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Corporate Definitions

This page defines and explains some of the terms used throughout the incorporation process. We hope you find our corporate definitions a useful resource during the formation of your business.

Articles of Incorporation: This is the formation document for any corporation, whether for-profit or non-profit. The information contained in the Articles of Incorporation can vary by state, but typical Articles will include the name of your corporation, the principle office address, the registered agent, a business purpose statement, and an incorporator’s signature.

Articles of Organization: The Articles of Organization are to an LLC what the Articles of Incorporation are to a corporation: the formation document containing basic important information about the business. (Notice that while a corporation is incorporated, a limited liability company is organized.)

Assumed Name: An Assumed Name is another term for a DBA—the business name under which you are doing business. Depending on your location, this entity type may be known as an Assumed Name, DBA, Trade Name, Fictitious Name, Fictitious Firm Name, or Business Certificate. A DBA can be held by an individual, an unincorporated partnership, or an incorporated business entity (such as a corporation or LLC).

Business License: This is a very general term that refers to any of the various licenses or permits your business may be required to hold. The requirements vary based on your entity type, your business purpose, and the specific rules and procedures at your state, county, and local level. In order to determine your business license requirements, you should contact each level of your local government to determine what licenses and permits you’ll need in order to remain in compliance. You may also wish to review our business license service, which can make those determinations for you.

Bylaws: Also known as corporate bylaws, the bylaws detail the day-to-day operations of your corporation. (This document parallels an LLC’s Operating Agreement.) While your bylaws will not be submitted to a government agency for filing, as with your Articles of Incorporation, it’s important that you formally adopt corporate bylaws so that you have agreed-on, written procedures to reference in the future so that you always know how to deal with financial interactions, how business affairs are conducted, and how shareholders and offers are removed or replaced.

C Corporation: A C corporation is the default type of for-profit corporation; if you incorporate, you’re automatically a C corporation (unless you take steps to become an S corporation). A C corporation can have any number of shareholders, and it experiences what is known as “double taxation.”

Corporate Kit: Business documents should all be kept in one location so that they’re available for reference. (Some states’ formation documents even require that you provide the address at which they are to be kept.) A corporate kit is simply a ringed binder that keeps your Articles of Incorporation, bylaws, stock certificates, corporate minutes, and other documentation in order.

The corporate seals and kits that we provide come customized with your business name embossed on the spine and designated tabs for all of your documents. Of course, a simple file folder or binder would be sufficient—however you choose to organize your documents, take care that you keep them somewhere that you can retrieve them easily.

Corporate Minutes: Corporate minutes are simply recaps of the actions that a corporation’s board of directors or shareholders have taken. Typical information that may be included in the corporate minutes (sometimes called corporate meeting minutes) is information about major purchases by the corporation, hirings or firings, acquisitions, financial transactions, and so on.

While corporate minutes are not filed with any government office—they remain internal documents to your business, kept by your corporate officers—it’s absolutely essential that you keep consistent and accurate meetings. If you fail to do so, it’s possible that a court could decide to pierce the corporate veil and hold the individual owners completely liable for the company.

Corporate Seal: In the past, businesses used corporate seals as a mark of authenticity, certifying that any given document was a reflection of the will of the company (as opposed to simply the will of the individual signing it). No longer are corporate seals a requirement, nor does their presence add some special legal status to the documents. However, corporate seals remain a tradition among business owners, many feeling that they lend a touch of class to corporate documents.

Corporation: A corporation is a type of business that exists as a legal entity in itself; it is not considered simply an extension of its owners. It is able to enter into contracts, open bank accounts, and take out loans. It is capable of suing or being sued. Owners of a corporation are not personally liable for the corporation.

A corporation can be formed as a for-profit or a non-profit corporation. For-profit corporations automatically have C corporation tax classification; further paperwork can change this status to an S corporation, which has a different sort of tax structure.

DBA: A DBA, which stands for Doing Business As, is a very simple type of business structure that enables a person or business to operate under a name other than their own legal name. DBAs, depending on the state you’re in, may be referred to as Trade Names, Assumed Names, Fictitious Names, Fictitious Firm Names, or other variations on this terminology, but the definition remains the same.

