SMALL BUSINESS

BUSINESS FORMATION 

Choosing a business structure determines how your company operates. Klok Law will help you select the best structure to fit your needs and growth. Our quick turnaround formation packages offer everything you need to get up and running, including: state filing documents, fully customized internal operating documents, EIN, and one-on-one time with your attorney.

 

TERMINOLOGY

Business law terms can be confusing.  Here are some simple to understand definitions.

Accounts Payable: “A company’s outstanding debts, or liabilities, to vendors for purchases of goods and services made on credit.”

Accounts Receivable: “The money due from all customers for merchandise or services delivered on credit. The total figure would be shown on the balance sheet as an asset.”

Accrual Basis Accounting: “Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term “accrual” refers to any individual entry recording revenue or expense in the absence of a cash transaction.”

Acquisition: “The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets.”

Administrative Dissolution: “Involuntary cessation of the existence of a corporation by a government authority. It is prompted usually by the corporation’s failure to comply with certain statutory requirements such as to file an annual return or pay its taxes.

Advertising: “To call the public’s attention to your business, usually for the purpose of selling products or services, through the use of various forms of media, such as print or broadcast notices.”

Amortization: “Gradual repayment of a loan in equal (or nearly equal) installments which include portions of interest and principal amounts.”

Articles of Dissolution: “Document filed to effect and formalize the cessation of an incorporated organization.”

Articles of Incorporation: “The basic legal document which gives birth to a corporation. Together with the certificate of incorporation (corporation’s ‘birth certificate’) it constitutes the charter that gives the corporation an independent existence as a legal entity. Also called articles of formation or articles of organization.”

Assets: “Property of all kinds, including real and personal, tangible and intangible.”

Balance Sheet: “A financial statement that lists the assets, liabilities and equity of a company at a specific point in time and is used to calculate the net worth of a business. A basic tenet of double-entry book-keeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance. Subtracting liabilities from assets shows the net worth of the business A basic tenet of double-entry bookkeeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance.”

Bankruptcy: “A legal state of insolvency. A company deemed to be in this condition may choose protection under the law to allow a chance to reorganize (Chapter 11) or liquidate in an orderly fashion (Chapter 7).”

Board of Directors: “Governing body (called the board) of an incorporated firm. Its members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at an annual general meeting or AGM) to govern the firm and look after the subscribers’ interests. The board has the ultimate decision-making authority and, in general, is empowered to (1) set the company’s policy, objectives, and overall direction, (2) adopt bylaws, (3) name members of the advisory, executive, finance, and other committees, (4) hire, monitor, evaluate, and fire the managing director and senior executives, (5) determine and pay the dividend, and (6) issue additional shares.”

Breakeven Analysis: “Study of the mathematical relationship between costs and sales revenue, under a given set of assumptions regarding the firm’s fixed costs and variable costs. In this financial analysis, the objective is to determine (in manufacturing) number of products that must be sold at a given price to cover the costs, or (in project financing) number of months or years required by the forecasted total net cash flow to equal estimated total project cost. An integral part of financial planning, it is performed either by using a breakeven-formula or by drawing a breakeven graph.”

Burden of Proof: “The duty to prove disputed facts. In civil cases, a plaintiff generally has the burden of proving his or her case.”

Business Bankruptcy: “A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.”

Business Broker: “A professional who assists in the buying and selling of businesses.”

Business Plan: “A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement.”

Capital: “Money invested in a business to generate income.”

Cash Flow: “The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset.”

Cash Flow Statement: “A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period.”

Cash-Basis Accounting: “An accounting system that doesn’t record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There’s no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren’t possible.”

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 Good Standing: “A certificate issued by a proper authority in a jurisdiction to verify that a corporation actually exists, has paid all its statutory dues, has met all filing requirements and, therefore, is authorized to transact business in that state. Also called certificate of authorization or certificate of existence.”

Certificate of Incorporation: “Registered firm’s ‘birth certificate’ showing its legal name and date of incorporation. Also called certificate of registration.”

Close Corporation: “Firm whose all issued shares are held by a family or a small group of investors and, therefore, cannot be bought by the public. Also called privately held corporation.”

Condition: “An uncertain future act or event, the occurrence of which determines the existence or extent of an interest or right, or liability or obligation; or which initiates, halts, or terminates the performance of a duty.”

Contract: “An agreement between two or more people that creates an obligation to do or not to do a particular thing.”

Corporation: “A form of business operation that declares the business as a separate, legal entity guided by a group of officers known as the board of directors.”

Creditor: “A person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.”

Current Asset: “An asset such as receivables, inventory, work in process, or cash, that is constantly flowing in and out of an organization in the normal course of its business, as cash is converted into goods and then back into cash. In accounting, any asset expected to last or be in use for less than one year is considered a current asset.”

Current Liabilities: “Obligations such as deferred dividend, trade credit, and unpaid taxes, arising in the normal course of a business and due for payment within a year. Also called current debt.”

Current Ratio: “Indicator of a firm’s ability to meet short-term financial obligations, it is the ratio of current assets to current liabilities. Though every industry has its range of acceptable current-ratios, a ratio of 2:1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is a more suitable measure where salability of inventory is questionable. Formula: Current assets ÷ Current liabilities.”

Debt Financing: “Part of a firm’s total financing, it commonly comprises of (1) short-term bank borrowings (such as overdraft), (2) cash raised through debt instruments (such as bonds), (3) off-balance-sheet financing (such as operating leases), (4) and trade credit.”

Defendant: “In a civil case, the person or organization against whom the plaintiff brings suit.”

Dissolution: “End of the independent existence of a firm, brought about by consolidation or merger, creditors, government, or the stockholders (shareholders).”

Diversification: “A risk-reduction strategy that involves adding product, services, location, customers and markets to your company’s portfolio.

Doing Business As: “DBA indicates that the owners of a firm want neither to incorporate it nor to do business under their own names, but to operate under a fictitious name. Also called assumed name.”

E-Commerce: “Business done on and through the web.”

