Business Law
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103 Terms
Testator
the person who makes and signs a will. In business and estate law, it refers to the individual who formally lays out how their assets—such as business ownership, stocks, and personal property—will be distributed and managed after they pass away. To be a valid testator, a person must be of legal age and "sound mind" (meaning they understand what they own and who their beneficiaries are). The testator must be creating the document of their own free will, without pressure or manipulation from others
Executor
person or entity named in a will legally responsible for managing a deceased person's estate and carrying out their final wishes. Their primary duties involve gathering assets, paying outstanding debts and taxes, and distributing the remaining property to beneficiaries. an executor's main tasks include:
Valuation: Calculating the total worth of the estate (including business interests, property, and personal items).
Settling Liabilities: Paying off any taxes and valid debts owed by the deceased.
Distribution: Transferring assets to the exact people or entities named in the will.
Business Continuation: If the deceased owned a business, managing or winding down business affairs according to the will or court directives.
Administrator
court-appointed person or professional who manages, protects, and distributes a company's or an individual's assets. They step in to handle financial and legal obligations when an entity's operations cannot be managed by their usual owners. Appointed when someone dies without a will (intestate), or when a will does not specifically name an executor. Or, requested by directors or creditors to prevent the business from being forced into immediate liquidation.
Beneficiary
any person or entity designated to receive money, property, or legal advantages from a contract, trust, insurance policy, or will. They do not need to be a party to the original agreement to benefit from it.
Direct Beneficiary: Specifically named or intended to benefit by the parties creating the contract or trust. They have legal rights to enforce the agreement.
Incidental (Indirect) Beneficiary: Someone who might accidentally benefit from an agreement but was not explicitly intended to. They generally have no legal right to sue or enforce the contract.
Primary Beneficiary: The first person or entity in line to receive the assets or funds.
Contingent Beneficiary: The backup recipient. They only receive the assets if the primary beneficiary is deceased, unreachable, or refuses the benefit
Spendthrift trust
legal arrangement where an independent trustee controls how money is distributed to a beneficiary. Because the beneficiary does not directly control or own the funds, their creditors generally cannot seize the money to pay off debts. A "settlor" (creator) puts assets into a trust, a "trustee" manages the assets, and a "beneficiary" receives the funds. The beneficiary cannot demand payouts, sell their interest in the trust, or use the future money as collateral for a loan. The trustee pays for the beneficiary's needs (such as housing, medical bills, or education) directly, protecting the funds from the beneficiary's poor financial habits or outside creditors. However, while state laws vary, spendthrift protections usually cannot shield trust assets from certain claims, such as court-ordered child support, alimony, or taxes.
Inter vivos (living) trust
legal arrangement created during your lifetime where a trustee holds and manages assets for the benefit of you or your beneficiaries. In the US, it is primarily used to bypass the slow, public, and expensive probate court process after you pass away.
Grantor (or Settlor/Trustor): The person creating the trust and putting their assets into it.
Trustee: The person (or institution) managing the assets. For most living trusts, you act as your own trustee while you are alive.
Beneficiary: The person or entity who receives the benefits and assets of the trust
Testamentary trust
trust outlined in a person's last will and testament that only comes into effect after the creator passes away. It directs a chosen trustee to manage and distribute the deceased's assets to specified beneficiaries based on strict instructions
Codicil
legal document that amends or supplements an existing will without requiring a complete rewrite. It acts as an official addendum, allowing you to easily add, remove, or change specific provisions while leaving the rest of the original will intact. It is typically used for minor, straightforward adjustments, such as changing a beneficiary, updating an executor, or adjusting a specific gift. To be legally binding, a codicil must generally be executed with the exact same legal formalities as the original will. This requires the document to be in writing, signed by the testator, and witnessed by at least two individuals who are not beneficiaries.
Holographic will
entirely handwritten and signed by the person making it (the testator). it typically requires no witnesses to be legally binding, unlike standard typed wills.
