Business Organizations and Corporate Law

Articles of Limited Liability Partnership

Public document that must be filed with the Secretary of State in order to form this type of partnership.

Joint Venture

Relationship or association between two or more persons, corporations, or an agency set up for a specific business undertaking or limited time period.

White Collar Crime

A crime committed in a commercial context by a member of the professional-managerial class or an officer of a corporation or similar business entity.

Securities and Exchange Commission (SEC)

Federal administrative agency charged with the regulation and administration of publicly-traded corporations.

Corporation

A business entity, authorized by state law, that is formed and authorized to act as a single person and to raise capital by issuing stock toinvestors who are the owners of the corporation.

Stock (Purchase) Warrant

A certificate allowing the holder to purchase a specific amount of stock at a fixed price for a specified time.

Foreign Corporation

A corporation incorporated in one state but doing business in other states or jurisdictions.

Franchise

A party that owns a trade name or trademark (the franchisor) may contract with a party that wishes to sell, distribute, or provide services and/or products using the trade name or mark (franchisee).

Proxy

A person or power authorized to act for another.

Nonresidential Alien

A person who does not meet the IRS green card or substantial presence test to be declared a "resident alien" - generally, a new arrival on a J-1 or F-1 visa. Non-residential aliens are taxed differently than residential aliens.

Closely Held Corporation

A privately held corporation whose stock is not traded on the national stock exchanges.

Security

A stock or bond, or any other instrument of interest that represents an investment in a common enterprise with reasonable expectations of profit, derived solely from efforts other than those of the investor.

Whistleblower

An employee who brings the wrongdoings of his/her employer or other employee(s) to the attention of a government or law enforcement agency.

Bond

An interest-bearing document giving evidence of a debt issued by a government body or corporation that is sometimes secured by a lien on property and is often designed to take care of a particular financial need.

Syndicate

An investment group that privately agrees to come together for the purpose of financing a large, commercial project that none of the syndicate members could finance alone.

Sole Proprietorship

Business owned by one person who has sole control over management and profits and who is individually responsible for business debts.

Stock

Capital raised by a corporation through the sale of shares that entitle shareholders to certain rights of ownership; the proprietorship element in a corporation usually divided into shares and represented by transferable certificates.

Officers

Corporate employees who are appointed by the board of directors to manage the day-to-day operations of the corporations.

Professional Corporation (PC)

Corporation organized by doctors, dentists, lawyers, accountants, and other licensed professionals specified in state statutes.

Publicly Held Corporation

Corporation whose stock is traded on at least one national securities exchange.

Piercing the Corporate Veil

Doctrine stating that if a shareholder dominates a corporation or misuses it for improper purposes, the corporate entity may be disregarded, and the shareholder may be personally liable for the corporation's debts and obligations.

National Stock Exchange

Entity for trading stocks of publicly held corporations. The two U.S. exchanges are the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ).

Limited Liability Partnership (LLP)

Form of partnership in which all partners are limited and there are no general partners. This form of entity is often used by professionals as the partnership may continue even if one partner is sued; the partners are not jointly or severally liable.

Limited Liability Company (LLC)

Hybrid corporation-partnership, such as a Subchapter S corporation, but with fewer restrictions.

Board of Directors

Individuals elected by the shareholders who are responsible for formulating policy and deciding the business activities in which the corporation should be engaged. The Board of Directors elects the officers of the corporation and also determines the capital structure, the sale of stock, payment of dividends and other business matters.

Letter of Deficiency

Informal letter issued by the Securities and Exchange Commission (SEC) indicating what corrections need to be made in a registration statement in order for it to become effective.

Business Judgment Rule

Legal principle stating that corporate officers and directors are not liable for honest mistakes of business judgment when acting in good faith.

Limited Liability Limited Partnership (LLLC)

Liability of all partners is the same even though there is a general partner. Liability is limited to the amount of the investment.

Cooperative

Not-for-profit organization formed by individuals to market products.

Share

One unit of ownership in a company.

Subchapter S Corporation

Organized like a corporation but treated like a partnership for tax purposes so long as it abides by certain IRS restrictions pertaining to stock, shareholders and affiliations.

Joint Stock Company

Partnership agreement in which members of the company own shares that are transferable, but all goods are held in the name of the members who assume partnership liability.

General Partnership

Partnership in which management responsibilities and profits are equally divided among the partners; all partners have unlimited personal liability for the partnership's debts.

Limited Partnership (LP)

Partnership that has one general partner responsible for managing the business, and one or more limited partners who invest in the partnership, but do not participate in its management and whose liability is limited to the amount of capital they contribute.

Corporate Opportunity Doctrine

Principle established by case law that says corporate officers, directors and agents cannot take personal advantage of an opportunity that in all fairness should have belonged to the corporation.

Winding Up

Process of completing all unfinished business and transactions, paying off outstanding debts, distributing assets and dividing remaining profits after a corporation or partnership has been terminated or dissolved.

Trade Secret

Process, product or method of operation, or compilation of information, used by a business that is not generally known to, or readily ascertainable by, the public and which may allow a competitive advantage to the business.

Sarbanes-Oxley Act

Securities and Exchange Commission (SEC) regulation that requires high-ranking corporate officials to validate and accurately report financial statements of the corporation. Failure to comply or falsification of financial records is corporate fraud and punishable under federal statutes.

Bylaws

Set of rules adopted by the board of directors which set forth the manner in which the business and affairs of the corporation will be managed.

Articles of Incorporation

The governing document of the corporation, which must be filed with the Secretary of State in the state of incorporation.

Fictitious Name

The operating name of a company, or the d/b/a (doing business as) name, as opposed to the legal name of the company. In the case of a corporation, a fictitious business name is any name other than the corporate name stated in the articles of incorporation.

Duty of Care

The responsibility of corporate directors and officers to use care and diligence when acting on behalf of the corporation.

Insider Trading

Use of material, non-public information received from a corporate source by someone who has a fiduciary obligation to shareholders and potential investors and who benefits from trading on such information.

Stock Option

Warrant issued to employees, who cannot trade their options, but can sell them back to the corporation. (NOTE: this does not apply to the Chicago Board of Trade, which is the world's first and largest "options" exchange.)