Business Structures, Laws, and Financial Regulations: Corporate Law and Market Practices

Articles of Incorporation

Documents filed with a governmental body to legally establish a corporation as a recognized entity under state law.

Benefit Corporation (B Corp)

A corporation that explicitly considers public benefit in its decisions rather than only maximizing shareholder value.

C Corporation (C Corp)

A corporation that can sell unlimited shares of its stock to the general public, is heavily regulated by the government, and reports its financial information to the public.

Corporation

A legal entity that is separate from its owners and controlled by a board of directors; the entity has most of the same rights and responsibilities that individuals possess but offers limited liability.

General Partnership

A business structure where all the partners have decision-making and management power, and have unlimited liability, meaning they can lose more than they invested.

Liability

The legal responsibility of an individual (or entity) for actions, debts, and obligations.

Limited Liability

The liability restricts an individual's potential loss to the total amount of their investment in a company.

Limited Liability Company

A hybrid business structure, where it combines the operational characteristics of a sole proprietorship or partnership while limiting the liability of the investors to the amount they invested.

Limited Liability Partnership

A hybrid business structure where all the partners have decision-making and management power, have limited liability, and can't be held responsible for any of their other partner's actions.

Limited Partnership

A business structure where one or more of the partners are not active, have no decision-making power, and are limited in their liability to the amount they invested.

Partnership

A business owned by two or more people.

Partnership Agreement

A legal document that outlines the rights, responsibilities, and obligations of the individuals involved in a partnership.

Private Corporation

A corporation with a small group of owners that does not sell its stock to the general public, and or report its financial information to the public.

Public Corporation

A corporation governed by a board of directors, that sell shares of stock, reports financial information to the general public, and is heavily regulated by the government.

S Corporation (S Corp)

A corporation that meets specific Internal Revenue Code requirements and passes corporate income (or loss) through to its shareholders for federal tax purposes.

Security

A financial instrument that holds some type of monetary value and can be traded in the financial markets.

Sole Proprietorship

A business owned by one person, and where the owner has unlimited liability.

Stock

A type of security that represents ownership in a company and signifies a claim on part of the company's assets and earnings.

Stock Exchanges

Clearing houses that facilitate the buying and selling of stocks.

Unlimited Liability

The liability that extends beyond an individual's financial investment in a company.

Articles of Organization

The formal documents filed with a state government to legally establish a limited liability company (LLC) within that state.

Bylaws

The internal rules, processes, and procedures established by an organization that govern its management and operations.

Doing Business As (DBA)

A publicly registered company name used to conduct business that is not the organization's (or sole proprietor's) legal name.

Domain

A unique, readable name on the internet that maps to a numeric IP address, facilitating easy access to websites.

Employer Identification Number (EIN)

A distinct, nine-digit tracking number assigned by the Internal Revenue Service (IRS) to a business operating in the United States.

Nonprofit Organization

An organization that provides a social service, benefit, or cause, that isn't chartered to earn a profit for owners or shareholders and that receives federal tax-exempt status from the IRS.

Prospectus

A formal legal document for public securities offerings, like stocks, bonds, and mutual funds, providing details about the investment, required to be filed with the Securities and Exchange Commission (SEC).

Securities and Exchange Commission (SEC)

The government regulatory agency responsible for policing the U.S. financial markets.

Tax-Exemption (or tax-exempt status)

The legal exemption from paying federal, and/or state, and/or local income taxes.

Trademark

A symbol, word, or set of words that represents a company, product, or service, and distinguishes it from others.

Board Chair

Leads the Board of Directors, oversees board meetings, and ensures effective implementation of the board's decisions.

Board of Directors

The group of individuals elected by shareholders to oversee a corporation's management and strategic direction.

Bond

A debt security representing a loan made by an investor to a borrower.

Chief Executive Officer (CEO)

A corporation's highest-ranking executive responsible for managing the company's strategy, resources, and operations, making major corporate decisions, and is the primary liaison to the board.

Common Stock

A type of security that represents ownership in a company where the owners have the right to vote on certain company matters and participate in the financial upside and downside of the company.

Corporate Governance

The systems put in place to determine and manage how an organization is operated and controlled.

Fiduciary Duty

The legal obligation of one party to act in the best interest of another, involving a relationship of trust and loyalty.

Interest

The cost of borrowing money.

Preferred Stock

Shares of ownership in a company that have preferential rights over common stock.

Ratify

To approve and make an official binding agreement.

Risk Management

Identifying, understanding, and predicting circumstances or events that might have negative consequences, and taking proactive measures to avoid these risks and effectively combat them if/when they occur.

Shareholder

A person or institution that owns at least one share of a company's stock, also known as a stockholder.

Stakeholder

Any person or institution that stands to gain or lose from the activities and performance of an organization.

Accounting Fraud

The illegal manipulation of financial data and statements to present a falsely positive image of a company's financial health.

Cybercrimes

Criminal acts conducted, in part or whole, using computer technology and networks.

Embezzlement

The act of taking money or property by a person to whom it was entrusted.

Extortion

The use of threats, coercion, or force, to obtain money, property, or services, from other businesses, individuals, or entities.

False Advertising

The use of misleading, deceptive, or blatantly untrue statements to promote a product or service.

