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Introduction to Law-Chapter 10
Introduction to Law. Chapter Ten. Essentials of the Legal Environment.
30
Law
Undergraduate 2
05/01/2012

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Term
sole proprietorship
Definition
the simplest form of business organization, in which the owner is the business. the owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business.
Term
partnership
Definition
an agreement by two or more persons to carry on, as co-owners, a business for profit
Term
dissociation
Definition
the severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business
Term
limited partnership (LP)
Definition
a partnership consisting of one of more general partners (who manage the business and are liable to the full extent of their personal assets for debts of the partnership) and one or more limited partners (who contribute only assets and are liable only up to the amount contributed by them).
Term
general partner
Definition
in a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts
Term
limited partner
Definition
in a limited partnership, a partner who contributes capital to the partnership but has no right to participate in the management and operation of the business. the limited partner assumes no liability for partnership debts beyond the capital contributed.
Term
corporation
Definition
a legal entity formed in compliance with statutory requirements. the entity is distinct from its shareholder-owners.
Term
S corporation
Definition
a close business corporation that has met certain requirements as set out by the Internal Revenue Code and thus qualifies for special income tax treatment. essentially, an S corporation is taxed the same as a partnership, but its owners enjoy the privilege of limited liability
Term
limited liability partnership (LLP)
Definition
a hybrid form of business organization that is used mainly by professionals who normally do business in a partnership. like a partnership, an LLP is a pass-through entity for tax purposes, but the personal liability of the partners is limited.
Term
limited liability corporation
Definition
a hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership
Term
member
Definition
a person who has an ownership interest in a limited liability company
Term
articles of organization
Definition
the document filed with a designated state official by which a limited liability company is formed
Term
operating agreement
Definition
in a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated. state statutes typically give the members wide latitude in deciding for themselves the rules that will govern their organization.
Term
franchise
Definition
any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright in the selling of goods or services
Term
franchisee
Definition
one receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods or services
Term
franchisor
Definition
one licensing another (the franchisee) to use the owner's trademark, trade name, or copyright in the selling of goods or services
Term
articles of incorporation
Definition
the document filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated; state statutes usually prescribe what kind of information must be contained in the articles of incorporation
Term
bylaws
Definition
a set of governing rules adopted by a corporation or other association
Term
dividend
Definition
a distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held
Term
retained earnings
Definition
the portion of a corporation's profits that has not been paid out as dividends to shareholders
Term
domestic corporation
Definition
in a given state, a corporation that does business in, and is organized under the law of, that state
Term
foreign corporation
Definition
in a given state, a corporation that does business in the state without being incorporated therein
Term
alien corporation
Definition
a designation in the United States for a corporation formed in another country but doing business in the United States
Term
proxy
Definition
in corporation law, a written agreement between a stockholder and another under which the stockholder authorizes the other to vote the stockholder's shares in a certain manner
Term
quorum
Definition
the number of members of a decision-making body that must be present before business may be transacted
Term
stock certificate
Definition
a certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation
Term
preemptive rights
Definition
rights held by shareholders that entitle them to purchase newly issued shares of a corporation's stock, equal in percentage to shares already held, before the stock is offered to any outside buyers. preemptive rights enable shareholders to maintain their proportionate ownership and voice in the corporation.
Term
shareholder's derivative suit
Definition
a suit brought by a shareholder to enforce a corporate cause of action against a third person
Term
watered stock
Definition
shares of stock issued by a corporation for which the corporation receives, as payment, less than the stated value of the shares
Term
business judgment rule
Definition
a rule that immunizes corporate management from liability for actions that result in corporate losses or damages if the actions are undertaken in good faith and are within both the power of the corporation and the authority of management to make
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