 percent of gross receipts have been realized in the last two months of such a year for the last three years. | |
| No Par Value Shares | no par value · no-par shares · no par value stock | Shares for which the articles of incorporation do not fix a par value and that may be issued for any consideration determined by the board of directors. |
| Nonprofit Corporation | not-for-profit corporation · not for profit corporation · nonprofit | A not-for-profit corporation is generally organized for some socially beneficial purpose, rather than for the direct monetary benefit of the directors or members. Not all not-for-profit corporations are tax exempt and some make a profit. However, the profit is not distributed to the members or directors. Also known as a non-profit corporation. |
| Notarization | notarized · notary · notary public | A notary public's verification of a signer's identity and witnessing of a signature, recorded with the notary's seal and commission details. Some state filings, and many documents headed overseas, must be notarized before they will be accepted. In the apostille and legalization chain, notarization is usually the first step, followed by state and sometimes federal authentication. |
| Officer | officers · corporate officers | Individuals appointed by the board of directors who are responsible for carrying out the board's policies and for making day-to-day decisions. |
| Operating Agreement | operating agreements · Op-Ag · LLC operating agreement | A contract among the members of a limited liability company governing the membership, management, operation and distribution of income of the company. Commonly abbreviated "Op-Ag". |
| Organizational Meeting | organizational meetings · organizing meeting | Meetings of incorporators or initial directors that are held after the filing of the articles of incorporation to complete the organization of the corporation. |
| Organizer | organizers | The person(s) who perform the act of forming a limited liability company. |
| Par Value | stated value | A minimum price of a share below which the share cannot be issued, as designated in the articles of incorporation. |
| Parent Corporation | parent company | A corporation that owns a controlling interest in another corporation. |
| Partnership | partnerships · general partnership | A business organization in which two or more persons agree to do business together. |
| Pass-Through Taxation | pass through taxation · passthrough taxation · flow-through taxation | A tax treatment in which the entity itself generally pays no federal income tax and its income, deductions, and losses are instead reported by its owners on their own returns. Partnerships, most limited liability companies, and S corporations are typically taxed this way. Pass-through treatment avoids the double taxation that applies to C corporation dividends. |
| Passive Income | passive activity income | Income to certain taxpayers (including S corporation shareholders) that is subject to the passive activity loss (PAL) rules because the taxpayer does not materially participate in the business activity producing the income. Generally includes receipts from royalties, rents, dividends, interest, annuities, and the sale and exchange of stock and securities. |
| Perpetual Existence | perpetual | Unlimited term of existence; characteristics of most business corporations. |
| Piercing the Corporate Veil | pierce the corporate veil · corporate veil · veil piercing | Piercing the corporate veil is a legal theory sometimes used to impose personal liability on shareholders, officers, and directors for corporate acts. This theory permits a court to disregard the separate identity of the corporation. |
| Preferred Shares | preferred stock · preferred share | A class of shares that entitles the holders to preferences over the holders of common shares, usually with regard to dividends and distributions of assets upon dissolution or liquidation. |
| Principal Office | principal place of business · principal executive office · principal address | The main business address of an entity, where its records are kept and its management sits. It is reported on many state filings and is often confused with the registered office, which is only the address where the registered agent accepts service of process. The two can be the same address but frequently are not, and the principal office may be in a different state entirely. |
| Process Agent | process agents · designation of process agent | A person or company designated to accept legal process on behalf of a motor carrier, broker, or freight forwarder in each state where it operates. The designation is filed with the Federal Motor Carrier Safety Administration on Form BOC-3. It serves the same notice function as a registered agent, but it is a federal transportation requirement rather than a state entity requirement. |
| Professional Corporation | professional corporations · professional association · professional limited liability company | A corporation whose purposes are limited to professional services, such as those performed by doctors, dentists and attorneys. A professional corporation is formed under special state laws that stipulate exactly which professionals are required to incorporate under this status. |
| Promoter | promoters | A person who takes the initiative in organizing a business before it is formed, for example by lining up investors, arranging financing, negotiating leases, or contracting for property the future entity will use. Because the entity does not yet exist, a promoter can be personally responsible for pre-formation commitments unless the entity later adopts them. Promoters are generally treated as owing a duty of good faith to the entity and to the investors they bring in. |
| Proxy | proxies · proxy statement · proxy holder | A written authorization by which a shareholder lets another person vote their shares at a meeting. The word is used both for the authorization itself and for the person exercising it. Proxies are how a quorum is reached and votes are cast when shareholders cannot attend in person, and their form and duration are usually governed by statute and by the bylaws. |
| Publication Requirement | publication requirements · notice of formation publication · publish notice of formation | A rule in a handful of states requiring a newly formed or newly qualified entity to publish notice of its formation in one or more designated newspapers and then file proof of publication. New York, Arizona, Nebraska, and Georgia are the commonly cited examples, and the details differ in each. Failing to publish can affect the entity's standing or its ability to bring suit in that state, depending on the statute. |
| Qualified Retirement Plan | qualified plan | A pension or profit sharing plan that qualifies under the Internal Revenue Code for deductible contributions by an employer that are not included in employee income until plan distributions are made. |
| Quorum | The percentage or proportion of voting shares required to be represented in person or by proxy to constitute a valid shareholders meeting, or the number of directors required to be present for a valid meeting of the board. | |
| Record Date | The date for determining the shareholders entitled to vote at a meeting, receive dividends, or participate in any corporate action. | |
| Redeemable Shares | redeemable stock · callable shares | Shares subject to purchase by the corporation on terms set forth in the articles of incorporation. |
| Registered Agent | registered agents · resident agent · resident agents | A person or company designated to receive service of process and other important legal and state notices on behalf of a business entity. The registered agent must maintain a physical address in the jurisdiction, called the registered office, and be available there during normal business hours. Nearly every state requires each registered corporation, limited liability company, and similar entity to appoint and continuously maintain one. Failure to maintain a registered agent can lead to loss of good standing and administrative dissolution. Also called a resident agent, a statutory agent, or an agent for service of process, depending on the state. |
| Registered Office | registered offices · registered agent address | The statutory address of a corporation. In states requiring the appointment of a registered agent, it is usually the address of the registered agent. |
| Regulations | regulation · administrative rules | Regulations are administrative rules which have the force and effect of laws. Government agencies promulgate rules. If you don't comply, you are subject to the possibility of fines or revocation of the corporate charter. |
| Reinstatement | reinstate · reinstated · revival | Returning a corporation that has been administratively dissolved or had its certificate of authority revoked, to good standing on a state's records. |
| Resolution | resolutions · corporate resolution · board resolution | A formal statement of any item of business that has been voted upon. |
| Restated Articles | restated articles of incorporation · amended and restated articles | A document that combines all currently operative provisions of a corporation's articles of incorporation and amendments thereto. |
| Revised Model Business Corporation Act | RMBCA · Model Business Corporation Act · MBCA | A model corporation statute compiled by the American Bar Association that has been adopted in whole or in part by, or has influenced the statutes of many states. |
| S Corporation | S corp · S-corp · Subchapter S | A corporation that is eligible, and does elect to be taxed under Subchapter S of the Internal Revenue Code. A corporation granted a special tax status as specified under the Internal Revenue Code. The code is very explicit on how and when this election is made and the number of shareholders this type of corporation can have. Since this type of corporation pays no income tax, all gains and losses of the corporation pass through to the individual shareholders in proportion to their holdings. Basically, shareholders pay tax on the corporation's income by reporting their pro-rata shares of pass-through items on their own individual tax returns. |
| S Corporation Termination | A cessation of S corporation status by operation of statute because the corporation either fails to continue to meet the requirements for S corporation status, or has C corporation earnings and profits plus excess passive investment income for three consecutive years. | |
| Scrip | A form used to represent ownership of fractional shares in lieu of issuing share certificates. | |
| Secretary of State | SOS · Secretary of State's office · state filing office | The state office that receives and maintains business entity filings such as articles, amendments, annual reports, and registered agent designations. Not every state uses that title: the same function may sit with a Department of State, a Corporation Commission, a Division of Corporations, or a similar agency. It is a filing and recordkeeping office, so acceptance of a filing is not an opinion that the filing was a good idea. |
| Securities Laws | securities law · securities regulation | State and federal laws that govern the issuance, sale and transfer of stocks and bonds. |
| Security | securities | An investment instrument representing either an ownership stake in a business or a debt owed by it, bought with the expectation of a return produced by someone else's efforts. Stock, bonds, debentures, and many investment contracts are securities. Offering or selling securities is regulated at both the federal and state level, which is why capital raises usually involve either registration or a documented exemption. |
| Self-Employment Tax | SE tax · self employment tax · SECA tax | The Social Security and Medicare tax paid by people who work for themselves rather than having it withheld by an employer. It generally applies to a sole proprietor's business income and to a member's share of active LLC income. How much of an owner's income is subject to it is one of the main practical differences discussed between LLC and S corporation treatment, since an S corporation shareholder-employee takes wages plus distributions. |
