Glossary

If you're getting ready to launch a new business, chances are you know your product or service and your market like the back of your hand. But the mechanics of forming a business entity-knowing the terminology-may be more difficult to understand.

To help you sort through the terminology, Harvard Business Services, Inc. has included a comprehensive glossary to help guide you. To use the glossary, match the first letter of the term you want to look up with the alphabet list below, and click on that letter.

Of course, our team of business formation professionals is standing by to help you make informed decisions if you need more information

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Paid in Capital

Shares that were acquired through the payment of actual consideration.

 

Par Value

The stated minimum value of a Corporation’s stock.

 

Partly Paid Shares

Delaware allows a Corporation to issue shares for less than the full consideration, with the balance due and callable by the board of directors at some future time.

 

Partnership

An informal association of two or more individuals normally created by a private partnership agreement. There is no limited liability afforded to the partners, although the partnership agreement can provide indemnification rights to all or some of the partners.

 

Partnership Agreement

A private agreement between partners that establishes a partnership and governs the terms and conditions of the partnership relationship.

 

Pass-Through Taxation

All income and profits are passed through the entity to the owner and this income is only taxed one time. LLCs and S Corporations provide this tax benefit to their owners.

 

Passive Income

Income generated from the licensing of intangible assets, like intellectual property.

 

Passive Income Assets

Intellectual property, e.g., trademarks, patents, copyrights, royalties.

 

Pierce the Corporate Veil

The act in which creditors are able to attack the personal assets of a Corporation’s owners due to the Corporation not conducting business as an entity separate from its owners, e.g., commingled funds, no or incomplete corporate records, unpaid franchise taxes or registered agents.

 

Preferred Stock

A special class of stock whose holders get paid dividends or asset distributions before common stock holders. An excellent way to attract investors, and also maintain control of the daily operations since preferred stock holders are normally denied voting rights.

 

Principal Place of Business

The actual, physical location wherein a company conducts the greatest portion of its business. Not the same as Registered Office.

 

Private Corporation

A Corporation whose shares are not publicly traded on any exchange.

 

Professional Corporation

A Corporation owned by licensed professionals in a given field whose sole purpose is to conduct business in that field.

 

Proxy

The granting of a shareholder’s voting rights to another party to vote on that shareholder’s behalf because the shareholder is not able to attend a meeting. Delaware allows for electronic proxies.

 

Public Corporation

A Corporation that trades its stock on a public stock exchange like the New York Stock Exchange or NASDAQ. Regulated by the Securities and Exchange Commission.

 

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