Chapters 26, 27, 28, and 29 Vocabulary

Question 1

One who initiates and assumes the financial risk of a new business enterprise and undertakes to provide or control its management.

Answer 1

Entrepreneur

Question 2

The simplest form of business organization, in which the owner is the business. The owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business.

Answer 2

Sole Proprietorship

Question 3

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright in the selling of goods or services.

Answer 3

Franchise

Question 4

One receiving a license to use another’s (the franchisor’s) trademark, trade name, or copyright in the sale of goods or services.

Answer 4

Franchisee

Question 5

One licensing another (the franchisee) to use the owner’s trademark, trade name, or copyright in the selling of goods or services.

Answer 5

Franchisor

Question 6

An agreement by two or more persons to carry on, as co-owners, a business for profit.

Answer 6

Partnership

Question 7

A business entity that has no tax liability. The entity’s income is passed through the owners, and they pay taxes on the income.

Answer 7

Pass-Through Entity

Question 8

A tax return submitted by a partnership that reports the business’s income and losses. The partnership itself does not pay taxes on the income, but each partner’s share of the profit (whether distributed or not) is taxed as individual income to that partner.

Answer 8

Information Return

Question 9

A written agreement that sets forth each partner’s right and obligations with respect to the partnership.

Answer 9

Articles of Partnership

Question 10

A partnership imposed by a court when nonpartners have held themselves out to be partners, or have allowed themselves to be held out as partners, and others have detrimentally relied on their misrepresentations.

Answer 10

Partnership by Estoppel

Question 11

In partnership law, an order granted by a court to a judgement creditor that entitles the creditor to attach a partner’s interest in the partnership.

Answer 11

Charging Order

Question 12

In partnership law, the partner’s shared liability for partnership obligations and debts. A third party must sue all of the partners as a group, but each partner can be held liable for the full amount.

Answer 12

Joint Liability

Question 13

In partnership law, a doctrine under which a plaintiff may sue, and collect a judgement from, all of the partners together (jointly) or one or more of the partners separately (severally, or individually). A partner can be held liable even if she or he did not participate in, ratify, or know about the conduct that gave rise to the lawsuit.

Answer 13

Joint and Several Liability

Question 14

The severance of the relationship between a partner and a partnership.

Answer 14

Dissociation

Question 15

The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that parter if the firm were wound up on that date, and offset any damages for wrongful dissociation.

Answer 15

Buyout Price

Question 16

The formal disbanding of a partnership or a corporation. Partnerships can be dissolved by acts of the partners, by operation of law, or by judicial decree.

Answer 16

Dissolution

Question 17

The second of two stages in the termination of a partnership or corporation, in which the firm’s assets are collected, liquidated, and distributed, and liabilities are discharged.

Answer 17

Winding Up

Question 18

A hybrid form of business organization that is used mainly by professionals who normally do business in a partnership. This is a pass-through entity for tax purposes, but a partner’s personal liability for the malpractice of other partners is limited.

Answer 18

Limited Liability Partnership (LLP)

Question 19

A partnership consisting of one or more general partners and one or more limited partners.

Answer 19

Limited Partnership (LP)

Question 20

In a limited partnership, a partner who assumes responsibility for the management of the partnership and has full liability for all partnership debts.

Answer 20

General Partner

Question 21

In a limited partnership, a partner who contributes capital to the partnership but has no right to participate in its management and has no liability for partnership debts beyond the amount of her or his investment.

Answer 21

Limited Partner

Question 22

The document that must be filed with a designated state official to form a limited partnership.

Answer 22

Certificate of Limited Partnership

Question 23

A hybrid form of business enterprise that offers the limited liability of a corporation and the tax advantages of a partnership.

Answer 23

Limited Liability Company (LLC)

Question 24

A person who has an ownership interest in a limited liability company.

Answer 24

Member

Question 25

The document filed with a designated state official by which a limited liability company is formed.

Answer 25

Articles of Organization

Question 26

An agreement in which the members of a limited liability company set forth the details of how the business will be managed and operated.

Answer 26

Operating Agreement

Question 27

A joint undertaking by two or more persons or business entities to combine their efforts or their property for a single transaction or project or for a related series of transactions or projects. Generally treated like a partnership for tax or other legal purposes.

Answer 27

Joint Venture

Question 28

A group of individuals or firms that join together to finance a project.

Answer 28

Syndicate (Investment Group)

Question 29

A hybrid form of business organization that combines characteristics of a corporation and a partnership. Usually this is regarded as a partnership for tax and other legal purposes.