| Series LLC | series LLCs · protected series | A limited liability company structure, authorized in some states, that lets a single parent LLC establish separate internal series, each able to hold its own assets and liabilities. The intent is that the debts of one series do not reach the assets of another. Because only some states authorize the form and courts outside those states have limited experience with it, the strength of the internal separation can vary by jurisdiction. |
| Service of Process | notice of service of process · notice of litigation · served with process | The formal delivery of a legal or court document, such as a summons and complaint, that notifies a business of an action or proceeding against it and starts the clock on responding. State law requires most registered entities to keep a registered agent available at a physical address to accept service on the entity's behalf. Missing service of process can result in a default judgment, which is why prompt forwarding matters. |
| Share | shares | The unit into which the ownership interest in a corporation is divided. |
| Share Exchange | A statutory form of business combination in which some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation and neither corporation ceases to exist. | |
| Shareholder | shareholders · stockholder · stockholders | Shareholders are the owners of a corporation based on their holdings. They own an interest in the corporation rather than specific corporate property. Also known as stockholders. |
| Shareholder's Basis in Loans | basis in loans | The measure of loans made directly by a shareholder to an S corporation, which can be used to provide additional basis for the deduction of losses after the shareholder's basis in stock is exhausted. It is calculated using the initial amount of the loan, adjusted to reflect S corporation pass-through items. |
| Shareholder's Basis in Stock | basis in stock | The measure of a shareholder's equity investment in a corporation, used to determine gain or loss when the stock is sold. It generally starts with what the shareholder paid for the stock, or the fair market value of property contributed for it, and is then adjusted over time. For S corporation shareholders it is adjusted for pass-through income, losses, and distributions. |
| Short-Form Merger | short form merger | The statutory merger of a subsidiary into its parent corporation in which shareholder approval is not required. |
| Single-Member LLC | single member LLC · SMLLC · one-member LLC | A limited liability company with one owner. It still provides the statutory liability separation of an LLC, but for federal tax purposes it is by default a disregarded entity, meaning its activity is reported on the owner's return rather than on a partnership return. Because there is only one member, courts in some states scrutinize whether the owner respected the separation between personal and company affairs. |
| Sole Proprietorship | sole proprietor · sole proprietorships · sole prop | An unincorporated business with a sole owner in which the owner may be personally liable for business debts and claims against the business. |
| Special Meeting | special meetings · special shareholders meeting | A shareholder meeting called so that the shareholders may act on the specific matters stated in the notice of the meeting. |
| State Filing Fee | state fee · state fees · state filing fees | The amount a state charges to accept a filing such as articles, an amendment, an annual report, or a certificate request. It is set by the state, is paid to the state, and is not discountable by a service provider. It is separate from any service fee charged for preparing and submitting the filing, and states change these amounts from time to time. |
| Statute | statutes | Statutes are laws passed by the state legislature or U.S. Congress. Business corporation laws are statutes. Statutes often authorize an administrative agency to declare regulations which are used to supplement the statute. In the event of a conflict, statutes control over regulations. |
| Stock | shares of stock | Stock represents ownership in a corporation. It may be represented by a certificate and can be common or preferred, voting or non-voting, redeemable, convertible, etc.. The classifications and special designations, if any, of the stock are set forth in the articles of incorporation. |
| Stock Certificate | stock certificates · share certificate | An instrument providing evidence of ownership of one or more shares of the capital stock of a corporation. May also be referred to as a share certificate. |
| Stock Ledger | stock ledgers · share ledger · stock transfer ledger | The entity's internal record of who owns its shares or membership interests, showing certificate numbers, amounts, dates, and transfers. It is the entity's own record, not a state filing, and it is normally kept with the corporate records. When ownership is questioned in a financing, a sale, or a dispute, the stock ledger is the first document anyone asks for. |
| Stock Option | stock options | A right granted by a corporation to officers or employees as a form of compensation that allows purchase of corporate stock at a fixed price at a specified time with reimbursement derived from the difference between purchase and market prices. |
| Stock Purchase Agreement | stock purchase agreements | A stock purchase agreement is an agreement between the shareholders and the corporation. It provides a mechanism to regulate the transfer and sale of corporate stock. Often, a stock purchase agreement will provide a right of first refusal in favor of the corporation or remaining shareholders in the event of a proposed sale of stock by a shareholder. A stock purchase agreement can also provide for a purchase upon the death, disability, retirement, discharge, resignation, or bankruptcy of a shareholder. |
| Stock Split | stock splits · forward split | A division of corporate stock by the issuance to existing shareholders of a specified number of new shares with a corresponding lowering of par value for each outstanding share. |
| Subscriber | subscribers | Persons who agree under specific conditions to purchase shares in a corporation. |
| Subscription | stock subscription · subscription agreement | The written agreement by which a subscriber commits to buy shares in a corporation, setting the number of shares, the price, and the conditions of the purchase. Before the corporation exists, a subscription is an offer that the corporation adopts once it is formed. After formation, an accepted subscription is an enforceable contract to pay for the shares. |
| Subsidiary | subsidiaries | A corporation that is either wholly owned or controlled through ownership of a majority of its voting shares, by another corporation or business entity. |
| Takeover | takeovers | A merger, acquisition or other change in the controlling interest of a corporation. |
| Target | target corporation · target company | The corporation that is the focus of a takeover, acquisition, or merger attempt. The party pursuing it is usually called the acquirer or the bidder. Whether the target's board supports the attempt is what distinguishes a negotiated deal from a hostile takeover. |
| Tax Clearance | tax clearance certificate · tax good standing · certificate of tax clearance | Confirmation from a state tax authority that an entity has filed its required returns and paid what it owes. Several states require a tax clearance certificate before they will accept a dissolution or a withdrawal filing, and some require it before issuing a certificate of good standing. Because it comes from the tax agency rather than the filing office, obtaining it can add weeks to a wind-down timeline. |
| Tax-Exempt Organization | tax exempt organization · tax-exempt status · 501(c)(3) | Any organization that is determined by the Internal Revenue Service to be exempt from federal taxation of income. A tax-exempt may be required to operate exclusively for charitable, religious, literary, educational or similar types of purposes. |
| Tort | torts | A tort is any act or failure to act (if there was a duty to act) which causes harm or damage. Examples of torts include assault, battery, fraud, misrepresentation, defamation, libel, slander, invasion of privacy, and negligence. If there is a claim against your corporation, other than a claim by the government, it will likely be based in contract or tort. |
| Trademark | trademarks · service mark · trade mark | A word or mark that distinctly indicates the ownership of a product or service, and that is legally reserved for the exclusive use of that owner. |
| Treasury Shares | treasury stock | Shares that a corporation issued and later reacquired, and that it now holds itself rather than having them outstanding with shareholders. Treasury shares generally carry no vote and receive no dividends while the corporation holds them. They may be reissued or retired depending on the statute and the articles. |
| UCC Filing | UCC-1 · UCC1 · UCC financing statement | A financing statement filed under Article 9 of the Uniform Commercial Code to give public notice that a lender claims a security interest in a borrower's personal property collateral. Filing perfects the security interest and establishes the lender's priority against later claimants. It is usually filed in the state where the debtor is located, and it lapses after five years unless continued. |
| UCC Search | UCC searches · lien search · UCC lien search | A search of state records for UCC financing statements and related liens filed against a business or individual. Buyers, lenders, and parties doing diligence run one to see what collateral is already pledged and to whom. Results reflect what has been indexed in the searched jurisdiction, so a complete picture usually requires searching each relevant state and name variation. |
| Underwriter | underwriters | A company that purchases shares of a corporation and arranges for their sale to the general public. |
| Virtual Corporate Kit | virtual corporate kits · digital corporate kit · electronic corporate kit | A digital version of the traditional corporate kit: the organizational documents, sample minutes and bylaws or operating agreement, certificates, and stock or membership ledger delivered as files rather than in a physical binder. The content serves the same recordkeeping purpose as a printed kit. Physical items such as an embossing seal and printed certificates are not included unless ordered separately. |
| Voluntary Dissolution | voluntarily dissolve | Action by shareholders, incorporators or initial directors to dissolve a corporation. |
| Voting Agreement | pooling agreement · voting agreements · voting or pooling agreement | A voting or pooling agreement is an agreement, preferably in writing, of two or more shareholders to vote their shares in a certain manner. The most common use of this agreement would be to pool voting strength for the election of directors. |
| Voting Rights | voting right · right to vote | Rights of shareholders to vote their shares pursuant to provisions of statutes, the articles of incorporation and the bylaws. |
| Voting Trust | voting trusts · voting trust certificate | A voting trust is a trust formed through an agreement among the shareholders of the corporation. Under a voting trust, shareholders transfer their shares of stock to a trustee in exchange for voting trust certificates. The trustee votes the shares in the manner directed in the voting trust agreement. Voting trusts are often used to preserve control of the corporation. Can be an eligible shareholder of an S corporation. |
| Watered Shares | watered stock | Shares that have been issued for a consideration less than the par or stated value of the shares. |
| Winding Up | wind up · wound up · wind-up | The discharging of a corporation's liabilities and the distributing of its remaining assets to its shareholders in connection with its dissolution. |
| Withdrawal | withdraw · withdrawals · foreign withdrawal | The statutory procedure whereby a foreign corporation obtains the consent of a state to terminate its authority to transact business there. |
A
Also: accumulated earnings tax
The accumulation of taxable earnings inside a corporation instead of distributing them to shareholders. A corporation with excess accumulated earnings can be assessed a separate accumulated earnings tax by the IRS unless the buildup is supported by a legitimate business need, such as covering a repurchase obligation. The purpose of the tax is to discourage corporations from holding back dividends solely to reduce shareholder income.
