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Chapter 9 Legal Terms

Agent
Partner who represents the business and other partners
Corporate Governance
Structure by which businesses are controlled
Fictitious Name Registration
Filing a name for the business to do business under
Sole proprietorship
business owned and operated by one owner
partners
2 or more co-owners, NOT taxable
joint and several liability
if businesses cannot fulfill a debt, creditors can seek compensation from one or all of the partners
indemnification
partner who paid businesses debts sues the other partners for reimbursement
information return
document submitted by partnership reporting business activities, no taxes paid
termination
partnership can terminate after a certain amount of time, or after a goal is met
dissolution
process by which a partner vacates a business venture, ceases association
winding up
fulfilling all business debts, meeting outstanding obligations
buy/sell agreement
spells out in advance how a leaving partner will be bought out
limited partnership
General partners manage business with unlimited liability, limited partners have no management power but are limited in liability for their investment; MUST file certificate of limited partnership with the state; loss of limited partner does NOT dissolve partnership
limited liability partnership (LLP)
protects partners from malpractice of others
family limited liability partnership (FLLP)
same as LLP but partners are family members
Corporation
own entity, articles of incorporation
board of directors
elected by shareholders
shareholders
own corporation, but are not liable for business debts/losses; have access to business info
corporate officers
run business day-to-day, selected by Board of Directors, supervised by Directors
business judgment rule
guides conduct of directors, make business decisions in good faith
piercing the corporate veil
court decision to treat corporations debts and liabilities as those of the shareholders
double taxation
corporate profits taxed, shareholder profit taxed
S corporation
profits passed to shareholders, taxed; avoids double taxation, MAX 100 SHAREHOLDERS
limited liability company (LLC)
limited liability of corporation with tax advantages of a partnership
Franchise
owner of a trademark allows another to sell its products in a geographic area
Securities and Exchange Commission (SEC)
Aims to protect investors and keep the securities markets fair
Securities Act of 1933
made securities market more transparent, more info to the investor; original offerings
Sarbanes-Oxley Act
enhanced corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud; makes CEO and CFO sign off on statements; no personal loans to officers/directors
Securities Act of 1934
subsequent offerings, requires registration of exchanges, brokers, and dealers of all secondary markets
Short-swing profits
profits made on investments sold within 6 months must be returned
Private Securities Litigation Reform Act of 1995
Limits liability of corporations on forecasts
Dodd-Frank Act
protects consumers from improper bank loans and mortgages; to prevent excessive risk taking that led to the great recession
organizational form
type of business model the company follows
articles of incorporation
states general information about a corporation when registering with the state
incorporators
signers of the articles of incorporation
franchisor
owner of trademark
franchisee
owner of store, distributor
prospectus
information given to investor to make an informed decision on a security
insider trading
buying or selling of a security while in possession of information not available to the public at large
tipping
giving of illegal security information
misappropriation theory
someone acquires illegal security information and then buys/sells securities for their own benefit
proxy
representing someone else in a vote
antitrust laws
prevent trusts/monopolies that restrict competition and free trade
Sherman Act
government can sue trusts to break them up
Clayton Act
specific, prevented unfair business practices like price fixing/discrimination, and mergers
Robinson Patam Act
prevented price fixing and discrimination
Starbucks Effect
competition benefits competitors

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