LAW-002: Glossary

C" Corporation

A "C Corp" can sell unlimited shares to the general public, is heavily regulated by the government, and reports its financial information to the public. Owners' losses are limited to the amount invested. It also experiences "double taxation", which means the company pays income taxes, and then the owners pay taxes on any dividends. Owners are called stockholders.

Franchise

A "franchisee" pays a fee to a "franchisor" that allows the franchisee to use the franchisor's brand name. There are generally two types of franchises: business format franchise and product trade name franchise.

Licensing

A "licensee" pays a royalty to a "licensor" that allows the licensee rights to use certain intangible property, like trademarks, patents, formulas, processes, designs, and copyrights. For example, Nike might license the use of the NBA trademark in order to sell certain branded apparel

Benefit Corporation

A C or S Corp, but with the purpose of explicitly including public benefit in their decisions, versus only considering maximizing shareholder value. So a B Corp considers all stakeholders, not just its shareholders. B Corps report annually to the public their overall performance regarding their social and environmental impact.

Sole Proprietorship

A business owned by one person, and the owner has unlimited liability, meaning the owner can lose more than they invested in the business. An advantage of this type of business ownership is that it is easy to get started.

Partnership

A business owned by two or more people. There are generally two types of partnerships - limited and general.

Piggyback Franchise

A business where a retail franchise operates inside of another, larger "host" facility.

General Partnership

A business where all the partners have decision-making and management power, and have unlimited liability, meaning they can lose more than they invested.

Multi-Level Marketing

A business where individuals make commissions selling goods and services directly, and also make commissions from sales made by their network of recruited distributors.

Private Corporation

This type of corporation has a small group of owners, does not sell its stock to the general public, and does not report its financial information to the public. Like a C Corp, it also experiences double taxation. Owners are called stockholders.

Expansion

When businesses experience growth through one or many ways, including by increasing marketing efforts, hiring more sales employees, adding locations, adding new products or services, and/or entering new markets,

Merger

When two companies, often competitors, join together to form one company. Most often one of the two companies gives up its brand identity. In other cases, the two brand names are shared; ExxonMobil is an example.

Joint Venture

When two or more companies cooperate by pooling together resources for the purpose of performing a specific task, like developing a product, selling a certain product, or combining certain business activities.

Limited Partnership

A business where one or more of the partners are not active, have no decision-making power, and are limited in their liability to the amount they invested. The active or general partner/s have decision-making and management power, and have unlimited liability, meaning they can lose more than they invested in the business.

Corporation

A corporation is a legal entity that is separate from its owners and controlled by a board of directors; the entity has most of the same rights and responsibilities that individuals possess, but offers limited liability, meaning investors can only lose the amount they invested. A corporation must file for a charter in the state where it operates. The charter permits the corporation to sell shares of stock which represent ownership. Owners are called stockholders. There are various types of corporations, determined by how they are taxed and what legal guidelines they follow.

Pyramid Scheme

A form of multi-level marketing that is illegal to operate, where most of the focus is on collecting large up-front fees and recruiting more members to pay more up-front fees, and to sell low quality products with very little effort on actually selling the products.

Business Format Franchise

A franchise relationship that gives the "franchisee" access to the "franchisor's" proprietary knowledge base, systems and processes, training programs, and trademarks and allows the franchisee to operate and sell the franchisor's product or service under the franchisor's brand name. Examples include McDonald's and Subway.

Product Trade Name Franchise

A franchise relationship where the "franchisee" can sell a "franchisor's" specific line of products. An example would be an independent car dealership selling cars made by, for example, a Ford dealer.

Non-Profit Corporation

A type of corporation that serves some public service and therefore gets special tax treatment under the law. The United Way charity is an example.

Limited Liability Company

Also called an LLC, it's a hybrid business structure, where it combines the operational characteristics of a sole proprietorship or partnership while limiting the liability of the investors to the amount they invested. The tax liability is passed directly through to each owner, like a partnership, based on the level of ownership each owner has in the company. It can raise money by selling "units" (not called shares), and owners are called "members".

Limited Liability Partnership

Also called an LLP, it's a hybrid business structure where all the partners have decision-making and management power, and have limited liability, meaning they can't lose more than they invested, and, they can't be held responsible (liable) for any of their partner's actions. Doctors and lawyers often choose this type of partnership.

"S" Corporation

An "S Corp" is similar to a C Corp in that owners' losses are limited to their investment. However, it is different from a C Corp in that it is limited by the number of owners it can have. And it avoids double taxation by passing the tax liability directly through to each owner (like an LLC or other form of partnership) based on the level of ownership each owner has in the company. Owners are called stockholders.

Consolidation

Bringing together multiple companies or multiple parts or business units from multiple companies to form one larger company.