Also: acquisitions
Obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets.
Also: administratively dissolved · admin dissolution · revoked · revocation
An involuntary dissolution of a corporation by an act of the Secretary of State or similar state authority, caused by the corporation's failure to comply with certain statutory requirements; especially the failure to file an annual report, to pay franchise taxes or maintain a valid Registered Agent.
Reinstatement Annual Report Franchise Tax Good Standing Involuntary Dissolution
Also: advisory board
An advisory board of directors are individuals appointed to advise an elected board of directors. This board is not bound by the duties imposed upon elected board members, and the corporation is not required to follow their recommendations.
Anyone who is authorized to act on the behalf of another. A corporation acts only through its agents; therefore, it is important to define what actions an agent is authorized to perform.
Also: alter ego doctrine
A doctrine of law which disregards the principle of limited liability enjoyed by a corporate entity when it is proven that, in fact, no separate identity of the individual and corporation exists.
Piercing the Corporate Veil Commingle Corporate Formalities Limited Personal Liability
A document issued by a state to a foreign corporation evidencing that the corporation has amended its original certificate of authority.
Also: amendments · articles of amendment · certificate of amendment
An addition to, deletion from, or a change of existing provisions of the articles of incorporation of a domestic corporation or articles of organization for a limited-liability company. An amendment is necessary to formally change the name of an entity or to change the capital stock structure.
Restated Articles Articles of Incorporation Articles of Organization
Also: annual meetings · annual shareholders meeting · annual shareholder meeting
A yearly meeting of shareholders at which directors are elected and other general business of the corporation is conducted.
Also: annual reports · annual statement · statement of information · periodic report
A required annual filing in a state, usually listing directors, officers and financial information. Also, an annual statement of business and affairs furnished by a corporation to its shareholders.
Franchise Tax Good Standing Administrative Dissolution Compliance Calendar Initial Report
Also: apostilles · apostille certificate · apostilled
An apostille is an official government certification that authenticates a public document so it can be accepted in another country. In the United States it is normally issued by the Secretary of State of the state that issued the underlying document, or by the U.S. Department of State for federal documents. Apostilles are used between countries that participate in the Hague Convention of 1961. Countries outside that convention generally require consular legalization instead.
Hague Convention Legalization of Certified Documents Certified Copy Notarization
The form filed in many states to qualify a corporation to transact business as a foreign corporation.
Also: arm's length · arms length · at arm's length
An arm's length relationship is a term used to describe a type of business relationship a corporation should have with a close associate to avoid a conflict of interest. For example, when you negotiate with your banker or your supplier, any agreement which results will likely reflect market value and commercially reasonable terms and conditions. When you loan money to your son or daughter, you may be inclined to provide much more favorable terms and conditions. The first example would be considered to be an arm's length relationship, while the second example would not. When your corporation does business with or makes loans to corporate officers and directors, the relationship must be at arm's length to avoid conflicts of interest.
Also: certificate of incorporation · corporate charter
The title of the document filed in many states to create a corporation. Also known as the certificate of incorporation or corporate charter.
Articles of Organization Incorporator Amendment Restated Articles Bylaws
Also: articles of formation · certificate of formation · certificate of organization
The title of the document filed in many states to register a limited liability company (LLC) with the state. Also known as articles of formation.
Articles of Incorporation Operating Agreement Organizer Limited Liability Company (LLC)
Also: legal opinion · attorney opinion · opinion of counsel
A lawyer's written statement that a certain matter or particular action complies with applicable legal requirements and/or is duly authorized or binding.
Also: authorized stock · authorized capital · authorized share · shares authorized
The maximum number of shares that a corporation may issue pursuant to its articles of incorporation.
B
Also: tax basis · cost basis
Basis, a tax and accounting term, is the measuring rod against which gain or loss is measured. With stock, basis is what you pay for stock or the fair market value of property you contribute in exchange for the stock.
Also: bearer instruments
An instrument is payable to its bearer when by its terms it is payable to 1) a bearer or the order of a bearer; 2) a specified person or bearer; or 3) "cash" or the order "cash," or any other indication that does not purport to designate a specific payee. Bearer shares are a common example of a bearer instrument.
Also: bearer stock · bearer share
Shares of capital stock issued payable to "bearer" rather than to a named holder, so ownership transfers by physical delivery of the certificate. Bearer shares are heavily restricted or prohibited in most U.S. jurisdictions today, and publicly traded corporations may not issue them. Because bearer shares obscure ownership, they also interact with federal beneficial ownership reporting. Whether any bearer instrument is permitted depends on the current statutes of the state of formation.
Also: BOI · BOI report · BOIR · beneficial ownership
Information about the individuals who ultimately own or control a company, reported to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) under the Corporate Transparency Act. A report generally identifies each beneficial owner and, for newer companies, the company applicant, along with identifying details and an identification document. Who must file, and by when, has changed through rulemaking and litigation since the requirement took effect, so current FinCEN guidance controls. The report goes to FinCEN, not to a Secretary of State, and it is separate from any state annual report.
Annual Report Limited Liability Company (LLC) Corporation Compliance Calendar
Also: benefit corporations · public benefit corporation · PBC · B corporation
A for-profit corporation formed under a state statute that expressly allows or requires its directors to weigh a stated public benefit alongside shareholder return. It is still a taxable for-profit corporation, not a nonprofit and not automatically tax exempt. Most benefit corporation statutes require a periodic benefit report. This is different from third-party B Corp certification, which is a private credential rather than a legal status.
Also: blue sky laws · blue-sky law · blue sky
A term used to describe state laws and regulations governing the issuance and sale of securities to residents of a state and the licensing and regulation of securities brokers and dealers as well as anti-fraud provisions. These laws protect the public from deceptive securities transactions and vary from state to state.
Also: boards of directors · the board
The governing body of a corporation who is elected by shareholders. The directors are responsible for selecting the officers and the supervision and general control of the corporation.
Director Officer Advisory Board of Directors Business Judgment Rule
Also: BOC-3 · BOC3 · Form BOC-3 · designation of agents for service of process
The federal form on which a motor carrier, broker, or freight forwarder designates process agents for every state in which it operates. It must be filed with the Federal Motor Carrier Safety Administration before operating authority becomes active, and only a process agent or the carrier itself may file it. One BOC-3 covers all states through the designated agents named on it.
Also: bonds
A long-term debt secured by a mortgage on real property or a lien on other fixed assets. A certificate evidencing indebtedness. It is a legal contract sold by an issuer promising to pay the holder its face value plus amounts of interest at future dates.
Also: business corporation acts · corporation code · business corporation law
A business corporation act is the collection of laws in each state that governs corporations.
Revised Model Business Corporation Act Corporation Law Statute
Also: business entities · entity type · entity types · legal entity
A legally recognized organization through which business is conducted, such as a corporation, limited liability company, limited partnership, or general partnership. Each type differs in how it is formed, who manages it, how owners are exposed to its debts, and how it is taxed. A sole proprietorship is a way of doing business rather than a separate entity, since there is no legal separation between the owner and the business.
Corporation Limited Liability Company (LLC) Limited Partnership Sole Proprietorship
A judicial doctrine which shields corporate officers and directors from personal liability for actions taken in good faith and with reasonable care.
Also: business licenses · business licensing · state business license · local business license
Government permission to conduct business, issued separately from entity formation and often at more than one level: state, county, and city. Some jurisdictions require a general license of every business, while others license only particular activities or professions. Forming an entity does not obtain any license, and licenses typically must be renewed on their own schedule.
Compliance Calendar DBA (Doing Business As) Professional Corporation Motor Carrier Authority
Also: buy sell agreement · buy/sell agreement
An agreement between shareholders of a privately held corporation and the corporation itself, made to govern the operations of the corporation and to define how shares of stock will be transferred. In small corporations, such an agreement can be used to set estate tax value of stock, define what happens if a shareholder is disabled, restrict the transfer of stock to outsiders and other conditions. It can also protect the corporation against a disqualifying act and provide other mechanisms for maintaining and ending S corporation status.
