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Small Business Law Glossary

Trying to decipher an acronym? Attempting to understand legal jargon? The Small Business Law glossary gives you access to definitions for the Small Business Law legal terminology commonly used in documents and court proceedings. This Small Business Law glossary will help you understand the legal terms and phrases which are relevant to business organizations, licensing, and other areas of Small Business law.

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Accrual Basis Accounting
An accounting method that records sales, expenses or other events at the time they occur, rather than when cash changes hands
Acquisition
1 : the act or action of acquiring ;specif : the obtaining of controlling interest in a company compare merger, takeover 2 : a thing gained or acquired
Administrative Dissolution
Dissolution of a corporation by the state, usually by the Secretary of State, for such things as failing to pay taxes, failing to deliver an annual report, or operating without a registered agent
Amortization
The gradual payment of a debt through a schedule of payments or the writing off of an intangible asset against expenses over the period of its useful life
Articles Of Dissolution
The document that a corporation files with the secretary of state that causes the dissolution of the corporation
Articles Of Incorporation
:a document by which a corporation is formed that sets forth basic information (as the corporation's name, purpose, directors, and stock) usu. as required by statute see also certificate of ...
Board Of Directors
often cap B&D : a group of individuals elected by the shareholders of a corporation to manage the corporation's business and appoint its officers
Break-Even Analysis
The method of determining the exact point at which a company makes neither a profit nor a loss
Business Plan
A written document that describes a business, its objectives, strategies, market and financial forecast
Capital
[Latin capitalis, from caput head, a person's life (as forfeit)] 1 a : punishable by death [ murder] b : involving execution [a case] 2 Medieval Latin capitalis chief, principal, from Latin caput ...
Cash Basis Accounting
An accounting method that records sales and expenses when the transfer of cash occurs
Cash Flow Statement
A charting of sources and uses of cash of a business
Certificate Of Assumed Name, Trade Name, Or Fictitious Name
A certificate granted by a state authority (usually the secretary of state) that allows you to transact business under a name other than your own
Certificate Of Authority
A certificate granted by a state authority (usually the secretary of state) that allows a foreign corporation to conduct business
Certificate Of Incorporation
1 : a certificate issued by a state's secretary of state that shows acceptance of a corporation's articles of incorporation 2 : articles of incorporation
Close Corporation
see corporation
Consumer Goods
see good
Corporation
[Late Latin corporatio, from Latin corporare to form into a body, from corpor- corpus body] : an invisible, intangible, artificial creation of the law existing as a voluntary chartered association of ...
Current Assets
Assets of a business that can be liquidated within a relatively short period of time
Current Liabilities
Debts that must be paid within a relatively short period of time, usually within one year
Current Ratio
A ratio of a business' current assets to its current liabilities
Debt Financing
The use of borrowed money to finance a business
Equity Financing
The securing of a monetary investment from an investor in which the investor becomes a part owner of the business
False Advertising
: the crime or tort of publishing, broadcasting, or otherwise publicly distributing an advertisement that contains an untrue, misleading, or deceptive representation or statement which was made ...
Financial Reports
Reports that show the financial status of a company at a given time
Financial Statement
: a statement of one's status with regard to money or wealth compare financing statement
Fiscal Year
: an accounting period of 12 months
Fixed Costs
Business costs that do not vary with sales volume
Forecasting
The calculation of reasonable probabilities about a business' financial future
Goodwill
1 : an intangible asset that is made up of the favor or prestige which a business has acquired beyond the mere value of what it sells due to the personality or experience of those conducting it, ...
Gross Profit
Net sales minus the cost of goods sold
Guaranty
pl: -ties [Old French garantie, from garantir to guarantee, from garant warrant] 1 : a pledge to pay another's debt or to perform another's duty in case of the other's default or inadequate ...
Income Statement
A presentation of the sales, expenses, and profit or loss of a business on a periodic basis
Indemnity
pl: -ties 1 a : security against hurt, loss, or damage b : exemption from incurred penalties or liabilities 2 a : indemnification b : something (as a payment) that indemnifies compare ...
