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A
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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 (aka "resident
agent" or "registered agent")
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.
Alter Ego
A doctrine of law which disregards the
principle of limited liability enjoyed by a corporate entity when it is
proven that, in fact, no separate identity of the individual and
corporation exists. The alter ego principle may also apply to
relationships between corporate entities and their subsidiaries.
Amended Certificate of Authority
A document issued by a state to a foreign
corporation evidencing that the corporation has amended its original
certificate of authority.
Amendment
An addition to, deletion from, or a change of
existing provisions of the articles of incorporation of a domestic
corporation or articles of organization for a limited-liability company.
An amendment is necessary to formally change the name of an entity or to
change the capital stock structure.
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
Official government authentication of a
document, usually by the State Department, Justice Ministry or Foreign
Ministry, which legalizes it for use in another country. This service is
included in The Company Corporation's international package.
Application for Certificate of Authority
The form filed in many states to qualify a
corporation to transact business as a foreign corporation
Arm's Length Relationship
An arm's length relationship is a term used
to describe a type of business relationship a corporation should have with
a close associate to avoid a conflict of interest. For example, when you
negotiate with your banker or your supplier, any agreement which results
will likely reflect market value and commercially reasonable terms and
conditions. When you loan money to your son or daughter, you may be
inclined to provide much more favorable terms and conditions. The first
example would be considered to be an arm's length relationship, while the
second example would not. When your corporation does business with or
makes loans to corporate officers and directors, the relationship must be
at arm's length to avoid conflicts of interest.
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 ("DBA")
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" ("DBA").
Authorized Shares
The maximum number of shares that a
corporation may issue pursuant to its articles of incorporation.
Accumulated Earnings
The accumulation of taxable earnings within a
corporation. A corporation which has excess accumulated earningscan be
assessed a separate tax by the IRS unless there is a justification for the
buildup, such as to cover the company's repurchase liability. The purpose
of this tax is to penalize those corporations which the IRS believes are
limiting their dividend declaration in order to reduce the stockholders'
declared income.
Attorney's Opinion
A lawyer's written statement that a certain
matter or particular action complies with applicable legal requirements
and/or is duly authorized or binding.
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Basis
Basis, a tax and accouning term, is the
measuring rod against which gain or loss is measured. With stock, basis is
what you pay for stock or the fair market value of property you contribute
in exchange for the stock.
Bearer Instrument
An instrument is payable to its bearer when
by its terms it is payable to 1) a bearer or the order of a bearer; 2) a
specified person or bearer; or 3) "cash" or the order
"cash," or any other indication that does not purport to
designate a specific payee. Bearer shares are a common example of a bearer
instrument.
Blue Sky Law
A term used to describe state laws and
regulations governing the issuance and sale of securities to residents of
a state and the licensing and regulation of securities brokers and dealers
as well as anti-fraud provisions. These laws protect the public from
deceptive securities transactions and vary from state to state.
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.
Bond
A long-term debt secured by a mortgage on
real property or a lien on other fixed assets. A certificate evidencing
indebtedness. It is a legal contract sold by an issuer promising to pay
the holder its face value plus amounts of interest at future dates.
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.
Bearer Shares
Shares of capital stock that is issued
payable to "bearer". This type of stock is specifically allowed
in the State of Wyoming and is also allowed under Nevada statutes for
privately held corporations. Public corporations are prohibited from
issuing bearer stock.
Blue Sky Laws
See "Blue Sky Law"
Business Judgment Rule
A judicial doctrine which shields corporate
officers and directors from personal liability for actions taken in good
faith and with reasonable care.
Buy-Sell Agreement
An agreement between shareholders of a
privately held corporation and the corporation itself, made to govern the
operations of the corporation and to define how shares of stock will be
transferred. In small corporations, such an agreement can be used to set
estate tax value of stock, define what happens if a shareholder is
disabled, restrict the transfer of stock to outsiders and other
conditions. It can also protect the corporation against a disqualifying
act and provide other mechanisms for maintaining and ending S corporation
status.
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C Corporation
The most common corporate structure, also
known as a general corporation. A C corporation may have an unlimited
number of stockholders. Consequently, it is usually chosen by those
companies planning to have more than 30 stockholders or large public stock
offerings. A C corporation pays tax on its own income under the general
rules of Subchapter C of the Internal Revenue Code.
Certificate of Authority
Formal evidence of qualification issued by a
state to a foreign corporation.
Certificate of Existence
See Certificate of Good Standing
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 and whose stock is not publicly traded and
held by only a few persons (such as those in management). The
organizational structure of this type of corporation must comply with
strict statutory requirements and limitations. 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.
