entity-choice-primer

Limited Liability Company (LLC)

A business entity that provides limited liability to its owners (members) and allows for pass-through taxation.

Non-Profit Corporation

An organization that is not owned by anyone and is controlled by a Board of Directors, designed to serve the public interest.

Pass-Through Taxation

A taxation structure where business income is passed directly to the owners, who then report it on their personal tax returns.

Benefit Corporation

A type of corporation that has a social mission in addition to profit, and may require a benefit director on the board.

S-Corporation

A corporation that meets specific Internal Revenue Code requirements and allows income to be passed through to shareholders for tax purposes.

Ownership Structure

The arrangement of the owners and their respective interests in a business entity.

Operating Agreement

A document outlining the operations of an LLC and the rights and responsibilities of its members.

Limited Liability

A legal structure that protects owners' personal assets from being used to satisfy business debts and liabilities.

Articles of Organization

A document required to establish an LLC, detailing its purpose, structure, and management.

Board of Directors

A group of individuals elected to represent shareholders and make decisions on major company issues.

Corporation

A legal entity that is separate and distinct from its owners, providing limited liability to its shareholders.

Shareholder

An individual or entity that owns shares in a corporation, which may entitle them to dividends and voting rights.

Limited Partnership

A partnership consisting of at least one general partner and one limited partner, where the limited partner's liability is restricted to their investment.

General Partnership

A business arrangement where two or more individuals manage and operate a business together, sharing profits and liabilities.

Double Taxation

A taxation situation where a corporation's profits are taxed at the corporate level and again at the individual shareholder level when distributed as dividends.

C-Corporation

A corporation that is taxed separately from its owners under the Internal Revenue Code, typically characterized by double taxation.

Business Entity

Any legal structure used to legally operate a business, such as a sole proprietorship, partnership, corporation, or LLC.

Tax ID Number (TIN)

A unique identifier used by the Internal Revenue Service for tax purposes, assigned to businesses and individuals.

Dissolution

The process of legally terminating a business entity, which involves settling debts and distributing any remaining assets.

Fiduciary Duty

A legal obligation for a board member or corporate officer to act in the best interest of the corporation and its shareholders.

Articles of Incorporation

A document filed with a governmental body to legally document the creation of a corporation.

Stakeholder

Any party that has an interest in a company, including employees, customers, suppliers, and shareholders.

Business Plan

A formal written document that outlines the goals, strategies, and financial projections of a business.

Intellectual Property

Creations of the mind, such as inventions, literary and artistic works, used for commercial advantage.

Franchise

A business model that allows individuals to operate a business under the brand and operational guidelines of a larger company.

Merger

The combination of two companies into a single corporation, achieved by the acquisition of one by the other.

Acquisition

The act of one company purchasing most or all of another company's shares to gain control.

Liability

The state of being responsible for something, especially by law; often refers to financial obligations.

Equity Financing

Raising capital through the sale of shares in a business.

Debt Financing

Raising capital through borrowing, typically through loans or credit.

Sole Proprietorship

A business owned and run by a single individual, where there is no legal distinction between the owner and the business.

Partnership Agreement

A legally binding document that outlines the terms of a partnership, including management responsibilities and profit sharing.

Market Segmentation

The process of dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics.

Business Model

A plan for how a company creates, delivers, and captures value, outlining the way it operates and makes money.

Brand Equity

The value added to a product by having a well-known brand name, which can lead to customer loyalty and higher sales.

Competitive Advantage

A condition or circumstance that puts a company in a favorable business position, enabling it to outperform competitors.

Liquidity

The ability to convert assets into cash quickly without significantly affecting the asset's price.

Due Diligence

The investigation or audit of a potential investment to confirm all facts, financials, and legal implications.

Valuation

The process of determining the current worth of an asset or company, usually based on earnings potential.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for a specific project or business activity.

Franchise Disclosure Document (FDD)

A legal document that a franchisor must provide to potential franchisees before they purchase a franchise, outlining the rights and responsibilities of both parties.

Crowdfunding

The practice of raising small amounts of money from a large number of people, typically via the internet, to fund a new business venture.

Angel Investor

An affluent individual who provides capital to startups in exchange for ownership equity or convertible debt.

Venture Capital

Financing provided to startups and small businesses with perceived long-term growth potential, typically in exchange for equity.

Bootstrapping

A method of starting and growing a business with minimal financial resources, relying on personal savings and revenue generated by the business.

Exit Strategy

A plan for how an investor intends to withdraw from an investment, typically through a sale, merger, or initial public offering (IPO).

Market Research

The process of gathering, analyzing, and interpreting information about a market, including information about the target market, competition, and industry trends.

Value Proposition

A statement that explains how a product or service benefits customers, outlining the unique value it provides compared to competitors.

Key Performance Indicators (KPIs)

measurable values that demonstrate how effectively a company is achieving key business objectives.

Supply Chain Management

The management of the flow of goods and services, including all processes that transform raw materials into final products.

Customer Relationship Management (CRM)

A strategy for managing a company's interactions with current and potential customers, often utilizing technology to organize, automate, and synchronize sales, marketing, and customer service.