An S corporation is a form of corporation, allowed by the Internal Revenue Code (IRS). 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. Thus S Corporation enables the company to enjoy the benefits of incorporation but be taxed as if it were a partnership. Also called Subchapter S Corporation.

Scrip

A form used to represent ownership of fractional shares in lieu of issuing share certificates.

Seal (Corporate Seal)

A seal adopted and used by a corporation for authenticating its corporate acts and executing legal documents. Corporate seals are no longer required by many corporate statutes but are still a useful tool for authenticating corporate documents.

Securities

A document evidencing collateral for money loaned. Also, an investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity. Securities are usually negotiable and therefore are regulated by both state and federal law. To prevent fraud, illegal acts and unsubstantial schemes, transactions in which promoters go to the public for risk capital are monitored. Personal security is the guarantee by one person to repay another person's debt.

Securities laws

State and federal laws that govern the issuance, sale and transfer of stocks and bonds.

A unit of stock representing ownership of a corporation and sometimes a limited partnership. A share certificate issued by the corporation in the name of the person owning the share represents the number of shares owned by a particular shareholder. Two types are used: common stock and preferred stock. Par value represents the equivalent dollar amount equal to one share's value. See Stock, Common stock.

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.

Shareholder

A person or entity that owns one or more shares of stock in a corporation. For corporations, along with the ownership comes a right to declared dividends and the right to vote on certain company matters, including the board of directors. Shareholders own an interest in the corporation rather than specific corporate property. Their rights are defined in the articles of incorporation and the bylaws. Also called stockholder.

Special meeting

A meeting of directors or shareholders, but not an annual meeting, called so that the shareholders may act on the specific matters stated in the notice of the meeting.

Sole Proprietorship

A business in which a single individual owns all assets. A sole proprietor pays no corporate income tax but has unlimited liability for business debts and obligations thus, personal property could be taken to pay business debts. Also called proprietorship.

Stated Capital

The basic capital of a corporation. It consists of the sum of the par value of all issued shares plus the consideration for no par value shares to the extent not transferred to capital surplus plus other amounts that may be transferred from other accounts. The amount of stated capital may effect the ability to pay dividends.

Stock

Stock signifies an ownership or equity, in a corporation, indicated by shares, which represent a piece of the corporation's assets and earnings. 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 of the stock must be stated in the articles of incorporation. Also called Equities or Equity Securities or Corporate Stock.

Stock Certificate

The document issued by a corporation, and sometimes a limited partnership, representing legal ownership of a specific number of shares of a corporation owned by a shareholder. The document identifies the name of the corporation, the name of the owner (stockholder), the class of stock, par value (if any), number of shares contained in the certificate and attendant voting rights. May also be referred to as a share certificate.

Stockholder

A person or organization that owns one or more shares of stock in a corporation. Same as shareholder.

Stock Transfer Book

A record book where all the owners of shares of stock in a corporation are listed.

Subscribers

Persons who agree under specific conditions to purchase shares of a corporation.

Subscription

The agreement of a shareholder to buy specified number of non-issued shares of a corporation.

Subsidiary

The parent or holding company owns the majority of the voting shares of another company. Thus, the subsidiary is wholly or partially owned and controlled by another company. A foreign subsidiary is a separately incorporated entity under the host country's law.

Surplus

A general term in corporate accounting that usually refers to either the extent to which assets exceed liabilities or that amount further reduced by the stated capital represented by issued shares.

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Glossary of most frequent business formation terms

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S Corporation