For an individual, this means that Mary Smith could do business as “Mary’s Cake Shop”—but Mary’s Cake Shop is, for all intents and purposes, simply an extension of Mary Smith herself. There is no legal separation between the two entities; in fact, technically they are not two entities at all. She is simply doing business under a different name. In the case of already-existing corporations or LLCs, the idea is much the same: a corporation that has added a new service or moved to a new location may decide to run that part of their business under a different name that more accurately reflects the new product, service, or location, but in essence, the DBA is the owning corporation—it’s simply an extension of the corporation itself. For more information and examples, you may wish to visit our DBA page.

Director: The Board of Directors is responsible for supervising day-to-day business affairs and activities, as well as any other responsibilities laid out in the corporate bylaws (such as approving budgets, reporting to shareholders, establishing company policies, and so on). Directors are typically voted into office by the shareholders.

Double Taxation: Double taxation is the term used to refer to the way a C corporation is taxed—corporate income is taxed once at the corporate level, and then again at the individual level once it is passed on to the owners. For further explanation on this concept, you may wish to visit our page on C corporations.

EIN (or FEIN): Called an Employment Identification Number (or a Federal Employment Identification Number), this is a number that your corporation or LLC will obtain from the IRS; it is to be used for filing your entity’s taxes and other transactions with the IRS. EINs are only required of incorporated entities, but if a sole proprietor (individual DBA) does not wish to use his or her social security number along with their business, he or she can obtain an EIN as well.

Entity Type: An entity type is the specific category of business we’re talking about; corporations, LLCs, partnerships, and DBAs are examples of different entity types. There are incorporated entities, such as LLCs, corporations, and limited partnerships; and there are unincorporated entities, such as sole proprietorships and general partnerships.

Foreign Corporation: Also available for LLCs, a foreign filing is for entities who have already registered in one state—their domestic state—and wish to expand to do business in another state—the foreign state. Foreign corporation filing is a process similar to filing new formation paperwork, but information about the business’s presence in both states will be included.

Some, but not all, states require foreign corporation or LLC filings to be accompanied by a certificate of good standing (also called a certificate of existence). Other states require a certified copy of the original Articles of Incorporation; others require only a statement that your business is in good standing with your domestic state.

Franchise Tax: This is simply the tax that a state imposes on businesses incorporated there. As franchise taxes are based on the specifics of your business and are calculated differently from state to state, it’s best to contact your state’s Department of Revenue for the most relevant information.

Incorporate: To incorporate a business is to form a corporation; the suffix “Inc.,” a common ending to corporation names, stands for “incorporated.” (Compare incorporate with organize.)

Incorporator: Articles of Incorporation must typically be signed by an incorporator—the person responsible for drafting the Articles of Incorporation. The incorporator can be someone associated with the company, but it is not required to be, and there can be multiple incorporators.

Limited Liability Company (LLC): Limited liability companies came into existence as an attempt to bridge the tax gap between partnerships and corporations. While common state entities, the IRS does not recognize LLCs as a federal tax classification. Therefore, LLCs will elect how they should be taxed federally; LLCs will file either a corporation, partnership, or sole proprietorship tax return. An LLC will be either member-managed, or manager-managed.

Manager: While an LLC is typically member-managed by default, the members can also elect to be manager-managed. This is typically done in situations where there are members who have contributed capital to the business but are not actively engaged in the business operations.

Member: Members are to an LLC what shareholders are to a corporation—the owners. An LLC may have an unlimited amount of members, and most states allow single-member LLCs. (Single-member LLCs will have a slightly different federal tax structure.) In a member-managed LLC, all of the members have some measure of authority over the business.

Name Availability: This simply means determining whether you’ll be able to file using your selected business name, or whether there’s already a business using that name in your state. When we check name availability, we search the appropriate state or county databases to ensure there are no businesses already in existence using that same name, as a conflict would result in your application’s rejection.

Note that when we return your name search results, we do so based on the state or county’s records only. If there is another business by the same name operating in a neighboring state, our name search results will not reflect that—our results reflect the availability in the specific jurisdiction that you have chosen in which to do business.

Nonprofit: A nonprofit corporation is simply a corporation that has been formed under that state’s nonprofit corporation law—the corporation does not operate in order to generate a profit for the owners. In many states, incorporation fees are lower than other for-profit incorporation fees. After formation, nonprofit corporations formed for eligible purposes, such as scientific, educational, charitable, or religious purposes, can elect to form a 501c3 Non Profit Corporation.

