Select the first letter of the word from the list above to jump to appropriate section of the glossary. If the term you are looking for starts with a digit or symbol,choose the '#' link.

Accrual Method

An accounting method under which income is subject to tax after all events have occurred which fix the right to receive such income and deductions are allowed when all the events have occurred to fix the obligation to pay the debt.

Aggregate Par Value

Aggregate par value is the par value multiplied by the number of authorized shares. This amount is important in determining initial fees and annual franchise taxes in many states.

Annual Meeting of Shareholders

Nearly all states require a corporation to hold an annual meeting of shareholders at which time directors are elected and other corporate issues are voted on.

Apostille

Is a method of certifying a document for use in another country pursuant to the 1961 Hague Convention. With this certification by apostille, a document is entitled to recognition in the country of intended use, and no additional certification or legalization by the embassy or consulate of the foreign country where the document is to be used is required. An apostillized copy of the articles of incorporation or articles of organization is often required to open a bank account in another country for a US-incorporated business. Note, certain countries require a certified copy of the articles of incorporation/organization with an appropriate seal instead of an apostillized copy.

Business Pro Net International Package includes either an apostille or a certified copy with gold seal for the country of intended use.

Articles of Incorporation

(Certificate of Incorporation or charter). The articles are the primary legal document of a corporation; they serve as a corporation's constitution. The articles are filed with the state government to begin corporate existence. The articles contain basic information on the corporation as required by state law. Business Pro Net Incorporated prepares the articles as part of its incorporation service.

Articles of Organization

LLCs must file the articles with the proper state authorities to begin existence. The articles of organization are very similar to a corporation's articles of incorporation. Business Pro Net Incorporated prepares the articles, as part of its formation service.

Asset

Anything owned that has monetary value.

Assumed Name

A name under which a corporation conducts business that is not the legal name of the corporation as shown in its articles of incorporation. Assumed names (also called a fictitious name and Doing Business As or DBA) are typically filed at the county level with the county recorders office. A corporation can use multiple assumed names.See "Other Filings" for more information.

Authorized Shares or Stock

The total number of shares a corporation is authorized to issue. This number is specified in the articles of incorporation. All of the shares authorized need not be issued to shareholders; the corporation can have unissued shares that can distributed at a latter time.

Business Entity

An organization that possesses a separate existence for tax purposes. Some types of business entities include corporations and limited liability companies.

Bylaws

Bylaws are the rules and regulations adopted by a corporation for its internal governance. It usually contains provisions relating to shareholders, directors, officers and general corporate business. At the corporation's initial meeting the bylaws are adopted.

Capital Gains or Losses

Gains or losses realized from the sale or exchange of capital assets. The amount is determined by calculating the difference between an asset's purchase and sale price.

Capital Stock

See Authorized stock.

Cash Method

An accounting method under which income is subject to tax when actually received and deductions are allowed when actually paid.

C Corporation

A C corporation is simply a standard business corporation. It is called a C corporation because it is taxed under subsection C of the IRS code.

Certificate of Authority or Application for Authority

Is a document issued by the proper state authority to a foreign corporation granting the corporation the right to do business in that state upon filing an application of authority. See our "Foreign Qualification" service for more information.

Common Stock

The primary stock of a corporation. This stock gives shareholders the right to participate in management of the corporation and give the shareholder a proportionate share of the dividends.

Corporate Record Book

Maintaining the proper records is very important to assure limited liability to corporate shareholders. The corporation should have a record book which contains a copy of the articles of incorporation, bylaws, initial and subsequent minutes of directors and shareholders meetings and a stock register.

Directors

Directors are elected by the shareholders. They manage or direct the affairs of a corporation. Typically, the directors make only major business decisions and monitor the activities of the officers.

Dissolution

The termination of a corporation's legal existence. Dissolution may be caused in many ways including, failure to file annual reports, failure to pay certain taxes, bankruptcy, or voluntary dissolution of the corporation by the shareholders and directors. Business Pro Net performs voluntary dissolution filings. See "Other Filings" for more information.

Doing Business As (DBA)

A "DBA", also known as an "assumed name", is typically completed by making a filing at the county level where the business is located. This filing does not change the official name of the corporation; however, it allows the company to use additional names. See "Other Filings" for more information.

Dividend

A dividend is a distribution of money or property paid by the corporation out of the corporation's profits to shareholders. Dividend payments are subject to double taxation, the corporation pays tax on its profits and the dividend recipient must pay income taxes on the dividend payment, the same money is taxed twice. The directors of the corporation decide if a dividend payment is to be made.

Domestic Corporation

A corporation is a domestic corporation in the state where it has incorporated.

Double Taxation

Corporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Thus, to the extent that earnings are distributed to shareholders as dividends, there is a double tax on earnings at the corporate and shareholder level. S corporations and LLCs are pass-through entities which are not subject to the double tax.

Equity

The ownership of a shareholder in a corporation.

Fictitous Name

See "Doing Business As".

Fiscal Year

Any twelve-month period used by a business as its fiscal accounting period.

Federal Tax Identification Number

This is a number assigned to a corporation or other business entity by the federal government for tax purposes. Banks generally require a tax identification number to open bank accounts. The federal tax identification number is also known as the Employer Identification Number (EIN).

Foreign Corporation

A corporation is referred to as a foreign corporation in all states except for the state where it is incorporated. If a corporation is "transacting business" in a state other than where it is incorporated, it must register for a certificate of authority to transact business in the other state or possibly lose access to that state's courts and face fines. See "Foreign Qualification" for more information.