Also: by-laws · corporate bylaws
The regulations of a corporation that, subject to statutory law and the articles of incorporation, provide the basic rules for the conduct of the corporation's business and affairs.
Operating Agreement Articles of Incorporation Resolution Corporate Formalities
C
Also: c corp · c-corp · general corporation
The default corporate form, also called a general corporation, taxed under Subchapter C of the Internal Revenue Code. A C corporation may have an unlimited number of shareholders and more than one class of stock, which is why it is the usual choice for companies that expect outside investment or a public offering. A C corporation pays tax on its own income, and shareholders pay tax again on dividends they receive, a pattern known as double taxation.
An accounting period that begins January 1 and ends December 31. Most S corporations are required to use a calendar year as their tax year unless they qualify for a permitted exception. A company that instead ends its year on another date is using a fiscal year.
Also: capital gains · capital gain
The tax imposed on the capital gains of a taxpayer. The tax treatment of capital gains and losses depends on whether the gains and losses are long-term or short-term, and on whether the taxpayer is a corporation or not. The long-term and short-term capital gains of corporations are taxable at the same rates as their ordinary income. For non-corporations, the maximum tax rate on net long-term capital gains is lower than the top rate on ordinary income.
Also: capital shares
The outstanding shares of a joint-stock company considered as an aggregate.
Also: carryforward · carried forward · loss carryforward
To offset for tax purposes one period's loss against a subsequent period's net income. Losses which are unused may generally carry over to another year. Such tax benefits may enhance the value of a target to a buyer burdened with high taxes.
Also: carry back · carry-back · loss carryback
For federal income tax purposes, the portion of a net operating loss applied against income of earlier tax years. The amount applied is absorbed in those years and any remainder is carried forward to offset income in future years. Whether and how far back a loss may be carried is set by the tax rules in effect for the year of the loss.
Also: certificates of authority
Formal evidence of qualification issued by a state to a foreign corporation.
Foreign Qualification Foreign Corporation Amended Certificate of Authority Withdrawal
Also: certificate of existence · certificate of authorization · certificate of status · good standing certificate
A certificate issued by a state official as conclusive evidence that a corporation is in existence or authorized to transact business in the state. The certificate generally sets forth the corporation's name; that it is duly incorporated or authorized to transact business; that all fees, taxes and penalties owed the state have been paid; that its most recent annual report has been filed; and, that articles of dissolution have not been filed. Also known as a certificate of existence or certificate of authorization.
Also: certified copies · certified copy of articles · exemplified copy · exemplification
A copy of a document on file with a state, stamped or sealed by that state's filing office as a true copy of its record. Banks, lenders, and foreign qualification filings often require certified copies of articles rather than plain photocopies. An exemplified copy, sometimes called a triple certified copy, adds further layers of certification and is used when a court or a foreign jurisdiction demands more than a standard certification.
Certificate of Good Standing Apostille Articles of Incorporation Legalization of Certified Documents
Also: charging orders
A court order directing that distributions otherwise payable to an owner of an LLC or partnership be paid instead to that owner's personal creditor. In many states it is the creditor's exclusive remedy against the ownership interest, so the creditor collects distributions if and when they are made but does not become a member, vote, or force a sale of company assets. How protective it is varies substantially by state and by whether the company has one owner or several.
Limited Liability Company (LLC) Operating Agreement Distribution Member
Also: close corporations · statutory close corporation
A corporation that elects in its articles of incorporation to be registered under the close corporation statutes of their state of incorporation and whose stock is not publicly traded and held by only a few persons (such as those in management). The organizational structure of this type of corporation must comply with strict statutory requirements and limitations. Some state close corporation statutes provide for a maximum number of shareholders. In addition, close corporation statutes may eliminate or limit the powers of the board of directors, prescribe preemptive rights to the shareholders or relax the corporate formalities. Exact specifications vary by jurisdiction. Not all state statutes provide for a close corporation provision.
Also: closely held company · privately held corporation · privately held company
A closely held corporation is any corporation in which the stock is held by a relatively small group of people, entities, investors, management, founders and/or their families. Stock of a closely held corporation is not publicly traded on any stock exchange.
Also: commercial registered agents · noncommercial registered agent
A registered agent that has filed a listing statement with a state and appears on the state's roster of agents serving many entities, as opposed to a noncommercial agent such as an individual serving one company. States that maintain the distinction let a commercial agent update its address once for all of its represented entities rather than filing separately for each. The underlying duty, accepting service of process and official notices, is the same either way.
Registered Agent CROP (Commercial Registered Office Provider) Registered Office Service of Process
Also: commingling · commingled · comingle · comingling
Commingling, is the sharing and pooling of personal and corporate assets. For example, rather than maintain separate corporate and personal bank accounts, you choose to use one account for personal and corporate purposes. This is considered commingling and an easy way to become personally liable for corporate acts.
Also: common stock · common share
A class of shares that has no special features and possesses no greater rights than any other shares except for Preferred Shares. All capital stock except for preferred stock is considered Common Shares.
Also: compliance calendars · filing calendar
A schedule of the recurring filings and payments an entity owes in each jurisdiction where it is registered, such as annual or biennial reports, franchise tax, license renewals, and registered agent renewals. Due dates vary by state and by entity type, and several states key the date to the anniversary of formation rather than to a fixed month. Keeping one is how companies avoid drifting out of good standing and into administrative dissolution.
Annual Report Franchise Tax Good Standing Administrative Dissolution Entity Management System
Also: in compliance
As used in InCorp's Compliance Watch suite of services, this term refers to how completely a legal entity has met the responsibilities that maintain its formal existence under the laws of the jurisdiction where it is formed, such as filing annual reports and maintaining a registered agent. It is not intended to mean or imply conformity with every federal, state, or local regulatory or tax requirement that may apply to operating your business.
Also: consent resolutions · written consent · unanimous written consent · action by written consent
A consent resolution is any resolution signed by all of the directors or shareholders, which authorizes a particular action. This act eliminates the need for face-to-face meetings of directors and shareholders.
Something of value, such as money, property, or personal services, given by one party to another in exchange for an act or a promise. In the corporate context it most often means the amount paid to the corporation for its stock. More generally, consideration is what makes a promise part of a legally enforceable contract rather than a gift.
The statutory combination of two or more corporations to create a new corporation.
Also: constituent corporation
A party to a transaction; a corporation involved in a merger, consolidation or share exchange.
Also: contract creditor
Contract creditors are people or businesses which you owe money or property to because of a written or verbal contractual agreement. If you buy 30 widgets from Widget World, Widget World becomes a contract creditor.
Also: capital contribution · capital contributions
A contribution of cash or other property that a shareholder makes to a corporation that increases the corporation's paid-in capital but for which the shareholder does not receive stock. The contribution increases that shareholder's basis in stock.
Also: controlled groups · brother-sister controlled group
A group of corporations treated as related for one or more tax purposes. Control may run through a parent and subsidiary chain, or through common ownership in what is called a brother-sister controlled group. Control generally means ownership of a threshold percentage, commonly at least 80 percent, and sometimes as little as 50 percent, of the combined voting power of all classes of voting stock or of the total value of the shares.
Also: convertible securities
A security that may be exchanged by the holder for another type of security.
Also: copyrights · copyrighted
The exclusive right of the creator of an original work, such as text, images, software, music, or video, to reproduce, distribute, display, and adapt it. Protection attaches automatically when the work is fixed in a tangible form, and registration with the U.S. Copyright Office is optional but is generally required before suing for infringement and before certain damages are available. Copyright covers creative expression, while a trademark covers names and marks that identify a source of goods or services.
Also: corporate formality · entity formalities · corporate housekeeping
The routine practices that keep an entity recognizable as separate from its owners: holding and documenting meetings, adopting resolutions, keeping minutes and an accurate ownership ledger, maintaining separate bank accounts, and signing on behalf of the entity rather than personally. State law requires some of these and good practice supplies the rest. When owners ignore them and blend personal and company affairs, that record is what an opposing party uses to argue for piercing the corporate veil.
Piercing the Corporate Veil Commingle Minutes Resolution Alter Ego
Also: corporate indicators · entity designator · corporate suffix · entity identifier word
A word or an abbreviation of a word that must be included in a corporation's name to indicate that the named entity is a corporation. Valid corporate indicators include: incorporated, corporation, limited, company, inc., corp., ltd. and co. The list of acceptable corporate indicators will vary depending upon the jurisdiction in which the corporation is registered.
Also: corporate kits · corporate record kit · corporate record book · minute book
A Corporate Kit is a binder usually containing essential items for the routine maintenance and administration of a corporation or limited liability company. Corporate kits commonly include sample minutes and bylaws, stock certificates, a corporate seal and stock ledger.