Closely Held Corporation
A closely held corporation is any corporation
in which the stock is held by a relatively small group of people,
entities, investors, management, founders and/or their families. Stock of
a closely held corporation is not publicly traded on any stock exchange.
Common Shares
A class of shares that has no special
features and possesses no greater rights than any other shares except for
Preferred Shares. All capital stock except for preferred stock is
considered Common Shares.
Commingle
Commingling, is the sharing and pooling of
personal and corporate assets. For example, rather than maintain separate
corporate and personal bank accounts, you choose to use one account for
personal and corporate purposes. This is considered commingling and an
easy way to become personally liable for corporate acts.
Compliant
As used throughout the Compliance WatchSM
suite of services, this term refers to a level of completion of a legal
entity's responsibilities to maintain the formalities of corporate
existence under the laws of the jurisdiction in which it is formed. The
term is not intended to mean or imply conformity with all of the federal
and state regulatory or tax requirements which may exist for operating
your business.
Consent Resolution
A consent resolution is any resolution signed
by all of the directors or shareholders, which authorizes a particular
action. This act eliminates the need for face-to-face meetings of
directors and shareholders.
Consideration
Relating to forming an incorporation in the
state of Illinois. (1) Something of value, such as money or personal
services, given by one party to another in exchange for an act or promise.
For example, amount paid for stock in a corporation. (2) Something
promised, given, or done that has the effect of making an agreement a
legally enforceable contract.
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.
Contract Creditors
Contract creditors are people or businesses
which you owe money or property to because of a written or verbal
contractual agreement. If you buy 30 widgets from Widget World, Widget
World becomes a contract creditor.
Convertible Security
A security that may be exchanged by the
holder for another type of security.
Corporate Charter
See Articles of Incorporation.
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 The Company Corporation
include sample minutes and bylaws, 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. The Company Corporation includes
custom-made corporate seals as part of the Corporate Kit.
Corporation
An entity formed and authorized by, created
under and governed by the laws of the state of incorporation to act as a
single person even though it is constituted by one or more persons and
legally endowed with various rights and duties including the capacity of
succession.
Corporation Law
The statutory provisions of a state relating
to domestic and foreign corporations.
Cumulative voting
A procedure used for electing directors in
which shareholders are entitled to multiply the number of votes they are
entitled to cast by the number of directors for whom they are entitled to
vote and cast the product for a single candidate or distribute the product
among two or more candidates.
Calendar Year
An accounting period that ends each December
31, which is the period most S corporation must adopt as a permitted year.
Capital Gains Tax
The tax imposed on the capital gains of a
taxpayer. The tax treatment of capital gains and losses depends on whether
the gains and losses are long-term or short-term, and on whether the
taxpayer is a corporation or not. The long-term and short-term capital
gains of corporations are taxable at the same rates as their ordinary
income. For non-corporations, the maximum tax rate on net long-term
capital gains is lower than the top rate on ordinary income.
Capital Stock
The outstanding shares of a joint-stock
company considered as an aggregate.
Carryback
For federal income tax purposes, the portion
of a net operating loss deductable from net income of the prior three
years. This amount is absorbed and the remainder carried forward to offset
future years net income.
Carry Forward
To offset for tax purposes one period's loss
against a subsequent period's net income. Losses which are unused may
generally carry over to another year. Such tax benefits may enhance the
value of a target to a buyer burdened with high taxes.
Closely Held Corporation
See "Closely Held Company"
Common Stock
See "Common Shares"
Contribution to Capital
A contribution of cash or other property that
a shareholder makes to a corporation that increases the corporation's
paid-in capital but for which the shareholder does not receive stock. The
contribution increases that shareholder's basis in stock.
Controlled Group
A group of corporations which are grouped
together for one tax purpose or another. Control may be through
parent-subsidiary relationships or common control such as a brother-sister
controlled group. Control means ownership of a certain percentage
(generally, either at least 80%, or less frequently, at least 50% of the
total combined voting power of all classes of voting stock or of the total
value of shares.
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DBA
Doing business as; see Fictitious Name.
Debenture
A long-term debt issued mainly to evidence an
unsecured corporate debt.
Debt Financing
A method of raising capital in which a
corporation borrows money.
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.
Double Taxation
Taxation by the federal government of
corporate earnings once at the corporate level and again at the
shareholder level upon distribution of dividends. When a corporation must
pay taxes on its earnings and individual shareholders must also pay taxes
on any dividends that are distributed.
