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Definitions
A.
Acquisition: Obtaining
control of another corporation by purchasing all
or a majority of its outstanding shares, or by
purchasing its assets.
Administrative Dissolution:
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:
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.
Agent For Service Of Process:
An agent, required to be appointed by a corporation,
whose authority is limited to receiving process
issued against the corporation. Also known as
a Registered Agent or a Resident Agent.
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: An addition
to, deletion from, or a change of existing provisions
of the articles of incorporation of a domestic
corporation.
Annual Meeting:
A yearly meeting of shareholders at which directors
are elected and other general business of the
corporation is conducted.
Annual 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.
Application For Certificate
Of Authority: The form filed in many
states to qualify a corporation to transact business
as a foreign corporation.
Articles Of Incorporation:
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:
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.
Assumed Name: A
name other than the true name, under which a corporation
or other business organization conducts business.
Also referred to as a fictitious name, a trade
name or "doing business as" (d/b/a).
Authorized Shares:
The maximum number of shares that a corporation
may issue pursuant to its articles of incorporation.
B.
Bearer Instrument:
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.
Blue Sky Law: 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.
Board Of Directors:
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.
Bond: A long-term
debt secured by a mortgage on real property or
a lien on other fixed assets.
Business Corporation Act:
A business corporation act is the collection of
laws in each state that governs corporations.
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.
Certificate Of Authority:
Formal evidence of qualification issued by a state
to a foreign corporation.
Certificate Of Good Standing:
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.
Certificate Of Incorporation:
The title of the document filed in many states
to create a corporation. Also known as the articles
of incorporation or corporate charter.
Close Corporation:
A corporation that elects in its articles of incorporation
to be registered under the close corporation statutes
of their state of incorporation. 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.
Common Shares:
A class of shares that has no special features
and possesses no greater rights than any other
shares.
Consolidation:
The statutory combination of two or more corporations
to create a new corporation.
Constituent: A
party to a transaction; a corporation involved
in a merger, consolidation or share exchange.
Convertible Security:
A security that may be exchanged by the holder
for another type of security.
Corporate Indicator:
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:
a binder usually containing essential items for
the routine maintenance and administration of
a corporation or limited liability company. Corporate
kits may include sample minutes and bylaws, stock
certificates, a corporate seal and stock ledger.
Corporate 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.
Corporation: An
artificial entity created under and governed by
the laws of the state of incorporation.
Corporation Law:
The statutory provisions of a state relating to
domestic and foreign corporations.
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.
D.
Debenture: 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.
Derivative Suit:
A lawsuit brought by a shareholder on behalf of
a corporation to protect the corporation from
wrongs committed against it.
Directors: The
individuals who, acting as a group known as the
board of directors, manage the business and affairs
of a corporation.
Dissenters Right:
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: The
statutory procedure that terminates the existence
of a domestic corporation.
Distribution: A
transfer of money or other property made by a
corporation to a shareholder in respect of the
corporation's shares.
Dividend: A distribution
of a corporation's earnings to its shareholders.
E.
Equity Financing:
A method of raising capital in which a corporation
sells shares of stock.
Equity Interest:
An ownership interest; the interest of a shareholder
as distinguished from that of a creditor.
F.
Fictitious Name:
A name other than the true name, under which a
corporation or other business organization conducts
business. Also referred to as an assumed name,
a trade name or "doing business as"
(d/b/a).
Fiduciary Relationship:
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.
Foreign Corporation:
A term applied to a corporation doing business
in a state other than its state of incorporation.
Fractional Share:
Ownership in a corporation in an amount less than
a full share.
Franchise Tax:
A tax or fee usually levied annually upon a corporation,
limited liability company or similar business
entity for the right to exist or do business in
a particular state. Failure to pay the franchise
tax or similar fees may result in the administration
dissolution of the company and forfeiture of the
charter.
G.
Going Public: The
process by which a corporation first sells its
shares to the public.
H.
Hostile Takeover:
A takeover that occurs without the approval of
the target corporation's board of directors.
I.
Incorporation:
The act of creating or organizing a corporation
under the laws of a specific jurisdiction.
Incorporator: The
person(s) who perform the act of incorporation
and who sign the articles of incorporation and
deliver them for filing.
Indemnification:
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.
Involuntary Dissolution:
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.
J.
Judicial Dissolution:
Involuntary dissolution of a corporation by a
court at the request of the state attorney general,
a shareholder or a creditor.
L.
Leasee: One who
leases real estate or other property owned by
another for a fixed period of time for a fee without
benefit of acquiring title to the property.
