Limited Liability Companies and Corporations

These flashcards cover essential vocabulary and definitions related to limited liability companies and corporations, based on lecture content.

Limited Liability Company (LLC)

A business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation.

Pass Through Taxation

A tax structure where income is not taxed at the company level but passed on to the owners to be reported on their personal tax returns.

Governing Laws of LLCs

State laws that regulate the formation and operation of limited liability companies, often based on the Uniform Limited Liability Company Act.

Articles of Organization

A public document used to create a limited liability company, which includes the entity's name, address, and the registered agent.

Operating Agreement

A document that outlines the ownership and operating procedures of an LLC, governing its internal affairs.

Shell Company

A business entity that exists only on paper and has no significant assets or operations, often used for fraudulent purposes.

Member-Managed LLC

An LLC where all members participate in managing the business, unless otherwise specified in the operating agreement.

Manager-Managed LLC

An LLC where management is delegated to one or more managers appointed by the members.

Fiduciary Duties

Legal obligations of directors and officers of a corporation to act in the best interest of the corporation and its shareholders.

Preemptive Rights

Rights that allow existing shareholders to purchase additional shares before the company offers them to new investors to maintain their ownership percentage.

Derivatives Action

A lawsuit brought by a shareholder on behalf of the corporation against an officer or director for harm done to the corporation.

Tender Offer

An offer to purchase some or all of shareholders' shares in a corporation, usually at a premium over the market price, to gain control.

Corporate Veil

The legal distinction between corporation shareholders and the corporation itself, providing limited liability to shareholders.

Double Taxation

A taxation scenario where a corporation is taxed on its profits and shareholders are taxed again on dividends received.

Bylaws

Rules and regulations enacted by a corporation to provide a framework for its operation and management.

Involuntary Dissolution

The termination of a corporation's existence ordered by a court or regulatory authority, often due to legal violations or abuse by directors.

Limited Liability Company (LLC)

A business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation.

Pass Through Taxation

A tax structure where income is not taxed at the company level but passed on to the owners to be reported on their personal tax returns.

Governing Laws of LLCs

State laws that regulate the formation and operation of limited liability companies, often based on the Uniform Limited Liability Company Act.

Articles of Organization

A public document used to create a limited liability company, which includes the entity's name, address, and the registered agent.

Operating Agreement

A document that outlines the ownership and operating procedures of an LLC, governing its internal affairs.

Shell Company

A business entity that exists only on paper and has no significant assets or operations, often used for fraudulent purposes.

Member-Managed LLC

An LLC where all members participate in managing the business, unless otherwise specified in the operating agreement.

Manager-Managed LLC

An LLC where management is delegated to one or more managers appointed by the members.

Fiduciary Duties

Legal obligations of directors and officers of a corporation to act in the best interest of the corporation and its shareholders.

Preemptive Rights

Rights that allow existing shareholders to purchase additional shares before the company offers them to new investors to maintain their ownership percentage.

Derivatives Action

A lawsuit brought by a shareholder on behalf of the corporation against an officer or director for harm done to the corporation.

Tender Offer

An offer to purchase some or all of shareholders' shares in a corporation, usually at a premium over the market price, to gain control.

Double Taxation

A taxation scenario where a corporation is taxed on its profits and shareholders are taxed again on dividends received.

Bylaws

Rules and regulations enacted by a corporation to provide a framework for its operation and management.

Involuntary Dissolution

The termination of a corporation's existence ordered by a court or regulatory authority, often due to legal violations or abuse by directors.

Articles of Incorporation

A foundational legal document filed with a state to officially form a corporation, specifying basic information like the corporate name, purpose, and stock structure.

Board of Directors

The governing body of a corporation elected by shareholders to oversee management, set major policies, and make strategic decisions.

Shareholders

Owners of a corporation who hold shares of its stock and have certain rights, including electing directors and approving major corporate actions.

S Corporation

A special corporate tax election that allows a corporation to pass its income, losses, deductions, and credits through to its shareholders directly, avoiding corporate-level taxation.