Ch 17 Key Terms

501(c)(3)

501(c)(3) refers to a section of the U.S. Tax Code that specifies the conditions for a nonprofit organization to be certified tax-exempt, meaning it does not pay any federal income taxes. In addition to saving taxes, 501(c)(3) status gives the recipient organization the ability to legally tell donors that their donations are also tax-exempt, which makes such donations a way to decrease the amount on which taxpayers would have to pay income taxes. This is one of the big incentives to nonprofits to increase the attractiveness of getting donations.

design patent

A 14-year patent for a new, original, and ornamental design for an article of manufacture.

utility patent

A 20-year patent covering a process, machine, article of manufacture, composition of matter, or any new or useful improvement of an existing one.

plant patent

A 20-year patent that covers new strains of living plant organisms, algae, or macro fungi.

hourly fees

A basis for legal charges in which the rate is based on a price per hour. Often lawyers will charge for fractions of an hour.

legal entity

A being, human or nonhuman, such as a corporation, that is recognized as having rights and duties, such as the right to own property.

nonprofit corporation

A business form specific to charitable organizations (i.e., organizations that do not make a profit for their owners). Nonprofit business charters differ in the kinds of responsibilities the nonprofit has, compared to the other forms of for-profit business forms. Nonprofits are the only form of business that can seek 501(c)(3) status from the IRS, which permits donations to the nonprofit to be considered tax-deductible to the donor.

check the box taxation

A choice LLCs can make on their tax returns to be taxed as a corporation or a partnership.

operating agreement

A contract among LLC members outlining how the LLC will conduct itself.

subcontract

A contract by which a new party agrees to perform a duty that one of the original parties to a contract was already legally obligated to perform.

arbitration

A dispute resolution process held instead of court cases in which both sides present their case to a legal professional.

mediation

A dispute resolution process held instead of court cases in which both sides present their case to a neutral third party who is not a judge. Unlike arbitration and court decisions, mediation decisions are not binding on the two parties.

Sarbanes-Oxley Act (SOX)

A federal law describing the steps publicly traded businesses must take to protect and provide their key financial information.

retainer

A fee paid by a client to an attorney to engage the attorney's services.

litigation

A formal dispute resolution method that operates using the court system, typically with a lawyer representing each party.

patents

A grant by the U.S. government to an inventor for an idea that is new, useful, and nonobvious, giving the inventor the exclusive right to make, use, or sell his or her idea.

flat fees

A method of billing for lawyers in which a fixed amount is paid for a certain task.

provisional patent

A preliminary description of your idea submitted to the U.S. Patent Office according to its specifications. It is intended to serve as a sort of placeholder for a full (or regular) patent, which needs to be filed within one year of the filing of the provisional patent.

opinion of patentability

A report (typically written as a letter) from a patent attorney or patent agent that is his or her professional opinion of the possibility of obtaining a patent for an idea that you have explained. The opinion is based on the attorney's or agent's research of patents for similar or related ideas. Typically the first official step in the patenting process.

hold harmless

A type of waiver in which a party agrees not to hold another party responsible for certain events.

articles of partnership

Agreement between the partners of a firm on matters pertaining to the formation and operation of the partnership.

grace period

An idea in patent law that says disclosing the idea starts a one-year clock for filing a provisional or regular patent, where the disclosure would not count as "prior art" and disqualify the idea from being patented (since as "prior art" it was already publicly known). These grace period disclosures are strongest if they are limited to specific people (versus publicizing an idea on the Internet or in mass media).

business-to-business (B2B)

Business-to-business transactions using e-commerce.

business-to-consumer (B2C)

Business-to-consumer transactions using e-commerce.

trade secrets

Confidential information within a company that gives that company a competitive advantage.

trademarks

Distinctive word, slogan, or image that identifies a product and its origin.

articles of organization

Document setting forth information about a limited liability company that is filed with the state to establish an LLC.

pass through (taxation)

Earnings of the business are distributed to the business owners and those owners (rather than the business) pay individual tax on the earnings.

single taxation

Earnings of the business are taxed once with the owners paying the taxes.

double taxation

Earnings of the business are taxed twice with the business as well as its owners being subject to tax.

copyrights

Exclusive right given to the creator of a literary or artistic work to make use of that work.

contingency fee

Fee paid by a client to an attorney for legal services that is dependent on the outcome of a case.

assumed name filing or fictitious name filing

Filing made with a state(s) in which the business operates disclosing the trade name or assumed name of the business along with the owners of the business.

vicarious (indirect) liability

Indirect liability or responsibility for the actions of another.

waiver

Part of a contract in which a party intentionally gives up legal rights or claims.

exculpatory clause

Part of a contract in which a party to the contract states that he or she will not be responsible for certain actions.

noncompete clause

Part of a contract in which a person agrees not to open a certain type business or seek employment doing certain things in a particular area for a period of time.

defendant

Person or other entity being sued.

plaintiff

Person or other entity filing a lawsuit.

independent contractors

Persons working to achieve a certain goal without being subjected to substantial controls by another.

intangible property

Property coming from some sort of original thought; for example, patents, trade secrets, trademarks, and copyrights

infringer

Someone who uses intellectual property without the permission of the owner.

piercing the veil

The dissolution of a corporate form, making it back into a sole proprietorship or general partnership, if the court finds that the owner carelessly mixed up personal and business assets or finances.

trade name or assumed name or doing business as (dba) name

The name under which a business is operated.