Employee Handbook: ” A document that includes information that employees may need to refer to frequently in order to meet the terms and conditions of their employment.”

Equitable: “Pertaining to civil suits in “equity” rather than in “law.” In English legal history, the courts of “law” could order the payment of damages and could afford no other remedy (see damages). A separate court of “equity” could order someone to do something or to cease to do something (e.g., injunction). In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in “law” cases but not in “equity” cases.”

Equity: “Ownership interest or claim of a holder of common stock (ordinary shares) and some types of preferred stock (preference shares) of a company.”

Equity Funding: “Investment in the common stock (ordinary shares) of a firm.”

Evidence: “Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case in favor of one side or the other.”

Ex parte: “A proceeding brought before a court by one party only, without notice to or challenge by the other side.”

Expense Report: “A report that tracks expenses incurred during the course of performing necessary job functions. Examples include charges for gas, meals, parking or lodging.”

Express Terms: “Provision in a contract that is clearly, directly, and unmistakably communicated in written or spoken words.”

Financial Statement: “Summary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) and lenders, and what is its current financial position. The three basic financial statements are the (1) balance sheet, which shows firm’s assets, liabilities, and net worth on a stated date; (2) income statement (also called profit & loss account), which shows how the net income of the firm is arrived at over a stated period, and (3) cash flow statement, which shows the inflows and outflows of cash caused by the firm’s activities during a stated period. Also called business financials.”

Fiscal Year:  “Accounting period that can start on any day of a calendar year but has twelve consecutive months (52 consecutive weeks) at the end of which account books are closed, profit or loss is computed, and financial reports are prepared for filing. It may or may not match a calendar year.”

First In, First Out (FIFO): “An accounting system used to value inventory for tax purposes. Under FIFO, inventory is valued at its most recent cost.”

Fixed Cost: “A periodic cost that remains more or less unchanged irrespective of the output level or sales revenue, such as depreciation, insurance, interest, rent, salaries, and wages.

While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in short term cost accounting. Organizations with high fixed costs are significantly different from those with high variable costs. This difference affects the financial structure of the organization as well as its pricing and profits. The breakeven point in such organizations (in comparison with high variable cost organizations) is typically at a much higher level of output, and their marginal profit (rate of contribution) is also much higher.”

Forecasting: “A planning tool that helps management in its attempts to cope with the uncertainty of the future, relying mainly on data from the past and present and analysis of trends.”

Franchisable Business: “A business that has the potential to be sold as a franchise opportunity, generally having the following characteristics: It is established, offers a unique concept, is teachable and can provide an adequate return to potential franchisees.”

Goodwill: “Assumed value of the attractive force that generates sales revenue in a business, and adds value to its assets. Goodwill is an intangible but saleable asset, almost indestructible except by indiscretion. It is built painstakingly over the years generally with (1) heavy and continuous expenditure in promotion, (2) creation and maintenance of durable customer and supplier relationships, (3) high quality of goods and services, and (4) high quality and conduct of management and employees. Goodwill includes the worth of corporate identity, and is enhanced by corporate image and a proper location. Its value is not recognized in account books but is realized when the business is sold, and is reflected in the firm’s selling price by the amount in excess over the firm’s net worth.”

Gross Profit: “The difference between revenue and the cost of producing goods or services sold. It is sometimes expressed as a percentage.”

Guaranty: “Three-party contingent liability agreement under which a third-party (the guarantor) agrees to be directly or collaterally responsible for the obligation (contract fulfillment, loan) of a first-party (the principal) to a second-party (bank, client) in case the first-party defaults or fails to fulfill its part of a deal. In effect, signing a guaranty as a guarantor is like signing a blank check.”

Human Resources: “The department or support systems responsible for personnel sourcing and hiring, applicant tracking, skills development and tracking, benefits administration and compliance with associated government regulations.”

Income Statement: “A financial document generated monthly and/or annually that reports the earnings of a company by stating all relevant revenues (or gross income) and expenses in order to calculate net income. Also referred to as a profit and loss statement.”

Incorporation: “To legally form a corporation.”

Indemnity: “Undertaking given to compensate for (or to provide protection against) injury, loss, incurred penalties, or from a contingent liability. A shipping company, for example, will ask for a bank’s indemnity for releasing a shipment to a consignee who has lost original shipping documents. The bank in turn will require the consignee to sign a counter-indemnity before issuing its indemnity to the shipping company. This way the consignee gets the release of shipment in completion of a transaction, and both the shipping company and the bank are protected in case some dispute arises out of that transaction.”

Independent Contractor: “A person hired to do work for another but who is not an employee or agent of that person. Control is subjected to the end result and not as to how the work is performed as opposed to an employee who receives direction on what, when and, to some degree, how to do a job.”

Injunction: “A court order preventing one or more named parties from taking some action. A preliminary injunction often is issued to allow fact-finding, so a judge can determine whether a permanent injunction is justified.”

Intangible Asset: “Reputation, name recognition, and intellectual property such as knowledge and know how. Intangible assets are the long-term resources of an entity, but have no physical existence. They derive their value from intellectual or legal rights, and from the value they add to the other assets. Intangible assets are generally classified into two broad categories: (1) Limited-life intangible assets, such as patents, copyrights, and goodwill, and (2) Unlimited-life intangible assets, such as trademarks. In contrast to tangible assets, intangible assets cannot be destroyed by fire, hurricane, or other accidents or disasters and can help build back destroyed tangible assets.”

Intellectual Property: “Knowledge, creative ideas, or expressions of human mind that have commercial value and are protectable under copyright, patent, servicemark, trademark, or trade secret laws from imitation, infringement, and dilution. Intellectual property includes brand names, discoveries, formulas, inventions, knowledge, registered designs, software, and works of artistic, literary, or musical nature. It is one of the most readily tradable properties in the digital marketplace.”