Intestate succession
the legal process that dictates how a deceased person’s assets are distributed when they pass away without a valid will. state probate laws will determine who automatically inherits your business ownership, shares, or assets. When an owner dies intestate, their business interests are swept into their estate and governed by state law. How this impacts the company depends strictly on its legal structure:
Sole Proprietorships: The business and the owner are legally the same. The business ceases to exist, and its assets and liabilities are distributed to the owner's heirs (e.g., spouse, children, or parents) as determined by state intestacy laws.
Partnerships: Unless a valid partnership agreement states otherwise, the death of a partner forces the partnership to automatically dissolve. The deceased partner's share is caught up in the intestacy process, leaving surviving partners to negotiate with estranged family members or liquidate assets.
Corporations & LLCs: The business continues to operate as a separate legal entity. However, the ownership shares or membership interests become subject to intestate succession. Surviving family members may suddenly become voting shareholders or partners in your company, even if they have no experience running it.
Intestacy rules vary state-by-state, but typically follow this hierarchical order:
Surviving Spouse: Inherits the lion's share or the entirety of the estate in most cases (with specific percentages often depending on whether there are shared or step-children).
Children & Descendants: If there is no surviving spouse, the business assets are divided equally among your biological and adopted children.
Extended Kin: If you have no spouse or children, the state looks to parents, siblings, and then more distant relatives. In extreme cases with no living relatives, the business assets escheat (are surrendered) to the state.
Per stirpes distribution
an estate planning and inheritance rule. It dictates that if a named beneficiary dies before the deceased, that beneficiary's share of an estate or business passes equally to their children, rather than being absorbed by the other primary beneficiaries. If a child is deceased, their designated share is subdivided equally among their children (the grandchildren). If a child dies and has no children, their share is redistributed evenly among the remaining branches of the living children.
Per capita distribution
an equal division of assets or profits among all eligible individuals. every person gets the exact same share or payout, rather than the money being divided by family branches or groups. If a beneficiary passes away, their share does not automatically pass to their children. Instead, it gets re-absorbed and divided equally among the surviving beneficiaries.
Common-law marriage
legally recognized marriage formed without a license or ceremony. To qualify, a couple must mutually agree to be married, live together, and present themselves to the public as spouses. It is only officially recognized in a handful of US states. Common-law spouses are entitled to the same health insurance, pension rights, and survivor benefits as traditional spouses.
Annulment
a formal legal declaration that invalidates an agreement from its very beginning. Unlike a standard contract termination, which simply ends a valid agreement on a specific date, annulment erases the contract retroactively. It operates under the legal fiction that the agreement never existed.
Prenuptial agreement
a legal contract signed before marriage. specifies how assets, debts, and businesses will be divided in the event of divorce or death, preventing future disputes and protecting pre-marital wealth
Durable power of attorney
(POA) is a legal document that allows you (the principal) to designate a trusted person (the agent or attorney-in-fact) to manage your business and financial affairs. The "durable" feature means the document remains completely valid and effective even if you become incapacitated or mentally incompetent. By having a durable POA in place, your business is protected from sudden operational freezes, allowing your designated agent to seamlessly handle critical functions. Springing POA: A specific type of POA that only "springs" into action and takes effect upon your incapacitation, rather than functioning immediately.
Legal separation
court-ordered arrangement where married couples live apart but remain legally married. It establishes binding rules for child custody, support, and asset division without officially ending the marriage, meaning neither spouse can remarry
legal right that allows a skilled craftsperson or service provider to retain possession of personal property (holding a repaired watch or car) until they are paid for their labor, services, or materials.
legal Claim against real property (working on a house structure) by a contractor, subcontractor, or supplier. It guarantees they get paid for the labor or materials used to improve that property. If the bill isn't paid, the lien makes it difficult to sell or refinance the property
Assault is the threat, attempt, or fear of harm (no physical touch needed). Battery is the actual completion of physical, offensive contact.
One party knowingly lies to trick the other, intending to persuade them into a contract. If the other party relies on this lie and suffers financial loss, they can sue for damages
Mediation is a voluntary, non-binding negotiation facilitated by a neutral third party who helps you and the other side reach a mutual agreement. Arbitration, however, functions like a private, streamlined trial; an arbitrator acts like a judge, hears your arguments, and makes a final, legally binding decision for you.