Corporate Seal Stock Certificate Minutes Virtual Corporate Kit Stock Ledger
Also: corporate seals · company seal
A Corporate Seal is a device made to either emboss or imprint certain company information onto documents. This information usually includes the company's name and date and state of formation. Corporate seals are often required when opening corporate or LLC bank accounts, distributing stock or membership certificates or conducting other corporate business. Custom-made corporate seals are commonly included as part of a Corporate Kit.
Also: corporations
An entity formed and authorized by, created under and governed by the laws of the state of incorporation to act as a single person even though it is constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession.
C Corporation S Corporation Limited Liability Company (LLC) Incorporation Business Entity
Also: corporate law
The statutory provisions of a state relating to domestic and foreign corporations.
Also: CROP · commercial registered office provider
A company listed with the state that supplies a commercial registered office address which entities may use in place of their own street address. Pennsylvania is the best-known example, where an entity may name a CROP instead of providing a registered office of its own. Functionally the CROP receives the entity's official mail and service of process at that address.
Registered Agent Registered Office Service of Process Commercial Registered Agent
A procedure used for electing directors in which shareholders are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates.
D
Also: DBA · d/b/a · doing business as · assumed name
A name other than its true legal name under which a business operates. Depending on the state it is called a doing business as name, an assumed name, a fictitious name, or a trade name. A DBA is a registration, not a separate entity, so it creates no liability protection and no new tax status of its own. Most states or counties require the DBA to be registered, and many require periodic renewal.
Sole Proprietorship Name Availability Corporate Indicator Trademark
Also: debentures
A long-term debt issued mainly to evidence an unsecured corporate debt.
A method of raising capital in which a corporation borrows money.
Also: delayed filing · delayed effective date filing · future effective date
A request that a filing take effect on a later date rather than when the state accepts it, permitted in many states within a limited window. Companies forming late in the year commonly use it so the entity's existence begins on January 1, which can avoid a short first tax year and an extra annual report or franchise tax cycle. The available window and the rules differ by state.
Articles of Incorporation Articles of Organization Franchise Tax Annual Report
Also: derivative suits · derivative action · shareholder derivative suit
A lawsuit brought by a shareholder on behalf of a corporation to protect the corporation from wrongs committed against it.
Also: directors · board member · board members
The individuals who, acting as a group known as the board of directors, manage the business and affairs of a corporation.
An act by the corporation or shareholder that causes the corporation to cease to be an eligible corporation and that generally results in termination of S corporation status.
Also: disregarded entities
A business that exists as a separate legal entity under state law but is ignored as separate for federal income tax purposes, so its income and deductions are reported by its owner. The most common example is a single-member LLC that has not elected corporate taxation. Being disregarded for tax purposes does not undo the entity's legal separateness or its liability protection.
Single-Member LLC Pass-Through Taxation Limited Liability Company (LLC) EIN (Employer Identification Number)
Also: dissenters right · dissenters rights · dissenter's rights · appraisal rights
A right granted to shareholders that entitles them to have their shares appraised and purchased by the corporation if the corporation enters into certain transactions that the shareholders do not approve of.
Also: dissolve · dissolved · dissolving · certificate of cancellation
The statutory procedure that terminates the existence of a domestic corporation.
Administrative Dissolution Voluntary Dissolution Involuntary Dissolution Winding Up Withdrawal Tax Clearance
Also: distributions
A transfer of money or other property made by a corporation to a shareholder in respect of the corporation's shares.
Also: dividends
A distribution of a corporation's earnings to its shareholders.
Also: domestic entity · domestic LLC · domestic corporations
An entity viewed from the state where it was formed. From every other state's perspective the same entity is a foreign corporation. The distinction has nothing to do with international borders, only with the state of formation.
Also: domesticate · redomestication · conversion of domicile · transfer of domicile
A statutory process that moves an entity's state of formation from one state to another, so the same entity continues with a new home state rather than forming a new entity and merging into it. It requires that both states authorize it, and it usually involves filings in each. Where domestication is not available, companies typically achieve the same result through a merger into a newly formed entity.
Also: double taxed · taxed twice · double tax
Taxation by the federal government of corporate earnings once at the corporate level and again at the shareholder level upon distribution of dividends. When a corporation must pay taxes on its earnings and individual shareholders must also pay taxes on any dividends that are distributed.
Also: perpetual duration
How long a business entity is recognized as existing. An entity with perpetual duration continues indefinitely unless it is dissolved by its owners or by the state. An entity formed with a stated duration, for example 30 years, dissolves automatically on that anniversary unless the duration is amended first.
E
Also: EIN · employer identification number · federal tax ID · federal tax identification number
A nine-digit number the IRS assigns to a business to identify it for federal tax purposes, written in the format 12-3456789. Businesses generally need one to hire employees, open a business bank account, or file certain federal returns. It is issued by the IRS, not by a state, and it is separate from any state tax or entity number. A single-member LLC with no employees may be able to use the owner's Social Security number instead, though many banks still ask for an EIN.
ITIN (Individual Taxpayer Identification Number) Limited Liability Company (LLC) Corporation Disregarded Entity
Also: employment agreements · employment contract
An employment agreement is a contract between your corporation and an employee. These agreements can be written or verbal; although all employment agreements should be in writing. Employers are more likely to have employment agreements with key employees. The terms and conditions of an employment agreement should be consistent with statutes, articles, bylaws, and any existing shareholder agreements.
Also: conversion · statutory conversion · convert an LLC · convert to a corporation
A statutory process that changes an entity from one type to another, for example an LLC to a corporation, while the same entity continues to exist rather than being dissolved and replaced. Where conversion is authorized it usually preserves the entity's original formation date, contracts, and property. Not every state authorizes every conversion, and the tax consequences are separate from the state law mechanics.
Domestication Merger Incorporation Limited Liability Company (LLC)
Also: EMS · entity management · entity management software
Software used to track a portfolio of business entities in one place: formation details, jurisdictions, registered agent assignments, officers and directors, filing deadlines, and copies of documents received. Companies with entities in several states use one because deadlines and requirements differ by jurisdiction and are easy to lose track of on a spreadsheet. It is a recordkeeping tool and does not itself make filings.
Compliance Calendar Annual Report Good Standing Registered Agent
A method of raising capital in which a corporation sells shares of stock.
Also: ownership interest · equity interests
An ownership interest; the interest of a shareholder as distinguished from that of a creditor.
Also: expedite · expedited service · rush filing · same-day filing
An optional state service that moves a filing ahead of the standard queue for an additional state fee. Tiers and turnaround times vary by state, and some states offer same-day or one-hour handling while others offer no expediting at all. Expediting affects how quickly the state processes the document, not whether the document is acceptable.
State Filing Fee Secretary of State Articles of Incorporation
F
Also: fiduciary duty · fiduciary duties · fiduciary
A relationship in which one party (the fiduciary) must act in good faith and with due regard to the best interests of the other party or parties.
Also: fiscal years
An accounting year that ends on a date other than December 31. C corporations may elect to use a fiscal year. S corporations may generally use a fiscal year if it is a natural business year.
Also: foreign entity · foreign LLC · foreign corporations · foreign limited liability company
A term applied to a corporation doing business in a state other than its state of incorporation.
Foreign Qualification Certificate of Authority Domestic Corporation
Also: qualification · qualify to do business · foreign filing · foreign registration
The process of registering an entity to transact business in a state other than the one where it was formed, which results in a certificate of authority from that state. Corporations, limited liability companies, and similar entities all go through it, and each state requires a registered agent in that state as part of the process. States generally look at physical presence, employees, and the nature of the activity when deciding whether qualification is required. Transacting business without qualifying can lead to penalties, back fees, and difficulty enforcing contracts in that state.
Certificate of Authority Foreign Corporation Registered Agent Withdrawal Application for Certificate of Authority
Also: fractional shares
Ownership in a corporation in an amount less than a full share.
Also: franchise taxes · franchise fee · privilege tax · annual franchise tax
A tax or fee, usually annual, levied on a corporation, limited liability company, or similar entity for the privilege of existing or transacting business in a particular state. It is often calculated on authorized shares, capital, gross receipts, or a flat amount, and it is separate from income tax. Failure to pay franchise tax or similar fees can lead to loss of good standing, administrative dissolution, and forfeiture of the charter.
Also: fraudulent transfer · fraudulent conveyances
A contractual misrepresentation of the nature, quantity, or existence of transferred assets. Also, a term denoting potential risk for sellers and lenders.
Also: fringe benefit
Employee benefits and perquisites, other than qualified retirement plans.
G
Also: general partners · GP
A partner who manages the business of a partnership or limited partnership and, in a standard limited partnership, is personally liable for its debts and obligations. General partners have authority to bind the partnership in ordinary business dealings. In a limited-liability limited partnership, statute reduces that personal exposure.
