Accrual Method of Accounting

A method of keeping accounts which shows expenses incurred and income earned for a given period, although such expenses and income may not have been actually paid or received. Right to receive, and not actual receipt, determines the inclusion of an item in gross income. Obligations payable to or by a taxpayer are treated as if they are discharged when they are incurred.
Adoption

Affiliate

A organization that is related to another organization by shareholdings or other means of control (such as parent/subsidiaries or organizations under common control).

Agent

Generally, a person authorized by another (known as the principal to act for or in place of him. An agent can enter into binding contracts or take legal action on behalf of another. In the corporate setting, a company’s officers, directors, and employees may act as corporate agents depending on their level of responsibility.

Amortization

An accounting procedure which gradually reduces the cost or value of a limited life or intangible asset through periodic charges against income. This procedure is also commonly known as depreciation with the periodic charges usually treated as current expenses for purposes of determining income.

Annual Shareholders’ Meeting

Most states require a organization to hold an annual shareholders’ meeting during which the shareholders elect directors and vote on major corporate issues.

Articles of Incorporation

This is the name customarily given to the document that is filed in order to form a organization. Depending on the state statute, it is also known as "certificate of incorporation," "charter," "articles of association," or other similar name.

Asset

Anything owned, whether tangible or intangible, that has monetary value.

Assumed Name

A name under which an entity (i.e. a organization) conducts business that is not the legal name of the entity. Many states require the filing of a registration in order to conduct business under an assumed name in their territories.

Business Judgment Rule

A rule of law which prevents directors of a organization from being held personally liable for incorrect business decisions if the decision was informed and not made in self-interest.

Bylaws

Bylaws are the formal rules of internal governance adopted by a organization. They are usually adopted at the first shareholders’ meeting, and contain rules governing the actions of shareholders, directors, officers, and other actions of the company.

Capital Gain

The profit realized on the sale or exchange of a capital asset. The gain is the difference between the cost or adjusted basis of an asset and the net proceeds from the sale or exchange of such asset.

Capital Loss

A tax term used in reference to a loss incurred in the sale or exchange of a capital asset.

Cash Method of Accounting

The practice of recording the value of assets in terms of their cost.

Certificate of Authority

A document issued by a state organization authority (e.g. Secretary of State) on application of a foreign organization granting it the right to do business in the state.

Certificate of Incorporation

In most states, the document that is prepared by the Secretary of State that evidences the acceptance of the articles of incorporation and the commencement of the corporate existence. In Delaware, the certificate of incorporation is the name given to the document filed with the Secretary of State.

Charter

May mean either the document filed with the Secretary of State (articles of incorporation) or the grant by the State to conduct business with limited liability.

Corporate Records

Corporate records usually take the form of a corporate record book. Carefully maintaining records is very important to assure limited liability to the corporate shareholders. The records should include a copy of the articles of incorporation, the minutes of all shareholder and director meetings, and a stock register for keeping track of stock transactions.

Directors

Directors are manage the affairs of the organization. Directors typically elect the officers and only participate in major business decisions.

Dissolution

The termination of a organization’s legal existence.

Domestic Organization

A organization is domestic to the state where it was incorporated.

Fiscal Year

A twelve month period used by a company for accounting purposes.

Federal Tax Identification Number

A number given to a business entity by the federal government for tax purposes.

Foreign organization

A organization is referred to as a foreign organization in all states outside its state of incorporation In order to conduct business in another state, it must register for a certificate of authority to conduct business in the other state.

Franchise Tax

A tax on the privilege of carrying on business in a state. It is typically measured by the earnings or amount of business done within the state.

Holding Company

A company that owns a majority of the shares of one or more organizations. A holding company is not engaged in any business other than the ownership of shares.

Incorporators

The person or persons who execute the articles of incorporation

Indemnification

The practice by which organizations pay expenses of officers or directors who are named as defendants in litigation relating to corporate affairs. Note that directors and officers may also be paid for the expenses they incurred in the process of forming the organization.

Merger

An amalgamation of two organizations pursuant to statutory provision in which one of the organizations survives and the other disappears.

Minutes

A written record of the events of a organization, typically including all of the events taking place at both shareholders’ meetings and board of directors’ meetings. These records are usually kept in the organizations’ record book.

Name Reservation

The name of a organization must be different from those previously on the records of the government of the state of incorporation A name can usually be reserved for 120 days with the proper fee.

Officers

People appointed by the directors to manage the daily affairs of a organization. The officers usually consist of a president, vice-president, treasurer, and secretary.

Organizational Meeting

The initial meeting at which the formation of the organization is completed. At this meeting, initial tasks such as ratification of the articles of incorporation, issuance of the initial shares, election of officers, approval of bylaws, and authorization of the opening of bank accounts is passed.

Promoters

Persons who develop or take the initiative in founding or organizing an organization. Where more than one promoter is involved in an organization, they are described as co-promoters.

Quorum

The minimum participation required to conduct business at a particular meeting. Usually a quorum is achieved by a meeting of the majority of the directors or a meeting with the majority of outstanding shares represented. Note that the percentage needed for quorum may be modified in the bylaws.

Registered Agent

The agent named in the articles of incorporation to receive service of process on the organization or other important documents. This agent must be named in the articles of incorporation.

Registered Office

The office named in the articles of incorporation located where the registered agent is located. Note that this need not be the principle office or place of business of the organization.

Resolution

A formal decision of a organization adopted by either the directors or the shareholders.

Surplus

A general term in corporate accounting that usually refers to either the excess of assets over liabilities or that amount further reduced by the stated capital represented by issued shares.

Ultra Vires

The common law doctrine relating to the effect of corporate acts that exceed the powers or the stated purposes of a organization. Traditionally, if a organization acted beyond its stated purposes, the actions were unenforceable against the organization. However, the legal strength of this doctrine has greatly diminished.

Unanimous Written Consent

Most states allow directors to act without a formal meeting if they all give consent to specific corporate actions in writing.