Federal Trade Commission

The U.S. government agency responsible for protecting consumers by preventing anticompetitive, deceptive, and unfair business practices.

Forgery

The creation, alteration, or falsification of documents, including signatures and banknotes, with the intent to defraud.

Fraud

The intentional misrepresentation of fact, through words or actions, for personal or financial gain.

Insider Trading

The illegal practice of manipulating the market by buying or selling a publicly traded company's stock based on non-public information about the company.

Intellectual Property

Anything created from the mind, including inventions, ideas, designs, and literary and artistic works, for which rights are recognized and legally protected.

Intellectual Property Theft

The unauthorized use, reproduction, or distribution of someone else's intellectual property.

Market Allocation

The act of competitors dividing markets among themselves to avoid competition.

Money Laundering

The process of intentionally hiding the origins of money generated by criminal activities and making it appear to be from legitimate and legal business activities.

Monopolistic Practices

When a company uses its dominant position to prevent others from entering the market as competitors.

Ponzi Scheme

The illegal practice of paying earlier investors with new investor capital rather than from business profits.

Price-fixing

An agreement among competitors to collectively manipulate the selling prices of goods or services rather than letting the market determine pricing.

Securities Fraud

The illegal practice of deceiving investors or manipulating financial markets through false information, insider trading, or other fraudulent activities.

White-collar Crime

A financially motivated, nonviolent crime characterized by deceit, concealment, and violations of trust.

Acquisition

A business transaction where one company purchases and gains control of another company.

Asset Purchase

The acquiring company buys specific assets and assumes specific liabilities directly from the target company.

Balance Sheet

A financial statement that marks a company's financial situation at a moment in time, showing all assets, liabilities, and owners' equity.

Clayton Antitrust Act

The federal law that prohibits price discrimination, exclusive deal contracts, and mergers and acquisitions that substantially lessen competition.

Company Culture

The shared beliefs, values, goals, attitudes, and behaviors of a company's employees.

Conglomerate Merger

A type of merger that combines companies involved in unrelated business activities or industries.

Due Diligence

The gathering and reviewing of information before making a decision, entering a contract, or buying or selling something.

Federal Trade Commission Act

The federal law that prevents deceptive and unfair business practices and enforces antitrust laws.

Financial Analysis

Evaluating the financial well-being and invest-ability of a business, based on its transactions, profitability, stability, liquidity, rates of return, and other financial measures of success.

Financial Statements

A company's primary financial reports, including the balance sheet, income statement, and statement of cash flows.

Hart-Scott-Rodino Antitrust Improvements Act (HSRIA)

The federal law that requires parties to large mergers and acquisitions to file a detailed premerger report with the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ).

Horizontal Merger

A type of merger between companies in the same industry and at the same supply chain level to share resources, reduce costs, and increase market share.

Hostile Takeover

When the acquiring company buys another company (the acquired company) without the consent or cooperation of the acquired company.

Income Statement

A financial statement that reports revenues, expenses, and income (or loss), for a time period in the past.

Leveraged Buyout (LBO)

When a company uses significant amounts of debt to finance an acquisition.

Management Buyout (MBO)

When a company's executives purchase a significant portion or all of the assets and operations of the business they manage.

Merger

A business transaction that integrates two companies to form a new entity.

Merger of Equals (MOE)

A type of merger that combines similarly sized companies.

Mergers & Acquisitions (M&A)

The business activity that includes the buying (acquisition) and selling of companies, and/or the process of combining (merging) two or more companies.

Monopoly

A market where one company controls the supply of a good or service, where other options for consumers aren't readily available, and where the barriers to entry for other companies are highly restrictive.

Sarbanes-Oxley Act (SOX)

A law created in 2002, that helped restore confidence in the financial markets by cracking down on accounting errors and protecting investors from fraudulent accounting and financial reporting practices.

Securities Act

The federal law that requires companies to register all non-exempt securities sold in the United States with the Securities and Exchange Commission.

Securities Exchange Act

The federal law that mandated the reporting requirements for publicly traded companies, established the regulations for transactions, and created the agency to enforce them.

Sherman Antitrust Act

The federal law that promotes fair competition, prohibits actions that restrain trade, and makes it illegal to create monopolies.

Stock Purchase

The acquiring company purchases most or all of the target company's shares from its shareholders.

Strategic Plan

The comprehensive outline of an organization's objectives, strategies, and action plans, designed to guide decision-making and resource allocation toward achieving long-term goals and a competitive advantage.

Statement of Cash Flows

A financial statement that shows changes in income and balance sheet accounts, to ultimately show changes in cash and cash equivalents entering and leaving the company.

Subsidiary

A company owned by another "parent" company.

Subsidiary Merger

A type of merger where one company (the parent) acquires another company (the subsidiary) and the subsidiary retains its legal identity as a separate entity under the control of the parent company.

Supply Chain

A company's network of people, suppliers, activities, and resources that create and move a product from suppliers to the end consumer.

Tender Offer

The proposal by one entity to purchase a substantial percentage of another company, usually at a premium to the current market price, to be accepted or rejected within a specified time frame.

Vertical Merger

A type of merger between companies at different levels of the same supply chain to control their supply, streamline operations, improve efficiency, and reduce costs.

Williams Act

The federal law that amended the Securities Exchange Act to protect company shareholders in a hostile takeover.