Inventory Financing: “Type of asset based lending, it is a short-term working capital loan secured by the inventory purchased. As the inventory is converted into sales, the loan is gradually paid-off and (when it is fully satisfied) new inventory is bought with a new loan, and the cycle starts all over again. Inventory-financing interest rates are usually higher than for accounts-receivable financing because in the latter-case goods have already been sold. Also called inventory loan.”

Implied Term: “Provision in a contract that is not directly stated in written or spoken words but is introduced into the contract (1) by the courts as necessary to give effect to the obvious intentions of the contracting parties, or (2) by a statute such as sale of goods acts.”

Issue: “1. The disputed point between parties in a lawsuit; 2. To send out officially, as in a court issuing an order.”

Joint Venture (JV): “New firm formed to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses). Research indicates that two out of five JV arrangements last less than four years, and are dissolved in acrimony.”

Judgment: “The official decision of a court finally resolving the dispute between the parties to the lawsuit.”

Last In, First Out (LIFO): “An accounting method for inventory and cost of sales in which the last items produced or purchased are assumed to be sold first; allows business owner to value inventory at the less expensive cost of the older inventory; typically used during times of high inflation.”

Lawsuit: “A legal action started by a plaintiff against a defendant based on a complaint that the defendant failed to perform a legal duty which resulted in harm to the plaintiff.”

Leverage: “The ability to influence a system, or an environment, in a way that multiplies the outcome of one’s efforts without a corresponding increase in the consumption of resources. In other words, leverage is the advantageous condition of having a relatively small amount of cost yield a relatively high level of returns.”

Limited Liability Company:  “A form of business organization with the liability-shield advantages of a corporation and the flexibility and tax pass-through advantages of a partnership.”

Limited Liability Partnership: “A business organization that allows limited partners to enjoy limited personal liability while general partners have unlimited personal liability.”

Link Exchange: “The practice of exchanging links with other websites. You place another site’s link on your site, usually on a links page, and in return, the other site places a link on their site back to you.”

Litigation: “A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.”

Liquidation: “Winding up of a firm by selling off its free (un-pledged) assets to convert them into cash to pay the firm’s unsecured creditors. (The secured creditors take control of the respective pledged assets on obtaining foreclosure orders). Any remaining amount is distributed among the shareholders in proportion to their shareholdings. Liquidation process is initiated either by the shareholders (voluntary liquidation) or by the creditors after obtaining court’s permission (compulsory liquidation).”

Mergers: “The combination of one or more corporations, LLCs, or other business entities into a single business entity; the joining of two or more companies to achieve greater efficiencies of scale and productivity.”

Minimum Wage: “A wage below which employers may not legally pay employees for specific kinds of employment.”

Moot: “Not subject to a court ruling because the controversy has not actually arisen, or has ended.”

Operating Expenses: “The selling and general and administrative expenses incurred by a business.”

Negotiable Instrument: “Document of title or evidence of indebtedness that is freely (unconditionally) transferable in trading as a substitute for money. Negotiable instruments are unconditional orders or promise to pay, and include checks, drafts, bearer bonds, some certificates of deposit, promissory notes, and bank notes (currency). A negotiable instrument has three principal attributes: (1) an asset or property (that is the subject matter of the instrument) passes from the transferor to the transferee by mere delivery and/or endorsement of the instrument, (2) a transferee accepting the instrument in good faith and for value (and who has no notice of any defect in the title of the transferor) obtains an indefeasible title and may sue on the instrument in his or her name, and (3) no notice of the transfer need to be given to the party liable in the instrument.”

Net Profit: “The amount by which income from sales is larger than all expenditure. Also called profit after tax.”

Net Sales: “Gross sales revenue less returns and discounts; the amount shown in an income statement under sales revenue.”

Net Worth: “Value of a firm to its owners (stockholders/shareholders) as shown on its balance sheet. It is the sum of the issued share capital, retained earnings, and capital gains.”

Noncompete Clause: “Contracts between you and your employees in which your employees promise not to take what they learn while working for you and use it against you while working for a competitor. A typical noncompete agreement says the employee agrees not to work for rivals, solicit business from current clients, or otherwise compete with you for some period of time, such as a year, after leaving your company.”

Nonprofit Corporation: “A business organization that serves some public purpose and therefore enjoys special treatment under the law. Nonprofit corporations, contrary to their name, can make a profit but can’t be designed primarily for profit-making.”

Operating Expenses: “An expense incurred in carrying out an organization’s day-to-day activities, but not directly associated with production. Operating expenses include such things as payroll, sales commissions, employee benefits and pension contributions, transportation and travel, amortization and depreciation, rent, repairs, and taxes. These expenses are usually subdivided into selling expenses and administrative and general expenses. Also called non-manufacturing expenses.”

Opinion: “A judge’s written explanation of the decision of the court. Because a case may be heard by three or more judges in the court of appeals, the opinion in appellate decisions can take several forms. If all the judges completely agree on the result, one judge will write the opinion for all. If all the judges do not agree, the formal decision will be based upon the view of the majority, and one member of the majority will write the opinion. The judges who did not agree with the majority may write separately in dissenting or concurring opinions to present their views. A dissenting opinion disagrees with the majority opinion because of the reasoning and/or the principles of law the majority used to decide the case. A concurring opinion agrees with the decision of the majority opinion, but offers further comment or clarification or even an entirely different reason for reaching the same result. Only the majority opinion can serve as binding precedent in future cases. ”

Parol Evidence Rule: “Legal rule that once a written agreement has been duly executed (signed by all concerned parties) then it cannot be altered or annulled by any oral evidence that may contradict the terms of the agreement, except in case of a fraud or mistake.”

Partnership: “A legal form of business operation between two or more individuals who share management and profits. The federal government recognizes several types of partnerships. The two most common are general and limited partnerships.”

Partnership Agreement: “Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states the (1) nature of the business, (2) capital contributed by each partner, and (3) their rights and responsibilities. A partnership does not have a separate legal existence like an incorporated firm, and the partners are jointly and severally liable for the debts of the firm. Even on withdrawing from the partnership they remain liable for already incurred debts, and for future debts unless a proper notice of retirement is published. A valid partnership, however, can exist without a written agreement in which case the provisions of the statutes governing partnerships would apply.”

