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

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Leverage

Leveraged Buy-Out

Limited Liability Company (LLC)

Limited Partnership (LP)

Limited personal liability

 

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Leverage

Refers to the advantages that may accrue to a business through the use of debt obtained from third persons instead of contributed capital. For example, an option has high leverage compared to the underlying stock because a given price change in the stock may result in a greater increase or decrease in the value of the option.

 

Leveraged Buy-Out

The purchase of a business, with financing provided largely by borrowed money, often in the form of junk bonds.

 

Limited Liability Company (LLC)

A business entity created under filing articles of organization with the proper state authorities and paying all fees. Owners and managers of LLC receive the limited liability and (usually) tax benefits of an S Corporation without having to conform to the S corporation restrictions (no double taxation).

 

Limited Partnership (LP)

An association of one or more general partners who manage the business and are personally liable for its debts only to the extent of the amount of money they have invested; and one or more limited partners who contribute capital and share in the profits, but who take no part in running the business and have no liability with regard to partnership debts beyond their capital investment.

 

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.