Glossary of most frequent business formation terms
A B C D E F G H I J L M N O P Q R S T U V W
-A-
Accrual Method of
Accounting
Acquisition
Administrative
dissolution
Adoption
Advisory board of directors
Affiliate
Agent
Aggregate Par Value
Amended certificate of
authority
Amendment
Amortization
Annual Meeting of
Shareholders
Annual Meeting of
Directors
Annual report
Annual Return
Apostille
Application for
certificate of authority
Articles of
Incorporation
Articles of
Organization
Asset
Assumed Name
Authorized Shares
(Authorized Stock)
-A-
Accrual Method of Accounting
A method of
reporting income when earned and expenses when incurred, as opposed to
reporting income when received and expenses when paid. Obligations payable to
or by a taxpayer are treated as if they are discharged when they are incurred.
Acquisition
Obtaining
control of another corporation called a target by purchasing or exchanging all or a majority of its outstanding
shares, or by purchasing its assets, either hostile or friendly. Also called
Takeover.
Administrative dissolution
The
involuntary dissolution of a corporation by the Secretary of State, or other
equivalent state authority, due to the corporation’s failure to follow certain
statutory requirements, such as annual report filing, tax paying or a valid
registered Agent maintaining requirements.
Adoption
This is a
contract principle whereby a person agrees to assume a contract previously made
for his or her benefit. This concept is applied when a newly formed corporation
accepts a pre-incorporation contract made for its benefit by a promoter.
Advisory board of directors
A less formal
alternative to a board of directors, appointed to
advise an elected board of directors and management of a corporation. A
company's advisory board usually consists of 3 to 7 members, and meets
periodically but doesn't have authority to vote on corporation matters or legal
responsibility for operations.
Affiliate
A corporation
that is related to another corporation by share management, ownership or other
means of control (such as parent/subsidiaries or corporations under common
control)
Agent
An individual
or firm authorized to represent and act on behalf of another person or business
(called the principal) in transactions involving a third party. Unlike an
employee who merely works for the principal, an agent works in place of the
principal. Agent is subject to control and orders of the principal, but he does
not have a title to the principal's property and does not assume any financial
risk in the transaction.
Aggregate Par Value
The par value
multiplied by the number of authorized shares. This amount is important in
determining initial fees and annual franchise taxes in many states.
Amended certificate of authority
A document
issued by a state to a foreign corporation attesting that the corporation has
amended its original certificate of authority.
Amendment
A change or
addition to legal documents which, when properly signed, have the same legal
power as the original documents.
Amortization
The gradual
elimination of a liability (a loan), such as a mortgage through installed
regular payments over a period of the estimated life of the asset on which the
loan is made or secured. Such payments must be sufficient to cover both
principal and interest. For fixed assets, depreciation is the allowance for
wear-out. For natural resources, depletion is the allowance for the wasting away
of the asset.
Annual Meeting of Shareholders
A once-a-year
meeting of stockholders (usually held at the end of each fiscal year) where the
managers of a company report the year's results, the board of directors stand
for election for the next year, and those present provide a forum for
discussion or voting on pivotal issues of the company. Usually presided by the
Chairman of the Board of Directors or the Chief Executive Officer.
Annual Meeting of Directors
A meeting held
each year to elect officers of a corporation, and to address other corporate
matters. Usually follows immediately after an Annual Meeting of Shareholders.
Annual report
Audited
document required by the Securities and
Exchange Commission (SEC) and sent to a public
company or mutual fund’s shareholder(s) at the end of each fiscal year,
detailing the company's preceding year's financial results and plans for the
upcoming year. The report contains financial information about a company's
assets, liabilities, earnings, profits, an auditor's statement and other
year-end statistics. It is also the most widely read shareholder communication.
The term sometimes refers to the glossy, colorful brochure and sometimes to
Form 10-K, which is sent along with the brochure and contains more detailed
financial information.
Annual Return
A document
required to be filed in the jurisdiction of incorporation once a year, which
confirms certain basic information about the structure of a Corporation, such
as the increase in value of an investment, expressed as a percentage per year
and taking into consideration the effects of compounding.
Apostille
A method of
certifying a document for use in another country pursuant to the 1961 Hague
Convention. When legalized by apostille, a document is recognized in the country
of intended use. No certification or legalization by the embassy or consulate
of the foreign country where the document is to be used is required.
Application for certificate of
authority
The form
issued by a state corporation authority (e.g. Secretary of State) and filed in
many states to qualify a corporation to transact business as a foreign
corporation.
Articles of Incorporation
A document
filed with a state of the United States by the founders of a corporation. Upon approval of the articles,
the state issues a Certificate of Incorporation that legally establishes the
corporation as a business entity. The two documents together (Articles of
Incorporation and Certificate of Incorporation) are sometimes called the Charter of the
corporation, embodying such information as the corporation's name, officers'
names, the incorporator, purpose, amount of authorized shares, number of
directors and place of business. The charter and the laws of the state give
rise to the powers of the corporation. This is a legal document establishing
the corporation, its structure, and purpose.
Articles of Organization
The articles,
required to file with the proper state authorities to begin existence of a limited liability company (LLC). The articles of organization are very
similar to a corporation's articles of incorporation. Also
known as articles of formation.
Asset
Anything of
value that is owned by a business or an individual. Assets are financial, such
as cash; physical, such as real property; tangible, such as a patent or stock;
or intangible, such as bonds or goodwill. On a balance sheet, assets always
equal the sum of liabilities, common stock, preferred stock, and retained
earnings.
Assumed Name
A name other
than the name shown in its articles of incorporation, 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). Many
states require the filing of a registration in order to conduct business under
an assumed name in their territories.
Authorized Shares
The number of
shares of each class of stock that is allowed by the articles of incorporation,
and that represents the maximum capital investment in the corporation as
permitted by the charter. It can be changed with
shareholder approval. The books of the corporation show
the number of shares issued and outstanding, the number of shares of treasury
stock and the number of shares of not issued comprising the total authorized
shares. Also called authorized stock or shares
authorized.