Performance Reviews: “An analysis of an employee’s work habits undertaken at a fixed point in time to determine the degree to which stated objectives and expectations have been reached.”

Piercing the Corporate Veil: “A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company’s debts and other obligations. This protection is not ironclad or impenetrable. Where a court determines that a company’s business was not conducted in accordance with the provisions of corporate legislation (or that it was just a façade for illegal activities) it may hold the shareholders personally liable for the company’s obligations under the legal concept of lifting the corporate veil.”

Plaintiff: “A person or business that files a formal complaint with the court.”

Pleadings: “Written statements filed with the court that describe a party’s legal or factual assertions about the case.”

Product Liability: “General liability or obligation of a producer (or supplier) of a good or service to make restitution for loss associated with its use, such as personal injury or property damage. Commonly, the aggrieved party does not have to prove that the producer (or supplier) was negligent because the fault is inherent to the item.”

Public Offering: “Offer of sale of an issue of securities to general public by the issuer, after meeting all requirements of the securities inspectorate. Public offerings are commonly handled by underwriters who guaranty the placement (sale) of the entire issue.”

Retained Earnings: “Profits generated by a company that are not distributed to stockholders (shareholders) as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset). A balance sheet figure shown under the heading retained earnings is the sum of all profits retained since the company’s inception. Retained earnings are reduced by losses, and are also called accumulated earnings, accumulated profit, accumulated income, accumulated surplus, earned surplus, undistributed earnings, or undivided profits.”

Search Engine Optimization: “The process of increasing the amount of visitors to a website by ranking high in the search results of a search engine.”

Settlement: “Parties to a lawsuit resolve their dispute without having a trial. Settlements often involve the payment of compensation by one party in at least partial satisfaction of the other party’s claims, but usually do not include the admission of fault.”

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.”

Securities and Exchange Commission (SEC): “US federal agency established in 1934 to help protect investors by enforcing securities-related laws, and by setting mandatory standards for disclosure of financial and other pertinent information about firms whose securities are traded over a stock exchange. Its five commissioners (appointed by the US President and confirmed by the Senate) serve for staggered five-year terms, and at any time no more than three of them may be from the same political party.”

Secured Loan: “Loan agreement under which a borrower pledges a specific asset or property which the lender can seize in case of default.”

Settlement: “Conclusion of an agreement under which a party (called the obligor) fulfills its promise to another party (called the obligee).”

Severance Pay: “Money in addition to wages and any other money that employers owe employees when their employment ends, such as through a layoff or firing. Severance pay is a form of what’s generally called “separation,” “termination” or “final pay.”

Shareholder: “An individual, group, or organization that owns one or more shares in a company, and in whose name the share certificate is issued. It is legal for a company to have only one shareholder.”

Small Business Administration (SBA): “Provides support to small business owners in the United States, including loan programs, counseling and educational opportunities, and contract negotiation that ensures 23% of federal dollars are allocated to small businesses.”

Sole Proprietorship: “A business that legally has no separate existence from its owner. Income and losses are taxed on the individual’s personal income tax return.”

Statute: “A law passed by a legislature.”

Statute of limitations: “The time within which a lawsuit must be filed.”

Subchapter S Corporation: “A special form of corporation that allows the protection of limited liability but direct flow-through of profits and losses.”

Telecommuting: “The practice of working from home for a business and communicating through the use of a personal computer equipped with modem and communications software.”

Temporary restraining order: “Akin to a preliminary injunction, it is a judge’s short-term order forbidding certain actions until a full hearing can be conducted. Often referred to as a TRO.”

Terminating an Employee: “A document that outlines the procedures involved when employees are fired, with or without cause.”

Testimony: “Evidence presented orally by witnesses during trials or before grand juries.”

Unsecured Loan: “Loan extended only on the basis of the borrower’s financial position, creditworthiness, credit history, and general reputation. The borrower signs a promissory not but does not pledge any specific asset(s) as collateral.”

URL/Domain Name: “Universal resource locator, or, more simply, a web page’s address.”

Variable Cost: “A periodic cost that varies in step with the output or the sales revenue of a company. Variable costs include raw material, energy usage, labor, distribution costs, etc. Companies with high variable costs are significantly different from those with high fixed costs. This difference affects the financial structure of the company as well as its pricing and profits. The breakeven point in such companies (in comparison with high fixed cost companies) is typically at a much lower level of output, but their marginal profit (rate of contribution) is also much lower.”

Venue: “The geographic area in which a court has jurisdiction. A change of venue is a change or transfer of a case from one judicial district to another.”

Verdict: “The decision of a trial jury or a judge that determines the final outcome of a civil case.”

Warranty: “Legally binding assurance (which may or may not be in writing) that a good or service is, among other things, (1) fit for use as represented, (2) free from defective material and workmanship, (3) meets statutory and/or other specifications. A warranty describes the conditions under, and period during, which the producer or vendor will repair, replace, or other compensate for, the defective item without cost to the buyer or user. Often it also delineates the rights and obligations of both parties in case of a claim or dispute.”

Witness: “A person called upon by either side in a lawsuit to give testimony before the court or jury.”

 

BUSINESS FORMATION

There are different types of business structures, and selecting the one that works for you is very important. The South Carolina Secretary of State’s office has a website to help you create your own business.  It is free and easy to use.  Check out the South Carolina Business One Stop website.

  • Sole Proprietorship
  • Partnership
  • Limited Liability Partnership
  • Limited Liability Company
  • Corporation
  • Statutory Close Corporation
  • Nonprofit Corporation

Check out our learning center for more information: 

TERMINOLOGY

Business law terms can be confusing.  Here are some simple to understand definitions.

 

Accounts Payable: “A company’s outstanding debts, or liabilities, to vendors for purchases of goods and services made on credit.”

 

Accounts Receivable: “The money due from all customers for merchandise or services delivered on credit. The total figure would be shown on the balance sheet as an asset.”

