Legal Business and Environment Chapter 10

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  1. Sole Proprietorship
    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 debts and obligations incurred by the business
  2. Partnership
    an agreement by two or more persons to carry on, as co-owners, a business for profit
  3. Dissociation
    the severance of the relationship between a partner and partnership when the partner ceases to be associated with the carrying on of the partnership business
  4. Limited Partnership (LP)
    a partnership consisting of one or 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)
  5. General Partner
    in a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts
  6. Limited Partner
    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
  7. Corporation
    a legal entity formed in compliance with statutory requirements. The entity is distinct from its shareholder-owners
  8. S Corporation
    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
  9. Limited Liability Partnership (LLP)
    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
  10. Limited Liability Company (LLC)
    a hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership
  11. Member
    a person who has an ownership interest in a limited liability company
  12. Articles of Organization
    the document filed with a designated state official by which a limited liability company is formed
  13. Operating Agreement
    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
  14. Franchise
    any arranagement 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
  15. Franchisee
    one receiving a license to use another's (the franchisor's) trademark, trade name, or copyrights in the sale of goods and services
  16. Franchisor
    one licensing another (the franchisee) to use the owner's trademark, trade name, or copyright in the selling of goods or services
  17. Articles of Incorporation
    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
  18. Bylaws
    a set of governing rules adopted by a corporation or other association
  19. Dividend
    a distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held
  20. Retained Earnings
    the portion of a corporation's profits that has not been paid out as dividends to shareholders
  21. Domestic Corporation
    in a given state, a corporation that does business in, and is organized under the law of, that state
  22. Foreign Corporation
    in a given state, a corporation that does business in the state without being incorporated therein
  23. Alien Corporation
    a designation in the United States for a corporation formed in another country but doing business in the United States
  24. Proxy
    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
  25. Quorum
    the number of members of a decision-making body that must be present before business may be transacted
  26. Stock Certificate
    a certificate issue by a corporation evidencing the ownership of a specified number of shares in the corporation
  27. Preemptive Rights
    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
  28. Shareholder's Derivative Suit
    a suit brought by a shareholder to enforce a corporate cause of action against a third person
  29. Watered Stock
    shares of stock issued by a corporation for which the corporation receives, as payment, less than the stated value of the shares
  30. Business Judgment Rule
    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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Legal Business and Environment Chapter 10
Legal Business and Environment Chapter 10
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