Notarized Signature: When a document requires a notarized signature, it’s important not to sign the document until directed to by the notary public. The notary public will certify that your signature is your own by witnessing you sign the document, looking at your government-issued identification, and signing the document him- or herself. The notary will also add his or her stamp or seal; this practice of legally certifying a signature is called notarization. Essentially, it’s a way for the government to be sure that you’re you without requiring you to appear in person.

Officer: An officer of a corporation is someone who was appointed by the board of directors to manage the day-to-day operations of the business. The president, vice president, secretary, treasurer, chief executive officer, and chief financial officer are all considered officers of the corporation. Officers are typically appointed by the board of directors, and their duties and responsibilities are typically laid out in the corporate bylaws.

Operating Agreement: Just as in corporate bylaws, the LLC operating agreement is the document that dictates the processes and procedures about the various aspects of the business—replacing or appointing officers and directors, how ownership interests are transferred, how often the members should meet and when, and so on.

Organize: This term is the LLC equivalent of incorporating a corporation—to organize a limited liability company is to form a new legal entity, capable of entering into legal contracts and taking out loans. The person who creates the LLC is called the Organizer.

President: The president of a corporation holds the highest title of the corporate officers, but his or her responsibilities can vary depending on the amount of other officers involved in the corporation. For example, the president may double as CEO, but the CEO might also be a separate individual.

Purpose Statement: Your purpose statement is simply the reason you’re forming your business. Most for-profit corporations or LLCs, unless there are special requirements from other businesses or government entities you’ll be dealing with, can have a general business purpose: “Any lawful business purpose” usually does the trick. Nonprofit corporations, on the other hand, are typically required to explain a little more specifically. And more specialized nonprofits, such as those that go on to obtain 501c3 nonprofit status from the IRS, must include an even more involved purpose statement. It is always best to determine the requirements of all agencies you anticipate dealing with so that you don't have to amend your Articles later to include a more appropriate purpose statement.

Quorum: A quorum is the amount of people required in order to conduct corporate business. The corporation should specify the number or percentage of shareholders that constitutes a quorum.

Registered Agent: A registered agent, the person (or business entity) that acts as the contact person for a corporation or LLC, is necessary in nearly all states. This person must have a physical address in the state of incorporation—though sometimes a PO box is accepted in conjunction with a physical address.

S Corporation: An S corporation is a type of for-profit corporation whose tax structure is closer to that of an LLC than that of a C corporation—corporate income is taxed only when it’s passed on to the individual owners. (Compare this with the “double taxation” of a C corporation.) While an S corporation has a clear tax advantage over a C corporation, its structure is comparatively limited, allowing no more than 100 shareholders and limiting those shareholders to US citizens.

Secretary: A secretary is a senior corporate officer with many responsibilities and skills, chief among them being compliance issues and business affairs. The corporate secretary keeps board minutes and ensures that the written record of meetings accurately reflects those meetings; he or she organizes the details of directors and shareholders meetings and serves as a point person between the two groups and the rest of the corporate officers. The secretary acts as liaison in many respects; while he or she may not have exclusive responsibility in one area, he or she typically is involved in some way, whether by keeping reports or coordinating various activities.

Shareholder: A shareholder is an owner of a for-profit corporation. Depending on the type of corporation, there can be any number of shareholders, but there must be at least one.

Stock: Shares of stock are sold to raise capital for the business. In return, shareholders receive portions of the company profit in the form of dividends. Corporations typically keep a majority of the shares, since shareholders’ voting rights, and therefore amount of control of the company, are typically dictated by the amount of shares owned.

Trade Name: A “Trade Name” is a term used in some jurisdictions as a substitute for “DBA” or “Assumed Name.” The business structure is identical to a DBA and simply means that an entity, whether an individual or a corporation, is doing business under a different name—the Trade Name.

Treasurer: The treasurer of a corporation has a complex role, but their focus, obviously, circles around corporate finances and financial transactions. They may be responsible for risk management, insurance and pension, and taxes, though in larger corporations there is often a significant amount of overlap of responsibility and authority with other corporate officers.

Vice President: A vice president of a corporation has a very different role than a government vice president—there can be multiple corporate vice presidents, and there can be different tiers of responsibility. The role of a vice president is comparatively loosely defined; while the vice president is involved in day-to-day company affairs and long-term planning, the rest of his or her job can be variable and will depend significantly on the roles and responsibilities of the other corporate officers.

Workers Compensation: Workers compensation is the area of law dealing with the employer’s responsibility toward their employees—providing time off, managing employee injuries, and so on. Each state has its own workers compensation laws.