 

Accrual Basis Accounting: “Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term “accrual” refers to any individual entry recording revenue or expense in the absence of a cash transaction.”

 

Acquisition: “The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets.”

 

Administrative Dissolution: “Involuntary cessation of the existence of a corporation by a government authority. It is prompted usually by the corporation’s failure to comply with certain statutory requirements such as to file an annual return or pay its taxes.

 

Advertising: “To call the public’s attention to your business, usually for the purpose of selling products or services, through the use of various forms of media, such as print or broadcast notices.”

 

Amortization: “Gradual repayment of a loan in equal (or nearly equal) installments which include portions of interest and principal amounts.”

 

Articles of Dissolution: “Document filed to effect and formalize the cessation of an incorporated organization.”

 

Articles of Incorporation: “The basic legal document which gives birth to a corporation. Together with the certificate of incorporation (corporation’s ‘birth certificate’) it constitutes the charter that gives the corporation an independent existence as a legal entity. Also called articles of formation or articles of organization.”

 

Assets: “Property of all kinds, including real and personal, tangible and intangible.”

 

Balance Sheet: “A financial statement that lists the assets, liabilities and equity of a company at a specific point in time and is used to calculate the net worth of a business. A basic tenet of double-entry book-keeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance. Subtracting liabilities from assets shows the net worth of the business A basic tenet of double-entry bookkeeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, the balance sheet must balance.”

 

Bankruptcy: “A legal state of insolvency. A company deemed to be in this condition may choose protection under the law to allow a chance to reorganize (Chapter 11) or liquidate in an orderly fashion (Chapter 7).”

 

Board of Directors: “Governing body (called the board) of an incorporated firm. Its members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at an annual general meeting or AGM) to govern the firm and look after the subscribers’ interests. The board has the ultimate decision-making authority and, in general, is empowered to (1) set the company’s policy, objectives, and overall direction, (2) adopt bylaws, (3) name members of the advisory, executive, finance, and other committees, (4) hire, monitor, evaluate, and fire the managing director and senior executives, (5) determine and pay the dividend, and (6) issue additional shares.”

 

Breakeven Analysis: “Study of the mathematical relationship between costs and sales revenue, under a given set of assumptions regarding the firm’s fixed costs and variable costs. In this financial analysis, the objective is to determine (in manufacturing) number of products that must be sold at a given price to cover the costs, or (in project financing) number of months or years required by the forecasted total net cash flow to equal estimated total project cost. An integral part of financial planning, it is performed either by using a breakeven-formula or by drawing a breakeven graph.”

Burden of Proof: “The duty to prove disputed facts. In civil cases, a plaintiff generally has the burden of proving his or her case.”

 

Business Bankruptcy: “A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.”

 

Business Broker: “A professional who assists in the buying and selling of businesses.”

 

Business Plan: “A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement.”

 

Capital: “Money invested in a business to generate income.”

 

Cash Flow: “The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset.”

 

Cash Flow Statement: “A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period.”

 

Cash-Basis Accounting: “An accounting system that doesn’t record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There’s no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren’t possible.”

 

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 Good Standing: “A certificate issued by a proper authority in a jurisdiction to verify that a corporation actually exists, has paid all its statutory dues, has met all filing requirements and, therefore, is authorized to transact business in that state. Also called certificate of authorization or certificate of existence.”

 

Certificate of Incorporation: “Registered firm’s ‘birth certificate’ showing its legal name and date of incorporation. Also called certificate of registration.”

 

Close Corporation: “Firm whose all issued shares are held by a family or a small group of investors and, therefore, cannot be bought by the public. Also called privately held corporation.”

 

Condition: “An uncertain future act or event, the occurrence of which determines the existence or extent of an interest or right, or liability or obligation; or which initiates, halts, or terminates the performance of a duty.”

 

Contract: “An agreement between two or more people that creates an obligation to do or not to do a particular thing.”

 

Corporation: “A form of business operation that declares the business as a separate, legal entity guided by a group of officers known as the board of directors.”

 

Creditor: “A person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.”

 

Current Asset: “An asset such as receivables, inventory, work in process, or cash, that is constantly flowing in and out of an organization in the normal course of its business, as cash is converted into goods and then back into cash. In accounting, any asset expected to last or be in use for less than one year is considered a current asset.”

 

Current Liabilities: “Obligations such as deferred dividend, trade credit, and unpaid taxes, arising in the normal course of a business and due for payment within a year. Also called current debt.”

 

Current Ratio: “Indicator of a firm’s ability to meet short-term financial obligations, it is the ratio of current assets to current liabilities. Though every industry has its range of acceptable current-ratios, a ratio of 2:1 is considered desirable in most sectors. Since inventory is included in current assets, acid test ratio is a more suitable measure where salability of inventory is questionable. Formula: Current assets ÷ Current liabilities.”

 

Debt Financing: “Part of a firm’s total financing, it commonly comprises of (1) short-term bank borrowings (such as overdraft), (2) cash raised through debt instruments (such as bonds), (3) off-balance-sheet financing (such as operating leases), (4) and trade credit.”

 

Defendant: “In a civil case, the person or organization against whom the plaintiff brings suit.”

 

Dissolution: “End of the independent existence of a firm, brought about by consolidation or merger, creditors, government, or the stockholders (shareholders).”

 

Diversification: “A risk-reduction strategy that involves adding product, services, location, customers and markets to your company’s portfolio.

 

Doing Business As: “DBA indicates that the owners of a firm want neither to incorporate it nor to do business under their own names, but to operate under a fictitious name. Also called assumed name.”

 

E-Commerce: “Business done on and through the web.”

 

Employee Handbook: ” A document that includes information that employees may need to refer to frequently in order to meet the terms and conditions of their employment.”

 

Equitable: “Pertaining to civil suits in “equity” rather than in “law.” In English legal history, the courts of “law” could order the payment of damages and could afford no other remedy (see damages). A separate court of “equity” could order someone to do something or to cease to do something (e.g., injunction). In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in “law” cases but not in “equity” cases.”

