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Corporate and Business
Law > Glossary of Corporate Terms
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.
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.
Apostille: Is a method of certifying a document for use in another
country pursuant to the 1961 Hague Convention. With this certification by
apostille, a document is entitled to recognition in the country of
intended use, and no certification or legalization by the embassy or
consulate of the foreign country where the document is to be used is
required. With our international package, we include an apostilled copy of
the certificate of incorporation for use in your desired country.
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.
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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.
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.
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.
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 provided by Active Filings, LLC.
include, for instance, 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. Active Filings, LLC includes custom-made
corporate seals as part of its corporate Kit.
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.
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Debenture: A long-term debt issued mainly to evidence an unsecured
corporate debt.
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.
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.
Federal Employer Identification Number: The Federal Tax Identification
Number (also known as a "95 Number" or "EIN Number") is a number assigned
to a corporation or L.L.C. by the Federal Government for purposes of
taxation. The Federal Tax ID Number is to a corporation or L.L.C. as a
Social Security Number is to an individual. Most banks require that a
corporation or L.L.C. obtain a Federal Tax Identification Number as a
prerequisite to opening a bank account regardless of whether the company
will have employees.
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).
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.
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Going public: The process by which a corporation first sells its
shares to the public.
Hostile takeover: A takeover that occurs without the approval of
the target corporation's board of directors.
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.
Judicial dissolution: Involuntary dissolution of a corporation by a
court at the request of the state attorney general, a shareholder or a
creditor.
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.
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Majority: More than 50 percent; commonly used as the percentage of
votes required to approve certain corporate actions.
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.
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.
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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.
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.
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.
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.
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.
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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.
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.
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.
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.
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.
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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.
Trademark: 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.
Underwriter: A company that purchases shares of a corporation and
arranges for their sale to the general public.
Voluntary dissolution: Action by shareholders, incorporators or
initial directors to dissolve a corporation.
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