Duration
How long a business will be recognized as a
corporate entity. A company with a perpetual duration will last forever
unless the state dissolves the company. A 30-year duration means that the
company will automatically dissolve on it's 30th anniversary of existence.
Disqualifying Act
An act by the corporation or shareholder that
causes the corporation to cease to be an eligible corporation and that
generally results in termination of S corporation status.
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Employment Agreement
An employment agreement is a contract between
your corporation and an employee. These agreements can be written or
verbal; although all employment agreements should be in writing. Employers
are more likely to have employment agreements with key employees. The
terms and conditions of an employment agreement should be consistent with
statutes, articles, bylaws, and any existing shareholder agreements.
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.
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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" ("DBA").
Fiduciary Relationship
A relationship in which one party (the
fiduciary) must act in good faith and with due regard to the best
interests of the other party or parties.
Foreign Corporation
A term applied to a corporation doing
business in a state other than its state of incorporation.
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.
Foreign Filing
See "Foreign Corporation"
Fiscal Year
An accounting year that ends on a date other
than December 31. C corporations may elect to use a fiscal year. S
corporations may generally use a fiscal year if it is a natural business
year.
Fraudulent Conveyance
A contractual misrepresentation of the
nature, quantity, or existence of transferred assets. Also, a term
denoting potential risk for sellers and lenders.
Fringe Benefits
Employee benefits and perquisites, other than
qualified retirement plans.
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Going Public
The process by which a corporation first
sells its shares to the public.
Good Standing
A corporation is said to be in good standing
when it has remained current with the necessary reports and fees required
by the regulatory jurisdictions under which it operates.
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Hague Convention
Since October 5, 1961, abolished the
requirement of legalization for foreign public documents, and established
a basic certification, of public documents, outside their country of
origination. Member countries have adopted a standard of the authenticity
of public documents, called an Apostille.
Hostile Takeover
A takeover that occurs without the approval
of the target corporation's board of directors.
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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.
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Judicial Dissolution
Involuntary dissolution of a corporation by a
court at the request of the state attorney general, a shareholder or a
creditor.
Jurat
Specific notary language citing, under oath,
that a signature has been witnessed.
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Legalization of Certified Documents
Needed for companies (overseas) that are not
part of the Hague Convention. Companies in a country that is not part of
the Hague will not benefit from an Apostille. (1) To make legal or lawful;
authorize or sanction by law.
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.
Legal Opinion
See "Attorney's Opinion"
Limited Liability
Liability (as a stockholder or shipowner)
limited by statute or treaty.
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Majority
More than 50 percent; commonly used as the
percentage of votes required to approve certain corporate actions.
Management
The board of directors and executive officers
of a corporation, limited liability company or similar business entity.
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.
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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.
Notice of Litigation
See Notice of Service of Process
Notice of Service of Process
Official notification of an action or
proceeding by the delivery of a legal or court document, with a request to
answer in a specific period of time.
Natural Business Year
A fiscal year that is permitted for an S
corporation because the corporation can show that 25 percent of gross
receipts have been realized in the last two months of such a year for the
last three years.
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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.
Operating Agreement
A contract among the members of a limited
liability company governing the membership, management, operation and
distribution of income of the company.
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.
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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.
Pass-Through Taxation
Rather than tax the income of the entity,
taxation is “passed through” to the individual shareholders in S
corporations (and LLCs). Income or losses are declared on their individual
tax returns.
Perpetual Existence
Unlimited term of existence; characteristics
of most business corporations.
Piercing the Corporate Veil
Piercing the corporate veil is a legal theory
sometimes used to impose personal liability on shareholders, officers, and
directors for corporate acts. This theory permits a court to disregard the
separate identity of the corporation.
Preemptive Rights
Giving a stockholder first option to purchase
(subscribe to) new stock in an amount proportionate to his or her existing
holdings.
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.
Promoter
A written authorization given by a person to
another party directing the party to vote on behalf of him/her.
Passive Income
Income to certain taxpayers (including S
corporation shareholders) that is subject to the passive activity loss
(PAL) rules because the taxpayer does not materially participate in the
business activity producing the income. Generally includes receipts from
royalties, rents, dividends, interest, annuities, and the sale and
exchange of stock and securities.
Preferred Stock
See "Preferred Shares"
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Qualification
The filing of required documents by a
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.
Qualified Retirement Plan
A pension or profit sharing plan that
qualifies under the Internal Revenue Code for deductible contributions by
an employer that are not included in employee income until plan
distributions are made.
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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.
Resident Agent
See "Registered Agent"
Regulations
Regulations are administrative rules which
have the force and effect of laws. Government agencies promulgate rules.