 

Equity: “Ownership interest or claim of a holder of common stock (ordinary shares) and some types of preferred stock (preference shares) of a company.”

 

Equity Funding: “Investment in the common stock (ordinary shares) of a firm.”

 

Evidence: “Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case in favor of one side or the other.”

 

Ex parte: “A proceeding brought before a court by one party only, without notice to or challenge by the other side.”

 

Expense Report: “A report that tracks expenses incurred during the course of performing necessary job functions. Examples include charges for gas, meals, parking or lodging.”

 

Express Terms: “Provision in a contract that is clearly, directly, and unmistakably communicated in written or spoken words.”

 

Financial Statement: “Summary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) and lenders, and what is its current financial position. The three basic financial statements are the (1) balance sheet, which shows firm’s assets, liabilities, and net worth on a stated date; (2) income statement (also called profit & loss account), which shows how the net income of the firm is arrived at over a stated period, and (3) cash flow statement, which shows the inflows and outflows of cash caused by the firm’s activities during a stated period. Also called business financials.”

 

Fiscal Year:  “Accounting period that can start on any day of a calendar year but has twelve consecutive months (52 consecutive weeks) at the end of which account books are closed, profit or loss is computed, and financial reports are prepared for filing. It may or may not match a calendar year.”

 

First In, First Out (FIFO): “An accounting system used to value inventory for tax purposes. Under FIFO, inventory is valued at its most recent cost.”

 

Fixed Cost: “A periodic cost that remains more or less unchanged irrespective of the output level or sales revenue, such as depreciation, insurance, interest, rent, salaries, and wages.

While in practice, all costs vary over time and no cost is a purely fixed cost, the concept of fixed costs is necessary in short term cost accounting. Organizations with high fixed costs are significantly different from those with high variable costs. This difference affects the financial structure of the organization as well as its pricing and profits. The breakeven point in such organizations (in comparison with high variable cost organizations) is typically at a much higher level of output, and their marginal profit (rate of contribution) is also much higher.”

 

Forecasting: “A planning tool that helps management in its attempts to cope with the uncertainty of the future, relying mainly on data from the past and present and analysis of trends.”

 

Franchisable Business: “A business that has the potential to be sold as a franchise opportunity, generally having the following characteristics: It is established, offers a unique concept, is teachable and can provide an adequate return to potential franchisees.”

 

Goodwill: “Assumed value of the attractive force that generates sales revenue in a business, and adds value to its assets. Goodwill is an intangible but saleable asset, almost indestructible except by indiscretion. It is built painstakingly over the years generally with (1) heavy and continuous expenditure in promotion, (2) creation and maintenance of durable customer and supplier relationships, (3) high quality of goods and services, and (4) high quality and conduct of management and employees. Goodwill includes the worth of corporate identity, and is enhanced by corporate image and a proper location. Its value is not recognized in account books but is realized when the business is sold, and is reflected in the firm’s selling price by the amount in excess over the firm’s net worth.”

 

Gross Profit: “The difference between revenue and the cost of producing goods or services sold. It is sometimes expressed as a percentage.”

 

Guaranty: “Three-party contingent liability agreement under which a third-party (the guarantor) agrees to be directly or collaterally responsible for the obligation (contract fulfillment, loan) of a first-party (the principal) to a second-party (bank, client) in case the first-party defaults or fails to fulfill its part of a deal. In effect, signing a guaranty as a guarantor is like signing a blank check.”

 

Human Resources: “The department or support systems responsible for personnel sourcing and hiring, applicant tracking, skills development and tracking, benefits administration and compliance with associated government regulations.”

 

Income Statement: “A financial document generated monthly and/or annually that reports the earnings of a company by stating all relevant revenues (or gross income) and expenses in order to calculate net income. Also referred to as a profit and loss statement.”

 

Incorporation: “To legally form a corporation.”

 

Indemnity: “Undertaking given to compensate for (or to provide protection against) injury, loss, incurred penalties, or from a contingent liability. A shipping company, for example, will ask for a bank’s indemnity for releasing a shipment to a consignee who has lost original shipping documents. The bank in turn will require the consignee to sign a counter-indemnity before issuing its indemnity to the shipping company. This way the consignee gets the release of shipment in completion of a transaction, and both the shipping company and the bank are protected in case some dispute arises out of that transaction.”

 

Independent Contractor: “A person hired to do work for another but who is not an employee or agent of that person. Control is subjected to the end result and not as to how the work is performed as opposed to an employee who receives direction on what, when and, to some degree, how to do a job.”

 

Injunction: “A court order preventing one or more named parties from taking some action. A preliminary injunction often is issued to allow fact-finding, so a judge can determine whether a permanent injunction is justified.”

 

Intangible Asset: “Reputation, name recognition, and intellectual property such as knowledge and know how. Intangible assets are the long-term resources of an entity, but have no physical existence. They derive their value from intellectual or legal rights, and from the value they add to the other assets. Intangible assets are generally classified into two broad categories: (1) Limited-life intangible assets, such as patents, copyrights, and goodwill, and (2) Unlimited-life intangible assets, such as trademarks. In contrast to tangible assets, intangible assets cannot be destroyed by fire, hurricane, or other accidents or disasters and can help build back destroyed tangible assets.”

 

Intellectual Property: “Knowledge, creative ideas, or expressions of human mind that have commercial value and are protectable under copyright, patent, servicemark, trademark, or trade secret laws from imitation, infringement, and dilution. Intellectual property includes brand names, discoveries, formulas, inventions, knowledge, registered designs, software, and works of artistic, literary, or musical nature. It is one of the most readily tradable properties in the digital marketplace.”

 

Inventory Financing: “Type of asset based lending, it is a short-term working capital loan secured by the inventory purchased. As the inventory is converted into sales, the loan is gradually paid-off and (when it is fully satisfied) new inventory is bought with a new loan, and the cycle starts all over again. Inventory-financing interest rates are usually higher than for accounts-receivable financing because in the latter-case goods have already been sold. Also called inventory loan.”