Limited Partner Limited Partnership LLLP (Limited-Liability Limited Partnership) Partnership
Also: initial public offering · IPO · go public
The process by which a corporation first sells its shares to the public.
Also: in good standing
A corporation is said to be in good standing when it has remained current with the necessary reports and fees required by the regulatory jurisdictions under which it operates.
Certificate of Good Standing Annual Report Administrative Dissolution Compliant
H
Also: hague apostille convention · apostille convention
Formally the Hague Convention of October 5, 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents. Among participating countries it replaces the older chain of consular legalization with a single standardized certificate called an apostille. A document apostilled in one member country is accepted as authentic in every other member country. Documents destined for a country that is not a member generally require consular legalization instead.
Also: hostile takeovers
A takeover that occurs without the approval of the target corporation's board of directors.
I
Also: incorporate · incorporating
The act of creating or organizing a corporation under the laws of a specific jurisdiction.
Corporation Articles of Incorporation Incorporator Entity Conversion
Also: incorporators
The person(s) who perform the act of incorporation and who sign the articles of incorporation and deliver them for filing.
Also: indemnify · indemnity
Financial protection provided by a corporation to its directors, officers, and employees against expenses and liabilities incurred by them in lawsuits alleging that they breached some duty in their service to or on behalf of the corporation.
Also: initial reports · initial list · initial list of officers · initial annual report
A first informational filing that some states require shortly after formation or foreign qualification, listing officers, directors, managers, or members. It is separate from, and in addition to, the recurring annual report, and its deadline is usually measured in days or a few months from the formation date. Missing it can put a brand-new entity out of good standing before its first annual report is even due.
Annual Report Compliance Calendar Good Standing Secretary of State
Also: involuntarily dissolved
The termination of a corporation's legal existence pursuant to an administrative or judicial proceeding; dissolution forced upon a corporation rather than decided upon by the corporation.
Administrative Dissolution Voluntary Dissolution Reinstatement
Also: issued shares · outstanding shares · issued and outstanding
The shares a corporation has actually sold or granted and that are currently held by shareholders. This is different from authorized shares, which is the ceiling set in the articles, and different from treasury shares, which the corporation has reacquired. Ownership percentages and voting math are calculated on issued and outstanding shares, not on authorized shares.
Also: ITIN · individual taxpayer identification number
A nine-digit number the IRS issues to individuals who have a U.S. tax filing obligation but are not eligible for a Social Security number. It exists only for federal tax purposes and does not confer work authorization or immigration status. Non-resident owners of U.S. entities sometimes need one to file returns or to be identified on entity filings.
L
Also: legalization · document legalization · consular legalization · legalize documents
The multi-step authentication process required when a document is going to a country that does not participate in the Hague Convention, and therefore cannot use an apostille. It typically involves certification by the state, then by the U.S. Department of State, and finally by the destination country's embassy or consulate. The result is a document the receiving country will treat as authentic.
The principle that an owner's exposure for the debts and obligations of a business is limited to what that owner has invested, rather than extending to personal assets. It is a feature of corporations, limited liability companies, and limited partners in a limited partnership, and it comes from statute rather than from private agreement. Limited liability is not absolute and can be lost, for example through veil piercing or a personal guarantee.
Limited Personal Liability Limited Liability Company (LLC) Piercing the Corporate Veil
Also: LLC · LLCs · limited liability companies · limited-liability company
An artificial entity created under and governed by the laws of the jurisdiction in which it was formed. Limited liability companies are generally able to provide the limited personal liability of corporations and the pass-through taxation of partnerships or S corporations.
Member Manager Operating Agreement Articles of Organization Pass-Through Taxation Charging Order
Also: limited partners · LP interest
A partner who invests capital in a limited partnership but does not manage it, and whose exposure for partnership debts is generally limited to that investment. The tradeoff is control: taking an active management role can put the limited liability at risk in some states. Limited partners' rights are usually set out in the partnership agreement.
General Partner Limited Partnership LLLP (Limited-Liability Limited Partnership)
Also: LP · limited partnerships
A statutory form of partnership consisting of one or more general partners who manage the business and are liable for its debts, and one or more limited partners who invest in the business and have limited personal liability.
General Partner Limited Partner LLLP (Limited-Liability Limited Partnership) Partnership
Also: limited liability protection · personal liability protection
The protection generally afforded a corporate shareholder, limited partner or a member of a limited liability company from the debts of and claims against the company.
Limited Liability Piercing the Corporate Veil Corporate Formalities
Also: LLLP · limited-liability limited partnership · limited liability limited partnership
A limited partnership that has also elected limited-liability partnership status, so that the general partners get statutory protection from the partnership's debts rather than the unlimited exposure a general partner normally carries. It keeps the limited partnership structure of general partners who manage and limited partners who invest. Not every state authorizes the LLLP form, and the election usually requires a specific filing and periodic renewal.
Limited Partnership General Partner Limited Partner Partnership
M
Also: majority vote
More than 50 percent; commonly used as the percentage of votes required to approve certain corporate actions.
The board of directors and executive officers of a corporation, limited liability company or similar business entity.
Also: managers · manager-managed · manager managed
The individuals who are responsible for the maintenance, administration and management of the affairs of a limited liability company (LLC). In most states, the managers serve a particular term and report to and serve at the discretion of the members. Specific duties of the managers may be detailed in the articles of organization or the operating agreement of the LLC. In some states, the members of an LLC may also serve as the managers.
Also: members · LLC member · LLC members · member-managed
The owner(s) of a limited liability company (LLC). Unless the articles of organization or operating agreement provide otherwise, management of an LLC is vested in the members in proportion to their ownership interest in the company.
Manager Limited Liability Company (LLC) Membership Certificate Operating Agreement
Also: membership certificates · membership interest certificate
Evidence of ownership of and membership in a limited liability company.
Also: mergers · merge · merged
The statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist.
Also: corporate minutes · meeting minutes
The corporate minutes are the written record of transactions taken or authorized by the board of directors or shareholders. These are usually kept in the corporate minute book in diary fashion.
Resolution Consent Resolution Corporate Kit Annual Meeting Corporate Formalities
Also: DOT authority · operating authority · MC number · USDOT number
Federal permission from the Federal Motor Carrier Safety Administration to operate as a for-hire motor carrier, broker, or freight forwarder in interstate commerce, identified by an MC number. It is distinct from a USDOT number, which is a registration and safety identifier. Obtaining authority generally requires designating process agents on Form BOC-3 and filing proof of insurance.
Also: multi member LLC · multiple-member LLC · multi-member limited liability company
A limited liability company with two or more owners. By default it is taxed as a partnership, filing an informational return and issuing each member a Schedule K-1 for their share of income or loss. An operating agreement matters more here than in a single-member LLC because it governs voting, distributions, admission of new members, and what happens when a member exits.
Single-Member LLC Operating Agreement Limited Liability Company (LLC) Pass-Through Taxation
N
Also: name availability search · business name availability · name check · name search
Whether the state filing office will accept a proposed entity name, which generally turns on the name not being the same as, or deceptively similar to, an existing registered name and on including a required corporate indicator. Availability is decided state by state, so a name that clears in one state may be rejected in another. Clearing a name with the state is not a trademark clearance and does not by itself establish the right to use the name as a brand.
Name Reservation Corporate Indicator Trademark DBA (Doing Business As)
The filing of a document in a foreign state to protect the corporate name, often in anticipation of qualification in the state.
Also: reserve a name · reserved name · name reservations
A procedure that allows a corporation to obtain exclusive use of a corporate name for a specified period of time.
A fiscal year that is permitted for an S corporation because the corporation can show that 25 percent of gross receipts have been realized in the last two months of such a year for the last three years.
Also: no par value · no-par shares · no par value stock
Shares for which the articles of incorporation do not fix a par value and that may be issued for any consideration determined by the board of directors.
Also: not-for-profit corporation · not for profit corporation · nonprofit · non-profit
A not-for-profit corporation is generally organized for some socially beneficial purpose, rather than for the direct monetary benefit of the directors or members. Not all not-for-profit corporations are tax exempt and some make a profit. However, the profit is not distributed to the members or directors. Also known as a non-profit corporation.
Also: notarized · notary · notary public · notarize
A notary public's verification of a signer's identity and witnessing of a signature, recorded with the notary's seal and commission details. Some state filings, and many documents headed overseas, must be notarized before they will be accepted. In the apostille and legalization chain, notarization is usually the first step, followed by state and sometimes federal authentication.
Apostille Legalization of Certified Documents Certified Copy
O
Also: officers · corporate officers
Individuals appointed by the board of directors who are responsible for carrying out the board's policies and for making day-to-day decisions.
Also: operating agreements · Op-Ag · LLC operating agreement
A contract among the members of a limited liability company governing the membership, management, operation and distribution of income of the company. Commonly abbreviated "Op-Ag".