Lessor: One who
makes real estate or other property available
for use by another for a fixed period of time
for a fee and retains title to or ownership after
the contracted period of time.
Limited Liability Company
(LLC): 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 Partnership:
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:
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.
M.
Majority: 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.
Managers: 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.
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 Certificates:
Evidence of ownership of and membership in a limited
liability company.
Merger: The statutory
combination of two or more corporations in which
one of the corporations survives and the other
corporations cease to exist.
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.
N.
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:
A procedure that allows a corporation to obtain
exclusive use of a corporate name for a specified
period of time
No Par Value Shares:
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.
Not-For-Profit Corporation:
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.
O.
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:
A contract among the members of a limited liability
company governing the membership, management,
operation and distribution of income of the company.
Organizational Meetings:
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: The
person(s) who perform the act of forming a limited
liability company.
P.
Parent Corporation:
A corporation that owns a controlling interest
in another corporation.
Partnership: A
business organization in which two or more persons
agree to do business together.
Par Value: A minimum
price of a share below which the share cannot
be issued, as designated in the articles of incorporation.
Perpetual Existence:
Unlimited term of existence; characteristics of
most business corporations.
Preemptive Rights:
The right of a shareholder to subscribe ratably
for his or her proportion of any additional shares
issued by a corporation.
Preferred Shares:
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.
Professional Corporation:
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.
Proxy: A written
authorization given by a person to another party
directing the party to vote on behalf of him/her.
Q.
Qualification:
The filing of required documents by a foreign
corporation to secure a certificate of authority
to conduct its business in a state other than
the one in which it was incorporated. Limited
liability companies or similar business entities
may also conduct this process.
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.
R.
Record Date: The
date for determining the shareholders entitled
to vote at a meeting, receive dividends, or participate
in any corporate action.
Redeemable Shares:
Shares subject to purchase by the corporation
on terms set forth in the articles of incorporation.
Registered Agent:
A person or entity designated to receive important
tax and legal documents on behalf of the corporation.
The Registered Agent must be located and available
at a legal address within the specified jurisdiction
at all times. Failure to maintain a Registered
Agent in the jurisdiction in which the corporation
is registered, may result in the forfeiture of
the corporate status. Also known as a Resident
Agent.
Registered Office:
The statutory address of a corporation. In states
requiring the appointment of a Registered Agent,
it is usually the address of the Registered Agent.
Reinstatement:
Returning a corporation that has been administratively
dissolved or had its certificate of authority
revoked, to good standing on a state's records.
Resolution: A formal
statement of any item of business that has been
voted upon.
Restated Articles Of Incorporation:
A document that combines all currently operative
provisions of a corporation's articles of incorporation
and amendments thereto.
Revised Model Business Corporation
Act: 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.
S Corporation:
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.
Scrip: A form used
to represent ownership of fractional shares in
lieu of issuing share certificates.
Security: A contract
between a business and an investor whereby the
investor supplies money and experts to profit
from his or her investment.
Securities Laws:
State and federal laws that govern the issuance,
sale and transfer of stocks and bonds.
Share: 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.
Shareholders: 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.
Short-Form Merger:
The statutory merger of a subsidiary into its
parent corporation in which shareholder approval
is not required.
Sole Proprietorship:
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:
A shareholder meeting called so that the shareholders
may act on the specific matters stated in the
notice of the meeting.
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:
Evidence of ownership of shares in a corporation.
May also be referred to as a share certificate.
Stockholders: Stockholders 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
shareholders.
Subscribers: Persons
who agree under specific conditions to purchase
shares in a corporation.
Subscription: The
agreement executed by a subscriber.
Subsidiary: 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.
Takeover: A merger,
acquisition or other change in the controlling
interest of a corporation.
Target: A corporation
that is the focus of a takeover attempt.
Tax-Exempt Organization:
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.
Treasury Shares:
Shares of a corporation reacquired by a corporation.
U.
Underwriter: A
company that purchases shares of a corporation
and arranges for their sale to the general public.
V.
Voluntary Dissolution:
Action by shareholders, incorporators or initial
directors to dissolve a corporation.
Voting Rights:
Rights of shareholders to vote their shares pursuant
to provisions of statutes, the articles of incorporation
and the bylaws.
W.
Watered Shares:
Shares that have been issued for a consideration
less than the par or stated value of the shares.
Winding Up: The
discharging of a corporation's liabilities and
the distributing of its remaining assets to its
shareholders in connection with its dissolution.
Withdrawal:
The statutory procedure whereby a foreign corporation
obtains the consent of a state to terminate its
authority to transact business there.
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