Intangible Asset
see asset
Intellectual Property
see property
Inventory Financing
The process of obtaining capital for a business by borrowing money with inventory used as collateral
Involuntary Dissolution
see dissolution
Joint Venture
1 : a cooperative business agreement or partnership between two or more parties that is usually limited to a single enterprise and that involves the sharing of resources, control, profits, and losses ...
Leverage
: the use of credit to enhance one's speculative capacity
Liquidation
Collecting assets, converting assets to money, paying debts, and distributing the surplus while in the process of closing a business
Merger
1 : the absorption of a lesser estate or interest into a greater one held by the same person compare confusion 2 : the incorporation and superseding of one contract by another 3 a : the treatment ...
Negotiable Instruments
A written document signed by the maker that includes an unconditional promise to pay a sum of money.
Net Profit After Taxes
A company's net profit before taxes, minus federal, state or local income or franchise taxes
Net Profit Before Taxes
Net sales or total receipts of a business minus all expenses except taxes
Net Sales
Total sales of a business minus discounts, returns and pricing adjustments
Net Worth
: the excess of the value of assets over liabilities : net assets at asset
Nonprofit Corporation
A corporation formed for some charitable or benevolent purpose and not for profit. Such corporations are afforded special tax treatment.
Notice Of Intent To Dissolve
A document informing the secretary of state that your corporation will be dissolving
Operating Expenses
The expenses of a business not directly associated with the making of a product or providing of a service, such as administrative, technical or selling expenses
Partnership
: an association of two or more persons or entities that conduct a business for profit as co-owners see also Uniform Partnership Act in the Important Laws section compare corporation, joint venture, ...
Partnership Agreement
A contract that partners enter into that sets up the terms of their partnership
Piercing The Corporate Veil
The judicial act of imposing personal liability on otherwise immune corporate officers, directors and shareholders for a corporation's fraudulent or wrongful acts.
Product Liability Lawsuit
A suit brought by a person who has been injured by a product as opposed to being injured by another individual
Professional Corporation
see corporation
Public Offering
: an offering of corporate securities to the general public or to potential purchasers whose level of knowledge or access to information about the securities is dependent upon the disclosures of the ...
Retained Earnings
: earned surplus at surplus
S Corporation
A small business corporation with a limited number of shareholders. Its major significance is the fact that an S corporation usually avoids corporate income tax. Corporate losses can be claimed by ...
Secretary Of State's Office
In most states, the official office responsible for many types of formal state business, such as licensing of corporations and filing of UCC security agreements.
Secured Transaction
: a transaction that is intended to create a security interest in personal property (as goods) or fixtures and that is governed by Article 9 of the Uniform Commercial Code compare security agreement
Securities And Exchange Commission
The federal governmental agency that maintains order of the stock and securities exchanges
Settlement, n
1 : the act or process of settling 2 a : an agreement reducing or resolving differences ;esp : an agreement between litigants that concludes the litigation [the states finally agreed upon a and a ...
Shareholders
A person who owns stock in a corporation with certain legal rights attached.
Small Business Administration
The federal governmental agency that guarantees loans made by banks to small businesses
Sole Proprietorship
: a business owned and controlled by one person who is solely liable for its obligations compare corporation, partnership
Subchapter S Corporation
A corporation that has elected under Subchapter S of the Internal Revenue Code not to pay any corporate taxes on its earnings, and instead to have its shareholders pay taxes on it
Unsecured Loan
A loan made with no collateral posted to ensure repayment
Variable Cost
A cost that varies directly with sales, such as raw materials, labor and sales commissions
Voluntary Dissolution
see dissolution
Warranty
pl: -ties [modification (influenced by warrant) of Anglo-French garantie, from garantir to protect, warrant] 1 : a promise in a deed that gives the grantee of an estate recourse (as through an action ...
Winding Up
Liquidating a business
Working Capital
see capital
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