legal environment of business chapter 18

dividends

a distribution of corporate profits to the corporations shareholders in proporation to the number of shares held

corporation

a corporation is a firm that is authorized by statute to act as legal entity seperate & distinct from its owners (shareholders)

holding company

a company whose business activity is holding shares in another company

retrained earnings

the portion of a corporations profits that has not been paid out as dividends to shareholders

domestic corporation

in a given state, a corporation that is organized under the law of that state

foreign corporation

in a given state, a corporation that does business in that state but is not incorporated there

alien corporation

a corporation formed in another country but doing business in the U.S.

public corporation

a corporation owned by a federal, state, or municipal government-not to be confused with a publicly held corporation

publicly held corporation

a corporation whose shares are publicly traded in securities markets, such as the New York Stock Exchange or the NASDAQ

shareholder agreement

an agreement between shareholders that restricts the transactions of shares, often entered into for the purpose of maintaing proprtionate control of a close corporation

close corporation

a corporation whose shareholders are limited to a small group of persons, often family members

S corporation

a close business corporation that has most of the attributes of a corporation, including limited liability but qualifies under the Internal Revenue Code to be taxes as a partnership

benefit corporation

a type of for-profit corporation, available by statute in a number of states, that seeks to have a material positive impact on society & the environment

articles of incorporation

the document that is filed with the apprpriate state offical, usually that secretary of state, when a business is incorporated & that contains basic information about the corporation

bylaws

the internal rules of management adopted by a corporation at its first organizational meeting

securities

generally, stocks, bonds or other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation

bonds

a security that evidences a corporate (or government) debt

stocks

an ownership (equity) interest in a corporation, measured in units of shares

common stock

a security that evidences ownership in a corporation. a share of common stock gives the owner a proportionate interest in the corporation with regard to control, earnings, & net assets. common stock is lowest in priority with respect to payment of dividends & distribution of the corporations assets on dissolution

preferred stock

a security that entitles the holder to payment of fixed dividends & that has priority over common stock in the distribution of assets on the corporations dissolution

venture capital

financing provided to new business ventures by professional, outside investors that is venture capitalists, usually groups of wealthy investors & securities firms

private equity capital

capital funds invested by a private equity firm in an existing corporation, usually to purchase & reorganize it

crowfunding

a cooperative activity in which people network & pool funds & other resources via the Internet to assist a cause (such as disaster relief) or invest in a business venture (such as a startup)

piercing the corporate viel

the action of a court to disregard the corporate entity & hold the shareholders personally liable for corporate debts & obligations

inside director

a person on a corporations board of directors who is also an officer of the corporation

commingled

to put funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities

outside director

a person on a corporations board of directors who does not hold a management position in the corporation

quorum

the number of members of a decision-making body that must be present before business may be transacted

proxy

authorization to represent a corporate shareholder to serve as his or her agent & vote his or her shares in a certain manner

business judgement rule

a rule under which courts will not hold corporate officers & directors liable for honest mistakes of judgement & bad business decision that were made in good faith

voting trust

an agreement (trust contract) under which legal title to shares of corporate stock is transferred to a trustee who is authorized by the shareholders to vote the shares on their behalf

stock certificates

a certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation

preemptive rights

the right of a shareholder in a corporation to have the first opportunity to purchase a new issue of that corporations stock in proportion to the amount of stock already owned by the shareholder

stock warrants

a certificate that grants the owner the option to buy a given number of shares, usually within a set time period

watered stock

shares of stock issued by a corporation for which the corporation receives, as payment, less than the fair market value of the shares

shareholders derivative suit

a suit brought by a shareholder to enforce a corporate cause of action against a third person