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Sole proprietorship

A form of business ownership with a single owner who usually actively manages the company

Unlimited liability

When businesses formed as sole proprietorships or business partnerships cannot pay their bills, all or part of the business owner's personal financial assets, such as cash, bank accounts, investments, or homes, can be seized to pay the business debts

Partnership

A voluntary agreement under which two or more people act as co-owners of a business for profit

General partnership

A partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm

Corporation

A form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners

Articles of incorporation

The document filed with a state government to establish the existence of a new corporation

Limited liability

When owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected

Limited liability company (LLC)

A form of business ownership that offers both limited liability to its owners and flexible tax treatment

Limited partnership

A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability

Limited liability partnership (LLP)

All partners have the right to participate in the management and have limited liability for company debts

C corporation

The most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders

Corporate bylaws

The basic rules governing how a corporation is organized and how it conducts its business

Stockholder

An owner of a corporation

Institutional investor

An organization that pools contributions from investors, clients, or depositors and uses these funds to buy stocks and other securities

Board of directors

The individuals who are elected by stockholders of a corporation to represent their interests Establishes the corporation's mission and sets its broad objectives Appoints officers

CEO and CFO

Day-to-day management of the corporation

S corporation

A form of corporation that avoids double taxation by having its income taxed as if it were a partnership

Statutory close (or closed) corporation

A corporation with a limited number of owners that operates under simpler, less formal rules than a C corporation

Nonprofit corporation

A corporation that does not seek to earn a profit and differs in several fundamental respects from C corporations

Acquisition

A corporate restructuring in which one firm buys another

Merger

A corporate restructuring that occurs when two formerly independent business entities combine to form a new organization

Horizontal merger

A combination of two firms that are in the same industry

Vertical merger

A combination of firms at different stages in the production of a good or service

Conglomerate merger

A combination of two firms that are in unrelated industries

Divestiture

The transfer of total or partial ownership of some of a firm's operations to investors or to another company

Franchise

A licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations

Franchisor

The business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations

Franchisee

The party in a franchise relationship that pays for the right to use resources supplied by the franchise

Distributorship

A type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it

Business format franchise

A broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor

Franchise agreement

The contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties

Franchise Disclosure Document (FDD)

A detailed description of all aspects of a franchise that the franchisor must provide to the franchisee at least 14 calendar days before the franchise agreement is signed