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BUSI 4350 > Chapter 9- Business Organizations and Securities Regulation > Flashcards

Chapter 9- Business Organizations and Securities Regulation Flashcards

1
Q

Stockholder ( Shareholder)

A

An owner of a corporation

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2
Q

Stock

A

Ownership interest of a shareholder

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3
Q

Publicly held Corporation

A

Publicly traded shares

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4
Q

Corporations

A

Not elected to be taxed as an S corporation
All corporations are C corporations by default

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5
Q

General Partnership

A

All partners are general partners
Mutual agencies

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6
Q

Sole Proprietorships

A

One person owns and controls the business
Legally indistinguishable from the owner

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7
Q

Limited Liability Company

A

A hybrid form of business, general partnership with limited liability and operating advantages as a corporation

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8
Q

S Corporation

A

Closely-held corporation where shareholder have elected to be taxed like partners

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9
Q

Close held corporation

A

Few shareholders, stock not traded on a public market

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10
Q

Board of Directors

A

The body elected by the shareholders to govern the corporation

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11
Q

Bylaws

A

Governs the management and operation of an organization

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12
Q

Directors

A

Elected by shareholders to govern
Have no authority, only as board directors

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13
Q

Fiduciary Duty

A

The responsibility of one in a position of trust with another to act in the best interests

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14
Q

Fiduciary (Beneficduary)

A

Relationship of trust with another and act in their best interests

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15
Q

Business Judgement Rule

A

Protecting business managers from liability for making bad decisions when they have acted in accordance to fiduciary duties with loyalty and due care

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16
Q

Respondent Superior

A

Let the master answer

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17
Q

Indemnify

A

Directly pay the costs of or reimburse the costs incurred by

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18
Q

Piercing the corporate veil

A

Holding the shareholder responsible for acts of a corporation because of the shareholders domination
1- Misuse of the corporate form
2-An unjust result if limited liability is allowed to stand

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19
Q

Buy-sell agreement

A

Required to sell stock to the corporation or shareholder under an event (death)

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20
Q

Liquidated

A

Satisfying all creditors
Distributing assets to shareholders

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21
Q

Article of Dissolution

A

Article filed to the state to dissolve a corporation

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22
Q

Tax Avoidance

A

Minimizing taxes by lawful means

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23
Q

Tax Evasion

A

Minimizing taxes by lawful means

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24
Q

Double Taxation

A

First taxed on income then shareholders are taxed again based on income when its distributed as dividends

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25
Q

Equity Capital

A

Resources obtained from owners to acquire assets and conduct operations

26
Q

Common Stock

A

Residual ownership interest in a corporation. Right to participate in control, earnings, and assets upon liquidation

27
Q

Preferred Stock

A

Enjoy a priority over common stock, with earnings and assets upon liquidation but ack the right to participate in control

28
Q

Debt Capital

A

Resources obtained from lenders to acquire assets and conduct operations ( short or long term )

29
Q

Bonds

A

Long-term debt security issued to raise capital for a venture

30
Q

Capital Structures

A

The balance between debt and equity capital

31
Q

Debt Covenant

A

Debt immediately payable should the condition cease to be satisfied
Ex: Exceeding a specified debt/equity ratio

32
Q

Right of contribution

A

Reimbursed by other partners for its payment of a disproportionate amount of a partnership obligation

33
Q

Dissociation

A

Cessation of a person’s status as a partner without causing the partnership dissolution

34
Q

Member

A

An owner of a LLC

35
Q

General Partner

A

Participates in management and has unlimited liability for partnership obligations

36
Q

Limited Partner

A

Does not participate in management and enjoys limited liability

37
Q

Venture Capitalists

A

Those who invest new riskey business venture

38
Q

Franchise

A

Franchisee can produce, distribute or sell their products using their name

39
Q

Inside/Outside Directors

A

Inside- Senior Directors
Outside- Not employed by company

40
Q

Independent Directors

A

Outside directors without conflicts of interest

41
Q

Proxy

A

Written permission from a shareholder to another to vote the share at a stockholders meeting

42
Q

Tender Offer

A

Public offer to buy common stock at a specified price for a specified period of time

43
Q

Stateless Income

A

Income purportedly subject to taxation nowhere in the world

44
Q

Interstate/ Intrastate Offering

A

1- Selling security to persons residing in states other than that in which the issuer incorporated
2- Selling in same state

45
Q

Initial Public Offering (IPO)

A

Sale for the first time

46
Q

Going Public/Private

A

1- Selling first equity interest in the public market
2-Private investors buy all of the equity securities of a publicly held cooperation

47
Q

Securities and Exchange Commission (SEC)

A

Federal regulatory agency created in 1934 that is responsible for overseeing the securities market

48
Q

Prospectus

A

Offering a security for sale and summarizing the information needed for a prospective buyer to evaluate it

49
Q

Solicitation

A

Offering to sell a security

50
Q

Tombstone Ad

A

Securities advertisement that does not constitute an offer to sell but rather informs the public that the security might be offered for sale in the future

51
Q

Red Herring

A

Draft securities prospectus included in the registration statement filed with the SEC
Doesn’t constitute an offer to sell the security

52
Q

Shelf Registration

A

Permits issuer to hold securities for sale until favorable market conditions emerge or the issuer needs the proceeds

53
Q

Underwriter

A

Best Sales: Finance professional who acts as the issuers sales agent in a securities offering
Firm Commitment: Buys securities from the issuer hoping to profit from their resale to the public

54
Q

Over the counter market

A

A computer network linking dealers to effectuate the purchase and sale of securities

55
Q

Due Diligence

A

Materially misleading statement or omission in a registration statement. Must demonstrate that a reasonable investigation was undertaken to provide plausible basis
Depends on if a defendant is an expert

56
Q

Insider trading

A

Trading securities while in possession of material nonpublic information in violation of a fiduciary duty
Insiders are directors officers and employees

57
Q

Disgorgement

A

Forfeiture of bad gains

58
Q

Greenmail

A

Hostile takeover defense involving the target corporations repurchase of a takeover raiders stock at a premium not offered to other shareholders

59
Q

Crow Jewel Defense

A

Target corporation prearranges to sell critical assets to a friendly third party

60
Q

Poison pill defense

A

Resist a hostile takeover, prearranging a new issuance of a significant amount of common stock to existing shareholders at a discounted price

61
Q

Golden Parachutes

A

Generous severance pay packages

BUSI 4350 (10 decks)

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