Chapter 4 Definitions Flashcards
Sole proprietorship
A business that is owned (and usually operated) by one person.
Unlimited liability
A legal concept that holds a business owner personally responsible for all the debts of the business.
Partnership
A voluntary association of two or more persons to act as co-owners of a business for profit.
General partner
A person who assumes full or shared responsibility for operating a business.
Limited Partner
A person who contributes capital to a business but has no management responsibility or liability for losses beyond the amount he or she invested in the partnership.
Master Limited Partnership (MLP)
A business partnership that is owned an managed like a corporation but often taxed like a partnership.
Corporation
An artificial person created by law with most of the legal rights of a real person including the rights to start an operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts.
Stock
The shares of ownership of a corporation.
Stockholder
A person who owns a corporation’s stock.
Closed corporation
A corporation whose stock is owned by relatively few people and is not sold to the general public.
Open corporation
A corporation whose stock can be bought and sold by any individual.
Domestic corporation
A corporation in the state in which it is incorporated.
Foreign corporation
A corporation in any state in which it does business except the one in which it is incorporated.
Alien corporation
A corporation chartered by a foreign government and conducting business in the United States.
Common stock
Stock owned by individuals or firms who may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of others.
Preferred stock
Stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common-stock owners.
Dividend
A distribution of earnings to the stockholders of a corporation.
Proxy
A legal form listing issues to be decided at a stockholders’ meeting and enabling stockholders to transfer their voting rights to some other individual or individuals.
Board of directors
The top governing body of a corporation, the members of which are elected by the stockholders.
Corporate officers
The chairman of the board, president, executive vice presidents, corporate secretary, treasurer and any other top executive appointed by the board of directers.
Limited liability
A feature of corporate ownership that limits each owner’s financial liability to the amount of money that he or she has paid for the corporation’s stock.
S-corporation
A corporation that is taxed as though it were a partnership.
Limited-liability company (LLC)
A form of business ownership that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those forms of ownership.
Not-for-profit corporation
A corporation organized to provide a social, educational, religious, or other service rather than earn a profit.
