Key Terms
Joint venture
Two or more parties combining efforts for a single transaction or limited activity; share profits/losses; remain separat
Partnership
Unincorporated association of two or more co-owners operating a general business for profit; ongoing duration.
Franchise
Contract granting the right to use a trademark and business model in exchange for a fee; not a separate entity.
Flow-through tax entity
Business does not pay tax on profits; income passes to owners who pay personal income tax.
Double taxation
Corporations pay tax on net income; shareholders pay tax again on dividends received.
Limited liability
Owners risk only their investment; personal assets protected from business creditors.
Piercing the corporate veil
Court removes limited liability protection when owners fail to treat the entity as legally separate from themselves.
Fiduciary duty
Obligation to act in the best interest of the partnership; includes good faith, no competition, no conflicts of interest
Articles of incorporation
Documents filed with the Secretary of State to form a corporation.
Articles of partnership
Written agreement setting forth how a partnership will be operated.
LLC operating agreement
Written agreement between LLC members governing management and operations.
Shareholder derivative lawsuit
Suit filed by a shareholder on behalf of the corporation when officers/directors fail to act in the corporation's best i
S corporation
Corporation taxed like a partnership (flow-through); limited to 100 shareholders; all must be US citizens or resident al
Parent company
Corporation that owns all stock of another corporation.
Wholly owned subsidiary
Corporation whose stock is entirely owned by a parent company.