 

Implied Term: “Provision in a contract that is not directly stated in written or spoken words but is introduced into the contract (1) by the courts as necessary to give effect to the obvious intentions of the contracting parties, or (2) by a statute such as sale of goods acts.”

 

Issue: “1. The disputed point between parties in a lawsuit; 2. To send out officially, as in a court issuing an order.”

 

Joint Venture (JV): “New firm formed to achieve specific objectives of a partnership like temporary arrangement between two or more firms. JVs are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. They, however, present unique problems in equity ownership, operational control, and distribution of profits (or losses). Research indicates that two out of five JV arrangements last less than four years, and are dissolved in acrimony.”

 

Judgment: “The official decision of a court finally resolving the dispute between the parties to the lawsuit.”

 

Last In, First Out (LIFO): “An accounting method for inventory and cost of sales in which the last items produced or purchased are assumed to be sold first; allows business owner to value inventory at the less expensive cost of the older inventory; typically used during times of high inflation.”

 

Lawsuit: “A legal action started by a plaintiff against a defendant based on a complaint that the defendant failed to perform a legal duty which resulted in harm to the plaintiff.”

 

Leverage: “The ability to influence a system, or an environment, in a way that multiplies the outcome of one’s efforts without a corresponding increase in the consumption of resources. In other words, leverage is the advantageous condition of having a relatively small amount of cost yield a relatively high level of returns.”

 

Limited Liability Company:  “A form of business organization with the liability-shield advantages of a corporation and the flexibility and tax pass-through advantages of a partnership.”

 

Limited Liability Partnership: “A business organization that allows limited partners to enjoy limited personal liability while general partners have unlimited personal liability.”

 

Link Exchange: “The practice of exchanging links with other websites. You place another site’s link on your site, usually on a links page, and in return, the other site places a link on their site back to you.”

 

Litigation: “A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants.”

 

Liquidation: “Winding up of a firm by selling off its free (un-pledged) assets to convert them into cash to pay the firm’s unsecured creditors. (The secured creditors take control of the respective pledged assets on obtaining foreclosure orders). Any remaining amount is distributed among the shareholders in proportion to their shareholdings. Liquidation process is initiated either by the shareholders (voluntary liquidation) or by the creditors after obtaining court’s permission (compulsory liquidation).”

 

Mergers: “The combination of one or more corporations, LLCs, or other business entities into a single business entity; the joining of two or more companies to achieve greater efficiencies of scale and productivity.”

 

Minimum Wage: “A wage below which employers may not legally pay employees for specific kinds of employment.”

 

Moot: “Not subject to a court ruling because the controversy has not actually arisen, or has ended.”

 

Operating Expenses: “The selling and general and administrative expenses incurred by a business.”

 

Negotiable Instrument: “Document of title or evidence of indebtedness that is freely (unconditionally) transferable in trading as a substitute for money. Negotiable instruments are unconditional orders or promise to pay, and include checks, drafts, bearer bonds, some certificates of deposit, promissory notes, and bank notes (currency). A negotiable instrument has three principal attributes: (1) an asset or property (that is the subject matter of the instrument) passes from the transferor to the transferee by mere delivery and/or endorsement of the instrument, (2) a transferee accepting the instrument in good faith and for value (and who has no notice of any defect in the title of the transferor) obtains an indefeasible title and may sue on the instrument in his or her name, and (3) no notice of the transfer need to be given to the party liable in the instrument.”

 

Net Profit: “The amount by which income from sales is larger than all expenditure. Also called profit after tax.”

 

Net Sales: “Gross sales revenue less returns and discounts; the amount shown in an income statement under sales revenue.”

 

Net Worth: “Value of a firm to its owners (stockholders/shareholders) as shown on its balance sheet. It is the sum of the issued share capital, retained earnings, and capital gains.”

 

Noncompete Clause: “Contracts between you and your employees in which your employees promise not to take what they learn while working for you and use it against you while working for a competitor. A typical noncompete agreement says the employee agrees not to work for rivals, solicit business from current clients, or otherwise compete with you for some period of time, such as a year, after leaving your company.”

 

Nonprofit Corporation: “A business organization that serves some public purpose and therefore enjoys special treatment under the law. Nonprofit corporations, contrary to their name, can make a profit but can’t be designed primarily for profit-making.”

 

Operating Expenses: “An expense incurred in carrying out an organization’s day-to-day activities, but not directly associated with production. Operating expenses include such things as payroll, sales commissions, employee benefits and pension contributions, transportation and travel, amortization and depreciation, rent, repairs, and taxes. These expenses are usually subdivided into selling expenses and administrative and general expenses. Also called non-manufacturing expenses.”

 

Opinion: “A judge’s written explanation of the decision of the court. Because a case may be heard by three or more judges in the court of appeals, the opinion in appellate decisions can take several forms. If all the judges completely agree on the result, one judge will write the opinion for all. If all the judges do not agree, the formal decision will be based upon the view of the majority, and one member of the majority will write the opinion. The judges who did not agree with the majority may write separately in dissenting or concurring opinions to present their views. A dissenting opinion disagrees with the majority opinion because of the reasoning and/or the principles of law the majority used to decide the case. A concurring opinion agrees with the decision of the majority opinion, but offers further comment or clarification or even an entirely different reason for reaching the same result. Only the majority opinion can serve as binding precedent in future cases. ”

 

Parol Evidence Rule: “Legal rule that once a written agreement has been duly executed (signed by all concerned parties) then it cannot be altered or annulled by any oral evidence that may contradict the terms of the agreement, except in case of a fraud or mistake.”

 

Partnership: “A legal form of business operation between two or more individuals who share management and profits. The federal government recognizes several types of partnerships. The two most common are general and limited partnerships.”

