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GLOSSARY OF TERMS
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GLOSSARY OF TERMS
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Officers
Officers are people who are appointed by the directors. They manage the daily affairs of the corporation. A Corporation’s officers usually consist of a president, vice-president, treasurer, and secretary. In most states, one person can hold all of these positions.
An agreement among the LLC members which govern the LLC operations and the rights of its members. It is analogous to corporate bylaws.
Marketable securities that provide for future exchange of cash and common shares contingent upon the option owner’s choice.
The initial meeting where the formation of the corporation is completed. At the organizational meeting a number of initial tasks are completed such as: the articles of incorporation are ratified, the initial shares are issued, officers are elected, bylaws approved, and a resolution authorizing the opening of bank accounts is passed. If the initial directors are named in the articles of incorporation, they can hold the organizational meeting. If they are not named, then the Incorporator holds the organizational meeting.
What the business is worth to the owner. See Capital and Equity.
Fixed costs not directly applicable to the production of a -product (for example, costs of lighting and heating a factory).
A few states require corporations to have a specified amount of paid in capital prior to starting business. These states include CT, DC, SD, and TX and require that the company have $1,000 in paid in capital before starting business.
The stated minimum value of a share stock. Stock must be sold for at least this value or the owner of the stock can face liability. With low par value stock or no par value stock this liability is minimized.
A corporation that directly or indirectly owns a controlling interest in another corporation. See Subsidiary.
Two or more persons carrying on a business for profit, each partner having unlimited liability for the debts of the partnership, except in a limited partnership in which some of the partners may have limited liability.
Income to the entity is not taxed. Instead the income is "passed through" to the individual shareholders or interest holders. S corporations, Partnerships and LLCs are pass-through taxation entities.
An obligation to pay a sum at a future date.
A record of wages or salaries paid or payable. The actual wages and salaries paid during a given period.
Arrangement whereby an employer agrees to provide benefits to retired employees.
A pension is paid out in a series of regular payments or a lump sum of money to retired employees or their beneficiaries.
If corporate formalities are not followed, it is possible that the corporate entity will not protect shareholders from corporate debt. Keeping proper records and holding regular meetings help solve this possible problem.
Process whereby transactions are transferred from a journal to a general ledger or subsidiary ledger.
Rights delineated in the articles of incorporation granting shareholders the first opportunity to buy a new issue of stock in proportion to their current equity. The shareholder has the right to buy the new issue of stock, but is not required to make the purchase. If the shareholder elects not to exercise this right, the shares can be sold on the open market.
Stock that generally provides the shareholder with preferential payment of dividends but does not carry voting rights.
An amount paid for insurance.
Asset created by payment for economic benefits that do not expire until a later time; as the benefit expires the asset becomes an expense (for example, prepaid rent, prepaid insurance).
The capital portion of a loan as opposed to interest.
A Corporation that is organized for the purpose of engaging in a learned profession such as law, medicine or architecture. Professional Corporations must file articles of incorporation with the state which meet the state’s requirements for professional corporations.
The excess of total revenue over total expenses for a period of time.
If a shareholder can not attend a meeting, the shareholder is allowed to vote by proxy. A proxy grants another individual the power to vote on their behalf.
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