If you don't comply, you are subject to the possibility of fines or
revocation of the corporate charter.
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.
Revised Model Business Corporation Act
A model corporation statute compiled by the
American Bar Association that has been adopted in whole or in part by, or
has influenced the statutes of many states.
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S Corporation
A corporation that is eligible, and does
elect to be taxed under Subchapter S of the Internal Revenue Code. 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. Basically, shareholders pay tax on the corporation's
income by reporting their pro-rata shares of pass-through items on their
own individual tax returns.
Scrip
A form used to represent ownership of
fractional shares in lieu of issuing share certificates.
Security
A contract between a business and an investor
whereby the investor supplies money and experts to profit from his or her
investment.
Securities Laws
State and federal laws that govern the
issuance, sale and transfer of stocks and bonds.
Service of Process
See Notice of Service of Process
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.
Short-Form Merger
The statutory merger of a subsidiary into its
parent corporation in which shareholder approval is not required.
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.
Statutes
Statutes are laws passed by the state
legislature or U.S. Congress. Business corporation laws are statutes.
Statutes often authorize an administrative agency to declare regulations
which are used to supplement the statute. In the event of a conflict,
statutes control over regulations.
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
An instrument providing evidence of ownership
of one or more shares of the capital stock of a corporation. May also be
referred to as a share certificate.
Stock Purchase Agreement
A stock purchase agreement is an agreement
between the shareholders and the corporation. It provides a mechanism to
regulate the transfer and sale of corporate stock. Often, a stock purchase
agreement will provide a right of first refusal in favor of the
corporation or remaining shareholders in the event of a proposed sale of
stock by a shareholder. A stock purchase agreement can also provide for a
purchase upon the death, disability, retirement, discharge, resignation,
or bankruptcy of a shareholder.
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.
Subscribers
Persons who agree under specific conditions
to purchase shares in a corporation. Subscription
Subscription
The agreement executed by a subscriber.
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.
Stockholders
See "Shareholders"
S Corporation Termination
A cessation of S corporation status by
operation of statute because the corporation either fails to continue to
meet the requirements for S corporation status, or has C corporation
earnings and profits plus excess passive investment income for three
consecutive years.
Shareholder's Basis in Loans
The measure of loans made directly by a
shareholder to an S corporation, which can be used to provide additional
basis for the deduction of losses after the shareholder's basis in stock
is exhausted. It is calculated using the initial amount of the loan,
adjusted to reflect S corporation pass-through items.
Shareholder's Basis in Stock
The measure of a shareholder's equity
investment in a corporation, which is used to measure the gain or losss
when the stock is sold.
Stock Option
A right granted by a corporation to officers
or employees as a form of compensation that allows purchase of corporate
stock at a fixed price at a specified time with reimbursement derived from
the difference between purchase and market prices.
Stock Split
A division of corporate stock by the issuance
to existing shareholders of a specified number of new shares with a
corresponding lowering of par value for each outstanding share.
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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.
Tort
A tort is any act or failure to act (if there
was a duty to act) which causes harm or damage. Examples of torts include
assault, battery, fraud, misrepresentation, defamation, libel, slander,
invasion of privacy, and negligence. If there is a claim against your
corporation, other than a claim by the government, it will likely be based
in contract or tort.
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.
Treasury Shares
Shares of a corporation reacquired by a
corporation.
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Underwriter
A company that purchases shares of a
corporation and arranges for their sale to the general public.
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Voluntary Dissolution
Action by shareholders, incorporators or
initial directors to dissolve a corporation.
Voting Rights
Rights of shareholders to vote their shares
pursuant to provisions of statutes, the articles of incorporation and the
bylaws.
Voting or Pooling Agreement
A voting or pooling agreement is an
agreement, preferably in writing, of two or more shareholders to vote
their shares in a certain manner. The most common use of this agreement
would be to pool voting strength for the election of directors.
Voting Trust
A voting trust is a trust formed through an
agreement among the shareholders of the corporation. Under a voting trust,
shareholders transfer their shares of stock to a trustee in exchange for
voting trust certificates. The trustee votes the shares in the manner
directed in the voting trust agreement. Voting trusts are often used to
preserve control of the corporation. Can be an eligible shareholer of an S
corporation.
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Watered Shares
Shares that have been issued for a
consideration less than the par or stated value of the shares.
Winding Up
The discharging of a corporation's
liabilities and the distributing of its remaining assets to its
shareholders in connection with its dissolution.
Withdrawal
The statutory procedure whereby a foreign
corporation obtains the consent of a state to terminate its authority to
transact business there