Answer 29

Joint Stock Company

Question 30

A form of business organization, created by a written trust agreement, that resembles a corporation. Legal ownership and management of this organization’s property stay with the trustees, and the profits are distributed to the beneficiaries, who have limited liability.

Answer 30

Business Trust

Question 31

An association, which may or may not be incorporated, that is organized to provide an economic service to its members. When unincorporated, these are often treated like partnerships for tax and other legal purposes.

Answer 31

Cooperative

Question 32

A legal entity formed in compliance with statutory requirements that is distinct from its shareholder-owners.

Answer 32

Corporation

Question 33

A distribution of corporate profits to the corporation’s shareholders in proportion to the number of shares held.

Answer 33

Dividend

Question 34

The portion of a corporation’s profits that has not been paid out as dividends to shareholders.

Answer 34

Retained Earnings

Question 35

In a given state, a corporation that is organized under the law of that state.

Answer 35

Domestic Corporation

Question 36

In a given state, a corporation that does business in that state but is not incorporated there.

Answer 36

Foreign Corporation

Question 37

A corporation formed in another country but doing business in the United States.

Answer 37

Alien Corporation

Question 38

A corporation whose shares are publicly traded in securities markets, such as the New York Stock Exchange or the NASDQ.

Answer 38

Publicly Held Corporation

Question 39

A corporation whose shareholders are limited to a small group of persons, often family members.

Answer 39

Close Corporation

Question 40

A close business corporation that has most corporate attributes, including limited liability, but qualifies under the Internal Revenue Code to be taxed as a partnership.

Answer 40

S Corporation

Question 41

A for-profit corporation that seeks to have a material positive impact on society and the environment. It is available by statute in a number of states.

Answer 41

Benefit Corporation

Question 42

The document that is filed with the appropriate state official, usually the secretary of state, when a business is incorporated and that contains basic information about the corporation.

Answer 42

Articles of Incorporation

Question 43

The internal rules of management adopted by a corporation at its first organizational meeting.

Answer 43

Bylaws

Question 44

Generally, stocks, bonds, or other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation.

Answer 44

Securities

Question 45

A security that evidences a corporate (for government) debt.

Answer 45

Bond

Question 46

Shares of ownership in a corporation that give the owner a proportionate interest in the corporation with regard to control, earnings, and net assets. Lowest in priority with respect to payment of dividends and distribution of the corporation’s assets on dissolution.

Answer 46

Common Stock

Question 47

Stock that has priority over common stock as to payment of dividends and distribution of assets on the corporation’s dissolution.

Answer 47

Preferred Stock

Question 48

Financing provided by professional, outside investors (venture capitalists) to new business ventures.

Answer 48

Venture Capital

Question 49

Funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it.

Answer 49

Private Equity Capital

Question 50

A cooperative activity in which people network and pool funds and other resources via the Internet to assist a cause (such as disaster relief) or invest in a venture (business).

Answer 50

Crowdfunding

Question 51

In a corporate dissolution, a court-appointed person who winds up corporate affairs and liquidates corporate assets.

Answer 51

Receiver

Question 52

Acts of a corporation that are beyond its express and implied powers to undertake (the Latin phrase means “beyond the powers.”).

Answer 52

Ultra Vires Acts

Question 53

The action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations.

Answer 53

Piercing the Corporate Veil

Question 54

The put funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities.

Answer 54

Commingle

Question 55

A person on the board of directors who is also an officer of the corporation.

Answer 55

Inside Director

Question 56

A person on the board of directors who does not hold a management position at the corporation.

Answer 56

Outside Director

Question 57

The number of members of a decision-making body that must be present before business may be transacted.

Answer 57

Quorum

Question 58

A rule under which courts will not hold corporate officers and directors liable for honest mistakes of judgement and bad business decisions that were made in good faith.

Answer 58

Business Judgement Rule

Question 59

When a shareholder formally authorizes another to serve as his or her agent and vote his or her shares in a certain manner.

Answer 59

Proxy

Question 60

A certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation.

Answer 60

Stock Certificate

Question 61

The right of a shareholder in a corporation to have the first opportunity to purchase new issue of that corporation’s stock in proportion to the amount of stock already owned by the shareholders.

Answer 61

Preemptive Rights

Question 62

A suit brought by a shareholder to enforce a corporate case of action against a third person.

Answer 62

Shareholder’s Derivative Suit