Franchise Tax

Is a tax on the privilege of carrying on business as a corporation or LLC in a state. The value of the franchise tax may be measured by amount of earnings, total value of capital or stock, or by amount of business done. In some states, like California, the franchise tax is simply an income tax.

Holding Company

A corporation that has no other function except owning stock in and supervising management of other business entities.

Incorporator

The person or entity that prepares, files and signs the articles of incorporation. Business Pro Net Inc. acts as an incorporator for many new companies.

IRS Form 1023

This form is used to apply for tax-exempt status with the IRS.

IRS Form SS-4

This form is used to apply for a federal tax ID number.

IRS 2553

This form is used to apply for S corporation status.

Limited Liability Company

A business entity formed upon filing articles of organization with the proper state authorities and paying all fees. LLCs provide the limited liability to their members, and are taxed like a partnership, preventing double taxation. LLCs can be formed in every state.

Manager

An LLC may be operated by a group of managers who act much like a board of directors. If an LLC is to controlled by mangers this fact must be stated in the articles of organization.

Membership Interest

A member's ownership of an LLC is represented by "interests" just as a partner has an interest in a partnership and shareholders own stock in a corporation.

Member

A member is a person or entity who is an owner of some or all of a Limited Liability Company. The business decisions of an LLC are made by the members unless the articles of organization provide that the LLC will controlled by a manager or managers.

Merger

A merger occurs when two corporations join together into one, with one corporation surviving and the other corporation disappearing. The assets and liabilities of the disappearing entity are absorbed into the surviving entity.

Minutes

A written record which details the events of the corporation. These records should be kept in the corporation's or LLC's record book.

Name Reservation

The name of a corporation or LLC must be distinguishable on the records of the state government. If the name is not unique, the state will reject the articles of incorporation or articles of organization (for LLCs). A name can be reserved, usually for 120 days, by applying with the proper state authorities and paying a fee. See "Other Filings" for more information.

No-Par-Value Stock

Stock with no minimum value. Most states allow no-par stock. If the stock is no-par stock then the amount of stated capital is an arbitrary amount assigned by the board of directors. Further, the value of capital for franchise tax purposes is determined by the state and this may result in higher franchise taxes in comparison with low par-value stock.

Not-For-Profit Corporation

A corporation organized for some charitable, civil or other social purpose which does not entail the generation of profits for shareholders. These corporations can apply for tax-exempt status at both the federal and state level. Not-for-profit corporations, also often called nonprofit corporations, must file not-for-profit articles of incorporation with the state.

Officers

The directors appoint officers. They manage the daily affairs of the corporation. A corporation's officers usually consist of a president, vice-president, treasurer, and secretary. In most states, one person can hold all of these posts.

Operating Agreement

An agreement among the LLC's members which govern the LLC's operations and the rights of its members. It is analogous to corporate bylaws.

Organizational Meeting

The initial meeting where the formation of the corporation is completed. At the organizational meeting a number of initial tasks are completed such as: the articles of incorporation are ratified, the initial shares are issued, officers are elected, bylaws approved, and a resolution authorizing the opening of bank accounts is passed.

Paid in Capital Requirements

A few states require corporations to have a specified amount of paid in capital prior to starting business.

Par-Value

The stated minimum value of a share of stock.

Partnership

A partnership is an association of two or more persons. In contrast to a corporation, a general partnership can come into existence without the need to file any formal papers with any state official. The owners of a partnership are personally and fully liable for all business debts; thus, personal property could be taken to pay business debts.

Pass-Through Taxation

The income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is "passed through" the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. S corporations and LLCs are both pass-through tax entities.

Professional Corporation

A corporation which is organized for the purpose of engaging in a learned profession such as law, medicine or architecture. Professional Corporations must file articles of incorporation with the state which meet the state's requirements for professional corporations.

Proxy

If a shareholder can not attend a meeting, the shareholder is allowed to vote by proxy.

Quorum

The minimum attendance required to conduct business at a shareholder or board of directors meeting. Usually, a quorum is achieved if a majority of directors are present (for directors meetings) or outstanding shares are represented (for shareholder meetings).

Registered Agent

The agent named in the articles of incorporation. The agent will receive service of process on the corporation and other important documents. The agent must be named in the articles of incorporation, and must be located in the state of incorporation or organization.

Registered Office

The office named in the articles of incorporation. The registered office must be where the registered agent is located, and need not be the principal office or place of business of the corporation.

Resolution

A resolution is a formal decision of the corporation, which has been adopted by either the shareholders or the board of directors.

S Corporation

A corporation which elects subchapter S tax treatment. This tax treatment allows the corporation to avoid entity level taxation.

Section 1244 Stock

An individual investor in a corporation which meets the Section 1244 requirements is entitled to treat up to $50,000 (or $100,000 if filing a joint return) of losses on the 1244 section stock as ordinary losses.

Share

An interest in a corporation. The total ownership of a corporation is divided into shares of stock.

Shareholder

Any holder of one or more shares in a corporation. A shareholder usually has evidence that they are a shareholder; this evidence is represented by a stock certificate.

Sole Proprietorship

A business carried on by the owner as an individual. The owner of a sole proprietorship is personally and fully liable for all business debts; thus, personal property could be taken to pay business debts.

Stated Capital

The par value of shares multiplied by the number of shares outstanding.

Stock

An equity or ownership interest in a corporation, measured in shares. Ownership of shares is demonstrated by stock certificates.

Stock Certificate

A written instrument that shows ownership of shares in a corporation.

Stockholder

See shareholder.

Stock Transfer Book

A record book, also called a stock transfer ledger, which lists the owners of shares of stock in a corporation.

Treasury Shares

Shares of stock which were issued and later acquired or bought back by the corporation.