COMMON BUSINESS LAW TERMS
Articles of Incorporation - A legal document filed with the state that expresses a corporation’s purposes, bylaws, and structure.
Board of Directors - The governing body of a corporation that is responsible for the general control, supervision, and appointment of officers within that corporation. The Board of Directors is elected by the shareholders of the corporation.
Business Entity - An organization involved in business practices.
Bylaws - The rules and regulations that govern a corporation set forth in that corporation’s Articles of Incorporation.
Capacity - The legal ability or authority one has, such as age or mental state.
D/B/A, Doing Business As - A legal term referring to the name under which a proprietorship goes by, as opposed to its legal name, which is the name of the proprietor.
Dividend - A portion of a corporation’s earnings that is distributed to shareholders.
Double Taxation - When the same income is taxed at the corporate level and then again at the shareholder level when distributed in the form of dividends.
Duty of Care - Duty owed by partners to manage the partnership affairs without gross negligence, reckless conduct, international misconduct, or knowingly violating a law.
Duty of Loyalty - An undeviating fiduciary duty to a corporation, in which one cannot have a conflict of interest with the corporation, usurp any corporate opportunity that belongs to the corporation, offer better prices to corporate insiders, and compete with the corporation, among others.
Duty of Obedience - Duty to act in accordance with the partnership agreement and any business decisions properly made by the partners.
Fiduciary Duty - A duty of utmost loyalty, fairness, and good faith owed by owners to each other and the business. Certain aspects of this duty disallow partners from: -
Competing with the business or self-dealing
- Having a conflict of interest
- Revealing confidential information regarding the business
- Appropriating or seizing business opportunities
Good Faith - To act with a mental and moral state of honesty and on the basis of trust and sincerity. An act that is made in “good faith” is “bona fide.”
Intent - The planning and desire to commit an act (or not act). Proving intent depends on the type of law that may be broken.
Investment - An outlay of money with the purpose and expectation of making a profit in the future.
Liability (Legal) - An obligation or responsibility owed to another business or person that results from some sort of harm. Liability can be strict (no proof of fault necessary), or stem from negligence, gross negligence, or intentional misconduct.
Liquidation - The sale of assets of a business for cash to pay off debts and/or terminate the business.
Litigation - The process of carrying out a lawsuit or legal proceeding.
Operating Agreement or Managing Agreement - An agreement among the owners or members of a business (typically an LLC) that establishes the rules and regulations of the company’s operation, management, and all other business conduct.
Partnership Agreement - An agreement between the owners of a partnership that establishes that partnership and governs the conduct of the business and any terms and conditions that are agreed to by the owners.
Pass-through Taxation - Taxation on a business’ income that occurs only at the personal level (to owners on their personal income tax returns), and not on the entity level. Thus, the income is only taxed once.
Perpetual - Continuous in existence, without having to terminate or close in situations that generally call for the closure of a business.
Shareholders - Any owner of a company’s stock.
Tort - A wrong or injury committed against a person or property with either intent or negligence for which civil action can be taken.
Unlimited Personal Liability - Liability to the extent that one is legally responsible for the actions of themselves, their co-owners, their employees, and the debts and obligations of their business. Repayment or judgment extends to one’s personal assets.
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