Bylaws Member Manager Limited Liability Company (LLC) Charging Order
Also: organizational meetings · organizing meeting
Meetings of incorporators or initial directors that are held after the filing of the articles of incorporation to complete the organization of the corporation.
Also: organizers
The person(s) who perform the act of forming a limited liability company.
P
Also: stated value
A minimum price of a share below which the share cannot be issued, as designated in the articles of incorporation.
Also: parent company
A corporation that owns a controlling interest in another corporation.
Also: partnerships · general partnership
A business organization in which two or more persons agree to do business together.
Limited Partnership LLLP (Limited-Liability Limited Partnership) Pass-Through Taxation Sole Proprietorship
Also: pass through taxation · passthrough taxation · flow-through taxation · pass-through entity
A tax treatment in which the entity itself generally pays no federal income tax and its income, deductions, and losses are instead reported by its owners on their own returns. Partnerships, most limited liability companies, and S corporations are typically taxed this way. Pass-through treatment avoids the double taxation that applies to C corporation dividends.
Double Taxation S Corporation Limited Liability Company (LLC) Disregarded Entity
Also: passive activity income
Income to certain taxpayers (including S corporation shareholders) that is subject to the passive activity loss (PAL) rules because the taxpayer does not materially participate in the business activity producing the income. Generally includes receipts from royalties, rents, dividends, interest, annuities, and the sale and exchange of stock and securities.
Also: perpetual
Unlimited term of existence; characteristics of most business corporations.
Also: pierce the corporate veil · corporate veil · veil piercing
Piercing the corporate veil is a legal theory sometimes used to impose personal liability on shareholders, officers, and directors for corporate acts. This theory permits a court to disregard the separate identity of the corporation.
Alter Ego Commingle Limited Personal Liability Corporate Formalities
Also: preferred stock · preferred share
A class of shares that entitles the holders to preferences over the holders of common shares, usually with regard to dividends and distributions of assets upon dissolution or liquidation.
Also: principal place of business · principal executive office · principal address
The main business address of an entity, where its records are kept and its management sits. It is reported on many state filings and is often confused with the registered office, which is only the address where the registered agent accepts service of process. The two can be the same address but frequently are not, and the principal office may be in a different state entirely.
Also: process agents · designation of process agent
A person or company designated to accept legal process on behalf of a motor carrier, broker, or freight forwarder in each state where it operates. The designation is filed with the Federal Motor Carrier Safety Administration on Form BOC-3. It serves the same notice function as a registered agent, but it is a federal transportation requirement rather than a state entity requirement.
BOC-3 Filing Motor Carrier Authority Registered Agent Service of Process
Also: professional corporations · professional association · professional limited liability company · PLLC
A corporation whose purposes are limited to professional services, such as those performed by doctors, dentists and attorneys. A professional corporation is formed under special state laws that stipulate exactly which professionals are required to incorporate under this status.
Also: promoters
A person who takes the initiative in organizing a business before it is formed, for example by lining up investors, arranging financing, negotiating leases, or contracting for property the future entity will use. Because the entity does not yet exist, a promoter can be personally responsible for pre-formation commitments unless the entity later adopts them. Promoters are generally treated as owing a duty of good faith to the entity and to the investors they bring in.
Also: proxies · proxy statement · proxy holder
A written authorization by which a shareholder lets another person vote their shares at a meeting. The word is used both for the authorization itself and for the person exercising it. Proxies are how a quorum is reached and votes are cast when shareholders cannot attend in person, and their form and duration are usually governed by statute and by the bylaws.
Also: publication requirements · notice of formation publication · publish notice of formation
A rule in a handful of states requiring a newly formed or newly qualified entity to publish notice of its formation in one or more designated newspapers and then file proof of publication. New York, Arizona, Nebraska, and Georgia are the commonly cited examples, and the details differ in each. Failing to publish can affect the entity's standing or its ability to bring suit in that state, depending on the statute.
Articles of Organization Foreign Qualification Good Standing Secretary of State
Q
Also: qualified plan
A pension or profit sharing plan that qualifies under the Internal Revenue Code for deductible contributions by an employer that are not included in employee income until plan distributions are made.
The percentage or proportion of voting shares required to be represented in person or by proxy to constitute a valid shareholders meeting, or the number of directors required to be present for a valid meeting of the board.
R
The date for determining the shareholders entitled to vote at a meeting, receive dividends, or participate in any corporate action.
Also: redeemable stock · callable shares
Shares subject to purchase by the corporation on terms set forth in the articles of incorporation.
Also: registered agents · resident agent · resident agents · statutory agent
A person or company designated to receive service of process and other important legal and state notices on behalf of a business entity. The registered agent must maintain a physical address in the jurisdiction, called the registered office, and be available there during normal business hours. Nearly every state requires each registered corporation, limited liability company, and similar entity to appoint and continuously maintain one. Failure to maintain a registered agent can lead to loss of good standing and administrative dissolution. Also called a resident agent, a statutory agent, or an agent for service of process, depending on the state.
Registered Office Service of Process CROP (Commercial Registered Office Provider) Commercial Registered Agent Foreign Qualification
Also: registered offices · registered agent address
The statutory address of a corporation. In states requiring the appointment of a registered agent, it is usually the address of the registered agent.
Registered Agent CROP (Commercial Registered Office Provider) Principal Office
Also: regulation · administrative rules
Regulations are administrative rules which have the force and effect of laws. Government agencies promulgate rules. If you don't comply, you are subject to the possibility of fines or revocation of the corporate charter.
Also: reinstate · reinstated · revival · revive
Returning a corporation that has been administratively dissolved or had its certificate of authority revoked, to good standing on a state's records.
Also: resolutions · corporate resolution · board resolution
A formal statement of any item of business that has been voted upon.
Also: restated articles of incorporation · amended and restated articles
A document that combines all currently operative provisions of a corporation's articles of incorporation and amendments thereto.
Also: RMBCA · Model Business Corporation Act · MBCA
A model corporation statute compiled by the American Bar Association that has been adopted in whole or in part by, or has influenced the statutes of many states.
S
Also: S corp · S-corp · Subchapter S · S election
A corporation that is eligible, and does elect to be taxed under Subchapter S of the Internal Revenue Code. A corporation granted a special tax status as specified under the Internal Revenue Code. The code is very explicit on how and when this election is made and the number of shareholders this type of corporation can have. Since this type of corporation pays no income tax, all gains and losses of the corporation pass through to the individual shareholders in proportion to their holdings. Basically, shareholders pay tax on the corporation's income by reporting their pro-rata shares of pass-through items on their own individual tax returns.
C Corporation Pass-Through Taxation S Corporation Termination Disqualifying Act
A cessation of S corporation status by operation of statute because the corporation either fails to continue to meet the requirements for S corporation status, or has C corporation earnings and profits plus excess passive investment income for three consecutive years.
A form used to represent ownership of fractional shares in lieu of issuing share certificates.
Also: SOS · Secretary of State's office · state filing office
The state office that receives and maintains business entity filings such as articles, amendments, annual reports, and registered agent designations. Not every state uses that title: the same function may sit with a Department of State, a Corporation Commission, a Division of Corporations, or a similar agency. It is a filing and recordkeeping office, so acceptance of a filing is not an opinion that the filing was a good idea.
Annual Report Articles of Incorporation Registered Agent Statute
Also: securities law · securities regulation
State and federal laws that govern the issuance, sale and transfer of stocks and bonds.
Also: securities
An investment instrument representing either an ownership stake in a business or a debt owed by it, bought with the expectation of a return produced by someone else's efforts. Stock, bonds, debentures, and many investment contracts are securities. Offering or selling securities is regulated at both the federal and state level, which is why capital raises usually involve either registration or a documented exemption.
Also: SE tax · self employment tax · SECA tax
The Social Security and Medicare tax paid by people who work for themselves rather than having it withheld by an employer. It generally applies to a sole proprietor's business income and to a member's share of active LLC income. How much of an owner's income is subject to it is one of the main practical differences discussed between LLC and S corporation treatment, since an S corporation shareholder-employee takes wages plus distributions.
Sole Proprietorship S Corporation Pass-Through Taxation Limited Liability Company (LLC)
Also: series LLCs · protected series
A limited liability company structure, authorized in some states, that lets a single parent LLC establish separate internal series, each able to hold its own assets and liabilities. The intent is that the debts of one series do not reach the assets of another. Because only some states authorize the form and courts outside those states have limited experience with it, the strength of the internal separation can vary by jurisdiction.
Limited Liability Company (LLC) Operating Agreement Limited Personal Liability
Also: notice of service of process · notice of litigation · served with process
The formal delivery of a legal or court document, such as a summons and complaint, that notifies a business of an action or proceeding against it and starts the clock on responding. State law requires most registered entities to keep a registered agent available at a physical address to accept service on the entity's behalf. Missing service of process can result in a default judgment, which is why prompt forwarding matters.