 

Partnership Agreement: “Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states the (1) nature of the business, (2) capital contributed by each partner, and (3) their rights and responsibilities. A partnership does not have a separate legal existence like an incorporated firm, and the partners are jointly and severally liable for the debts of the firm. Even on withdrawing from the partnership they remain liable for already incurred debts, and for future debts unless a proper notice of retirement is published. A valid partnership, however, can exist without a written agreement in which case the provisions of the statutes governing partnerships would apply.”

 

Performance Reviews: “An analysis of an employee’s work habits undertaken at a fixed point in time to determine the degree to which stated objectives and expectations have been reached.”

 

Piercing the Corporate Veil: “A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company’s debts and other obligations. This protection is not ironclad or impenetrable. Where a court determines that a company’s business was not conducted in accordance with the provisions of corporate legislation (or that it was just a façade for illegal activities) it may hold the shareholders personally liable for the company’s obligations under the legal concept of lifting the corporate veil.”

 

Plaintiff: “A person or business that files a formal complaint with the court.”

 

Pleadings: “Written statements filed with the court that describe a party’s legal or factual assertions about the case.”

 

Product Liability: “General liability or obligation of a producer (or supplier) of a good or service to make restitution for loss associated with its use, such as personal injury or property damage. Commonly, the aggrieved party does not have to prove that the producer (or supplier) was negligent because the fault is inherent to the item.”

 

Public Offering: “Offer of sale of an issue of securities to general public by the issuer, after meeting all requirements of the securities inspectorate. Public offerings are commonly handled by underwriters who guaranty the placement (sale) of the entire issue.”

 

Retained Earnings: “Profits generated by a company that are not distributed to stockholders (shareholders) as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset). A balance sheet figure shown under the heading retained earnings is the sum of all profits retained since the company’s inception. Retained earnings are reduced by losses, and are also called accumulated earnings, accumulated profit, accumulated income, accumulated surplus, earned surplus, undistributed earnings, or undivided profits.”

 

Search Engine Optimization: “The process of increasing the amount of visitors to a website by ranking high in the search results of a search engine.”

 

Settlement: “Parties to a lawsuit resolve their dispute without having a trial. Settlements often involve the payment of compensation by one party in at least partial satisfaction of the other party’s claims, but usually do not include the admission of fault.”

 

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.”

 

Securities and Exchange Commission (SEC): “US federal agency established in 1934 to help protect investors by enforcing securities-related laws, and by setting mandatory standards for disclosure of financial and other pertinent information about firms whose securities are traded over a stock exchange. Its five commissioners (appointed by the US President and confirmed by the Senate) serve for staggered five-year terms, and at any time no more than three of them may be from the same political party.”

 

Secured Loan: “Loan agreement under which a borrower pledges a specific asset or property which the lender can seize in case of default.”

 

Settlement: “Conclusion of an agreement under which a party (called the obligor) fulfills its promise to another party (called the obligee).”

 

Severance Pay: “Money in addition to wages and any other money that employers owe employees when their employment ends, such as through a layoff or firing. Severance pay is a form of what’s generally called “separation,” “termination” or “final pay.”

 

Shareholder: “An individual, group, or organization that owns one or more shares in a company, and in whose name the share certificate is issued. It is legal for a company to have only one shareholder.”

 

Small Business Administration (SBA): “Provides support to small business owners in the United States, including loan programs, counseling and educational opportunities, and contract negotiation that ensures 23% of federal dollars are allocated to small businesses.”

 

Sole Proprietorship: “A business that legally has no separate existence from its owner. Income and losses are taxed on the individual’s personal income tax return.”

 

Statute: “A law passed by a legislature.”

 

Statute of limitations: “The time within which a lawsuit must be filed.”

 

Subchapter S Corporation: “A special form of corporation that allows the protection of limited liability but direct flow-through of profits and losses.”

 

Telecommuting: “The practice of working from home for a business and communicating through the use of a personal computer equipped with modem and communications software.”

 

Temporary restraining order: “Akin to a preliminary injunction, it is a judge’s short-term order forbidding certain actions until a full hearing can be conducted. Often referred to as a TRO.”

 

Terminating an Employee: “A document that outlines the procedures involved when employees are fired, with or without cause.”

 

Testimony: “Evidence presented orally by witnesses during trials or before grand juries.”

 

Unsecured Loan: “Loan extended only on the basis of the borrower’s financial position, creditworthiness, credit history, and general reputation. The borrower signs a promissory not but does not pledge any specific asset(s) as collateral.”

 

URL/Domain Name: “Universal resource locator, or, more simply, a web page’s address.”

 

Variable Cost: “A periodic cost that varies in step with the output or the sales revenue of a company. Variable costs include raw material, energy usage, labor, distribution costs, etc. Companies with high variable costs are significantly different from those with high fixed costs. This difference affects the financial structure of the company as well as its pricing and profits. The breakeven point in such companies (in comparison with high fixed cost companies) is typically at a much lower level of output, but their marginal profit (rate of contribution) is also much lower.”

 

Venue: “The geographic area in which a court has jurisdiction. A change of venue is a change or transfer of a case from one judicial district to another.”

 

Verdict: “The decision of a trial jury or a judge that determines the final outcome of a civil case.”

 

Warranty: “Legally binding assurance (which may or may not be in writing) that a good or service is, among other things, (1) fit for use as represented, (2) free from defective material and workmanship, (3) meets statutory and/or other specifications. A warranty describes the conditions under, and period during, which the producer or vendor will repair, replace, or other compensate for, the defective item without cost to the buyer or user. Often it also delineates the rights and obligations of both parties in case of a claim or dispute.”

 

Witness: “A person called upon by either side in a lawsuit to give testimony before the court or jury.”

BUSINESS FORMATION

There are different types of business structures, and selecting the one that works for you is very important. The South Carolina Secretary of State’s office has a website to help you create your own business.  It is free and easy to use.  Check out the South Carolina Business One Stop website.

 

  • Sole Proprietorship
  • Partnership
  • Limited Liability Partnership
  • Limited Liability Company
  • Corporation
  • Statutory Close Corporation
  • Nonprofit Corporation