Business Ownership and Structures

Acquisition

The process of taking possession of something, such as acquiring another business by purchasing it

Annual report

A document outlining the financial status of a business

Asset(s)

Anything of value that a business or individual owns

Better Business Bureau

A consumer organization that monitors complaints against businesses

Board of directors

A group of people chosen to govern the activities of a corporation

Business-format franchise

A franchise arrangement in which the franchisee must operate under the trade name of the parent company that provides continuous assistance in setting up and operating the business

"C" corporation

A form of business ownership that is considered a separate legal entity from its owners; can be owned by unlimited stockholders and is susceptible to dual taxation; a type of public corporation

Capital

Assets of a business

Commission

A percentage of the total sale amount paid to the individual or business that makes the sale

Consolidation

A form of business growth in which a corporation acquires many smaller companies

Corporation

A form of business ownership that is owned by stockholders who have purchased units or shares of the company; an "artificial being, invisible, intangible, and existing only in contemplation of the law" (U.S. Supreme Court)

Dealership

See product trade-name franchise

Dividend

A sum of money paid to an investor or stockholder as earnings on an investment

Dual/Double taxation

The levying of two taxes on the same income, such as tax on a corporation's income as well as dividends

Exclusive distributorship

See product trade-name franchise

Expansion

A form of business growth in which a company extends its operations or facilities using new capital or reinvested funds

Franchise

A contractual agreement between a parent company and a franchisee to distribute goods or services

Franchisee

One who buys the right to sell the goods or services of the parent company (franchisor)

Franchising

A method of distributing recognized goods and services through a legal agreement between two parties

Franchisor

A parent company and owner of the name and/or system that is being distributed through a contractual franchising arrangement

General partnership

A type of partnership agreement in which all partners are liable for a business's losses; also known as ordinary partnership

Hybrid structure

A form of business ownership that combines elements of corporations and either sole proprietorships or partnerships

Joint venture

An arrangement that involves two or more businesses entering into a relationship by combining complementary resources, such as technology, skills, capital, or distribution channels, for the benefit of all parties; the relationship is usually short-term or for a single project/transaction

Licensee

The buyer of copyrighted, patented, or trademarked material

Licensing

A business structure that requires the authorization or permission from an owner to another entity to use trademarked, copyrighted (e.g., logo, name), or patented material for a specific activity, during a specific time period, for the profit of both parties

Licensor

The owner of copyrighted, patented, or trademarked material

Limited liability

Restricted chance of loss; a condition in which business owners risk only the amount of their investment

Limited liability company (LLC)

A form of business ownership in which members of a corporation experience limited liability; there is limited taxation on company income and limited life for the business entity

Limited liability partnership (LLP)

A form of business ownership that is generally used by business professionals for the purpose of protecting innocent partners from the malpractice of the other partners

Limited partnership

A type of partnership agreement in which a partner has limited liability; the liability is limited to the amount of the investment

Master licensee

A person or firm who helps franchisors find franchisees in a particular region or territory

Merger

Two individual businesses that combine to form one organization

Multi-level marketing

A business structure that pays commission on sales earned by people at two or more levels; the sales representatives usually work independent of the company; the representatives not only sell products but try to get others to sell them

Nonprofit corporation

A legal business structure that primarily operates for the purpose of serving others, not to make a profit; income is used to cover operational expenses; can be exempt from paying some or all taxes

Operating agreement

A written document signed by members of a limited liability partnership or limited liability company that specifies the terms of the business arrangement

Partnership

A form of business ownership in which the business is owned by two or more persons

Piggyback franchise

A form of ownership in which a retail franchise operates within the facilities of another store; often referred to as the host

Private corporation

A type of corporation owned by a few people that does not offer its shares for sale to the general public; also known as closely held, or close, corporation

Private enterprise system

An economic system in which individuals and groups, rather than the government, own or control the means of production; also known as free market economy, private profit system, market system, capitalistic system, or free enterprise system

Product trade-name franchise

A franchise arrangement based on an independent sales relationship between a franchisor and franchisee to stock and sell a specific line of goods; also known as dealership or exclusive distributorship

Public corporation

A type of corporation that usually sells millions of shares of stock to many stockholders; must make its financial information available to the general public

Pyramid scheme

An illegal form of multi-level marketing in which emphasis is placed on collecting initial fees from as many people as possible

Royalty

Fees paid to a parent company that are often based on a percentage of the franchise's profits; a percentage of actual sales that a licensee pays to a licensor; usually anywhere from 5 to 15 percent

Subchapter "S" corporation

A type of corporation that is limited to 100 or fewer shareholders, has limited shareholder liability, and requires little financial reporting; taxed as a partnership; also known as an "S" corporation

Sole proprietorship

A business owned by one person who receives all the profits from the business and takes all the risks

Stockholder

Owners of stock; also known as shareholders

Unlimited liability

Requirement that business owners be responsible for paying business debt; personal assets can be used to pay the debt