Also: shares
The unit into which the ownership interest in a corporation is divided.
Stock Shareholder Common Shares Issued and Outstanding Shares
A statutory form of business combination in which some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation and neither corporation ceases to exist.
Also: shareholders · stockholder · stockholders
Shareholders are the owners of a corporation based on their holdings. They own an interest in the corporation rather than specific corporate property. Also known as stockholders.
Also: basis in loans
The measure of loans made directly by a shareholder to an S corporation, which can be used to provide additional basis for the deduction of losses after the shareholder's basis in stock is exhausted. It is calculated using the initial amount of the loan, adjusted to reflect S corporation pass-through items.
Also: basis in stock
The measure of a shareholder's equity investment in a corporation, used to determine gain or loss when the stock is sold. It generally starts with what the shareholder paid for the stock, or the fair market value of property contributed for it, and is then adjusted over time. For S corporation shareholders it is adjusted for pass-through income, losses, and distributions.
Also: short form merger
The statutory merger of a subsidiary into its parent corporation in which shareholder approval is not required.
Also: single member LLC · SMLLC · one-member LLC · single-member limited liability company
A limited liability company with one owner. It still provides the statutory liability separation of an LLC, but for federal tax purposes it is by default a disregarded entity, meaning its activity is reported on the owner's return rather than on a partnership return. Because there is only one member, courts in some states scrutinize whether the owner respected the separation between personal and company affairs.
Multi-Member LLC Disregarded Entity Limited Liability Company (LLC) Corporate Formalities
Also: sole proprietor · sole proprietorships · sole prop
An unincorporated business with a sole owner in which the owner may be personally liable for business debts and claims against the business.
Partnership Limited Liability Company (LLC) DBA (Doing Business As) Self-Employment Tax
Also: special meetings · special shareholders meeting
A shareholder meeting called so that the shareholders may act on the specific matters stated in the notice of the meeting.
Also: state fee · state fees · state filing fees · statutory fee
The amount a state charges to accept a filing such as articles, an amendment, an annual report, or a certificate request. It is set by the state, is paid to the state, and is not discountable by a service provider. It is separate from any service fee charged for preparing and submitting the filing, and states change these amounts from time to time.
Expedited Filing Franchise Tax Annual Report Secretary of State
Also: statutes
Statutes are laws passed by the state legislature or U.S. Congress. Business corporation laws are statutes. Statutes often authorize an administrative agency to declare regulations which are used to supplement the statute. In the event of a conflict, statutes control over regulations.
Also: shares of stock
Stock represents ownership in a corporation. It may be represented by a certificate and can be common or preferred, voting or non-voting, redeemable, convertible, etc.. The classifications and special designations, if any, of the stock are set forth in the articles of incorporation.
Share Common Shares Preferred Shares Stock Certificate Stock Ledger
Also: stock certificates · share certificate
An instrument providing evidence of ownership of one or more shares of the capital stock of a corporation. May also be referred to as a share certificate.
Also: stock ledgers · share ledger · stock transfer ledger · share transfer ledger
The entity's internal record of who owns its shares or membership interests, showing certificate numbers, amounts, dates, and transfers. It is the entity's own record, not a state filing, and it is normally kept with the corporate records. When ownership is questioned in a financing, a sale, or a dispute, the stock ledger is the first document anyone asks for.
Stock Certificate Shareholder Corporate Kit Issued and Outstanding Shares
Also: stock options
A right granted by a corporation to officers or employees as a form of compensation that allows purchase of corporate stock at a fixed price at a specified time with reimbursement derived from the difference between purchase and market prices.
Also: stock purchase agreements
A stock purchase agreement is an agreement between the shareholders and the corporation. It provides a mechanism to regulate the transfer and sale of corporate stock. Often, a stock purchase agreement will provide a right of first refusal in favor of the corporation or remaining shareholders in the event of a proposed sale of stock by a shareholder. A stock purchase agreement can also provide for a purchase upon the death, disability, retirement, discharge, resignation, or bankruptcy of a shareholder.
Also: stock splits · forward split
A division of corporate stock by the issuance to existing shareholders of a specified number of new shares with a corresponding lowering of par value for each outstanding share.
Also: subscribers
Persons who agree under specific conditions to purchase shares in a corporation.
Also: stock subscription · subscription agreement
The written agreement by which a subscriber commits to buy shares in a corporation, setting the number of shares, the price, and the conditions of the purchase. Before the corporation exists, a subscription is an offer that the corporation adopts once it is formed. After formation, an accepted subscription is an enforceable contract to pay for the shares.
Also: subsidiaries
A corporation that is either wholly owned or controlled through ownership of a majority of its voting shares, by another corporation or business entity.
T
Also: takeovers
A merger, acquisition or other change in the controlling interest of a corporation.
Also: target corporation · target company
The corporation that is the focus of a takeover, acquisition, or merger attempt. The party pursuing it is usually called the acquirer or the bidder. Whether the target's board supports the attempt is what distinguishes a negotiated deal from a hostile takeover.
Also: tax clearance certificate · tax good standing · certificate of tax clearance · revenue clearance
Confirmation from a state tax authority that an entity has filed its required returns and paid what it owes. Several states require a tax clearance certificate before they will accept a dissolution or a withdrawal filing, and some require it before issuing a certificate of good standing. Because it comes from the tax agency rather than the filing office, obtaining it can add weeks to a wind-down timeline.
Also: tax exempt organization · tax-exempt status · 501(c)(3)
Any organization that is determined by the Internal Revenue Service to be exempt from federal taxation of income. A tax-exempt may be required to operate exclusively for charitable, religious, literary, educational or similar types of purposes.
Also: torts
A tort is any act or failure to act (if there was a duty to act) which causes harm or damage. Examples of torts include assault, battery, fraud, misrepresentation, defamation, libel, slander, invasion of privacy, and negligence. If there is a claim against your corporation, other than a claim by the government, it will likely be based in contract or tort.
Also: trademarks · service mark · trade mark
A word or mark that distinctly indicates the ownership of a product or service, and that is legally reserved for the exclusive use of that owner.
Also: treasury stock
Shares that a corporation issued and later reacquired, and that it now holds itself rather than having them outstanding with shareholders. Treasury shares generally carry no vote and receive no dividends while the corporation holds them. They may be reissued or retired depending on the statute and the articles.
U
Also: UCC-1 · UCC1 · UCC financing statement · financing statement
A financing statement filed under Article 9 of the Uniform Commercial Code to give public notice that a lender claims a security interest in a borrower's personal property collateral. Filing perfects the security interest and establishes the lender's priority against later claimants. It is usually filed in the state where the debtor is located, and it lapses after five years unless continued.
Also: UCC searches · lien search · UCC lien search · judgment and lien search
A search of state records for UCC financing statements and related liens filed against a business or individual. Buyers, lenders, and parties doing diligence run one to see what collateral is already pledged and to whom. Results reflect what has been indexed in the searched jurisdiction, so a complete picture usually requires searching each relevant state and name variation.
Also: underwriters
A company that purchases shares of a corporation and arranges for their sale to the general public.
V
Also: virtual corporate kits · digital corporate kit · electronic corporate kit
A digital version of the traditional corporate kit: the organizational documents, sample minutes and bylaws or operating agreement, certificates, and stock or membership ledger delivered as files rather than in a physical binder. The content serves the same recordkeeping purpose as a printed kit. Physical items such as an embossing seal and printed certificates are not included unless ordered separately.
Also: voluntarily dissolve
Action by shareholders, incorporators or initial directors to dissolve a corporation.
Also: pooling agreement · voting agreements · voting or pooling agreement
A voting or pooling agreement is an agreement, preferably in writing, of two or more shareholders to vote their shares in a certain manner. The most common use of this agreement would be to pool voting strength for the election of directors.
Also: voting right · right to vote
Rights of shareholders to vote their shares pursuant to provisions of statutes, the articles of incorporation and the bylaws.
Also: voting trusts · voting trust certificate
A voting trust is a trust formed through an agreement among the shareholders of the corporation. Under a voting trust, shareholders transfer their shares of stock to a trustee in exchange for voting trust certificates. The trustee votes the shares in the manner directed in the voting trust agreement. Voting trusts are often used to preserve control of the corporation. Can be an eligible shareholder of an S corporation.
W
Also: watered stock
Shares that have been issued for a consideration less than the par or stated value of the shares.
Also: wind up · wound up · wind-up
The discharging of a corporation's liabilities and the distributing of its remaining assets to its shareholders in connection with its dissolution.
Also: withdraw · withdrawals · foreign withdrawal
The statutory procedure whereby a foreign corporation obtains the consent of a state to terminate its authority to transact business there.
Definitions are general information about commonly used terms, not legal advice for your situation.
