Business Basics Resource Guide
Milt Wright & Associates
GLOSSARY OF LEGAL TERMINOLOGY
A-C | D-N | O-R | S-Z
Accrual
Method
An accounting method under which income is subject to
tax after all events have occurred which fix the right
to receive such income and deductions are allowed when
all the events have occurred to fix the obligation to
pay the debt.
Agent
A person authorized by another to act on their behalf.
Thus, an agent can enter into contracts and other such
legal binding functions on behalf of another. Usually,
the corporation's officers act as corporate agents.
Annual Meeting of Shareholders
Nearly all states require a corporation to hold an annual
meeting of shareholders at which time directors are
elected and other corporate issues are voted on.
Articles of Incorporation
(Certificate of incorporation or charter). The articles
are the primary legal document of a corporation; they
serve as a corporation's constitution. The articles
are filed with the state government to begin corporate
existence. The articles contain basic information on
the corporation as required by state law.
Articles of Organization
LLCs must file the articles with the proper state authorities
to begin existence. The articles of organization are
very similar to a corporation's articles of incorporation.
Asset
Anything owned that has monetary value.
Assumed Name
A name under which a corporation conducts business which
is not the legal name of the corporation as shown in
its articles of incorporation. If a corporation does
business under an assumed name, it may be required to
file registration of the assumed name with the state.
Authorized Shares
The total number of shares a corporation is authorized
to sell. This number is specified in the articles of
incorporation. All of the shares authorized need not
be issued.
Authorized Stock
The total amount of stock that a corporation is authorized
to issue. The amount of authorized stock is usually
contained in the Articles of Incorporation.
Business Judgment Rule
The rule states that directors of corporations will
not be held personally liable for unwise business decisions
providing that the directors made an informed decision
and that decision was not tainted by self-interest.
Bylaws
Bylaws are the rules and regulations adopted by a corporation
for its internal governance. It usually contains provisions
relating to shareholders, directors, officers and general
corporate business. At the corporation's initial meeting
the bylaws are adopted. Bylaws are a private document
not filed with any state authority. Bylaws are more
flexible than the articles of incorporation because
they are easier to amend.
Capital Gains or Losses
Gains or losses realized from the sale or exchange of
capital assets. The amount is determined by calculating
the difference between an asset's purchase and sale
price.
Capital Stock
See Authorized stock.
Cash Method
An accounting method under which income is subject to
tax when actually received and deductions are allowed
when actually paid.
Certificate of Authority
Is a document issued by the proper state authority to
a foreign corporation granting the corporation the right
to do business in that state.
Close Corporations
A close corporation is a corporation that possesses
the following traits: a small number of shareholders;
no ready market for the corporation's stock; and substantial
participation by the majority shareholders in the management
of the corporation. Some states have close corporation
statutes.
Common Stock
The primary stock of a corporation. This stock gives
shareholders the right to participate in management
of the corporation and give the shareholder a proportionate
share of the dividends.
Corporate Record Book
Maintaining the proper records is very important to
assure limited liability to corporate shareholders.
The corporation should have a record book which contains
a copy of the articles of incorporation, bylaws, initial
and subsequent minutes of directors and shareholders
meetings and a stock register.
Cumulative Voting
This method of voting is intended to create adequate
representation of minority shareholders. Cumulative
voting allows shareholders to aggregate their votes
in favor of fewer candidates than there are slots available.
*The
Build WorkSource web site provides material on topics
of interest to businesses. It is not intended as legal
advice or to answer specific legal or employment problems.
The information presented in the Build WorkSource web
site is from many sources therefore there can be no
warranty or responsibility as to the accuracy, originality
or completeness. Build WorkSource is not engaged in
rendering legal or other professional counsel.