This is our glossary of small business terms. Our glossary terms range from small business tax terms to business terms every entrepreneur should know. Starting a new business is like learning a new language, and our small business glossary will help you learn the meanings of terms and topics to help you along the way.

| # | A | B | C | D | E | F | G | H | I | J | L | M | N | O | P | Q | R | S | T | U | V | W 

#

401K: 401k stands for retirement plans qualified under Section 401(k) of the Internal Revenue Code.

A

Accounts Payable: Accounts payable describes the money a business owes its vendors and suppliers for goods and services the company purchased on credit.

Acquisition: The definition of acquisition in a business context is a circumstance where one company purchases control of another company.

Addendum: An addendum is a written and signed document that changes or makes additions to a previously signed contract or official document.

Affiliate Marketing: Affiliate marketing is a marketing model where an online retailer pays a third-party website a commission each time the website’s referrals generate traffic or sales for the retailer.

After-Tax Profit Margin: An after-tax profit margin is the percentage of revenue remaining once operating expenses, interest, income tax, and preferred stock dividends are deducted from a company’s total revenue.

Agent: An agent is a person appointed by a business to act on its behalf for a specified purpose.

Agile Working: Agile working is a flexible way of organizing when, where, and how employees and business owners get work done.

Amendment: Making certain changes to incorporated business entities like LLCs and corporations requires you to file an amendment to your formation documents with the state.

Angel Investor: An angel investor can help entrepreneurs and startups get the funds they need to help their business idea become a reality or their business grow.

Annual Meeting: An annual meeting is the yearly meeting of shareholders, upper management, and directors (or managing members) of a company.

Apostille: A special type of government-issued certification for use in another country.

Arbitration: Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute.

Arm’s Length Relationship: An arm’s length relationship is a relationship where the parties engaged in a transaction act freely, in their own self-interest, and without unduly influencing each other.

Articles of Incorporation: The document filed with a state government agency (usually the Secretary of State) to create a corporation.

Articles of Organization: Articles of Organization is a document you file with the state to form a legal entity called a  limited liability company (LLC).

Asset: Assets are any item of value, whether tangible or intangible, that provide some current or future benefit to your business.

Asset Protection Trust: An asset protection trust is a unique type of trust that protects your assets and your estate from creditors.

Audit: An audit takes place when an independent person or group inspects a person’s or business’s accounts.

Authorized Capital: Authorized capital is the maximum amount of capital that a business can raise by issuing shares.

B

B2B: A B2B is a business focused on selling goods and services to other businesses.

B2C: A B2C business sells its products and services to consumers in the general public instead of to other businesses or the government. 

B2G: A B2G is a business that sells its products or services to the government.

B Corporation: The nonprofit organization B Lab certifies companies as B Corporations. To gain such certification, a company must meet high performance, accountability, and transparency standards.

Bankruptcy: Bankruptcy is a federal court process designed to relieve individuals and businesses from unpaid debt.

Bearer Instrument: A bearer instrument, or bearer bond, is a type of fixed-income security where the issuer keeps no ownership information on record.

Blue Sky Law: Blue sky laws are state regulations that help protect investors against securities fraud.

Board of Directors: A board of directors is a group that oversees and makes important decisions about a corporation’s activities. 

Bond: Bonds are debt securities that are issued by companies and governments and sold to investors. As with most debt, bonds have maturity dates, at which point the principal amount must be paid back in full.

Breach of Contract: A breach of contract is when someone doesn’t fulfill a promise they made in a legally enforceable contract.

Business Address: A business address is the physical address you designate as your principal place of business when forming your small business

Business Bank Account: A business bank account is an account that helps an entrepreneur keep business transactions separate from personal ones.

Business Financing: Business Financing is the money business owners require to start, run or expand a business. 

Business Liability Insurance: A business liability insurance policy helps cover the cost of bodily injury, property damage, personal injury, and advertising injury claims and lawsuits. 

Business Name: A business name is the alias that your legal entity is registered under.

Business Plan: A business plan is defined as a guide that lays out what your business’s goals are and how you plan to meet them.

Business Registration Certificate: A business registration certificate is an official document that allows the state to recognize your company as a separate legal entity. 

Business Structure: A business structure is how the business is organized and determines who receives the profits, how those profits are distributed, and which employees or members perform the various jobs associated with the business. 

Buy-Sell Agreement: A buy-sell agreement is a contract between two or more parties that gives the other parties the right to buy out the other’s interest.

Bylaws: Corporate bylaws are the rules established to specify how a corporation is governed and operated.

C

C Corporation (C Corp): C Corps are the most popular type of corporation. It taxes its owners (shareholders) separately from the business. All C Corps must have the following governing positions: president or CEO, treasurer, and secretary.

Cash on Hand: Cash on hand is the amount of accessible cash a business has after paying all its costs.

Certificate of Authority: A Certificate of Authority is a certificate from a state that allows a foreign business to operate in that state.

Certificate of Cancellation: A Certificate of Cancellation is a certificate that effectively cancels your business.

Certificate of Good Standing: A Certificate of Good Standing verifies that a business is an actively operating legal commercial entity with the state.

Certificate of Incorporation: A Certificate of Incorporation is an important legal document that will serve as the official registration document for your corporation.

Certified Public Accountant: A certified public accountant is a professional who has met state licensing requirements for CPA designation pertaining to accounting and finance.

Chatbot: A chatbot is a computer program or application that is designed to interact with users, typically over the internet.

Chief Executive Officer: A chief executive officer is the leader of a company or organization whose responsibilities include creating policies, crafting growth strategies, and overseeing the entire staff.

Chief Financial Officer: A chief financial officer (CFO) is a senior executive who manages the financial business and actions of a company.

Chief Marketing Officer: A chief marketing officer (CMO) is a corporate executive responsible for overseeing all the marketing activities of a business. 

Chief Operations Officer: The Chief Operations Officer plays the role of vice president to the CEO and oversees all business operations. 

Classified Board of Directors: A classified board of directors is a board of directors that’s structured so that different board members serve for various lengths of time, based on their classification.

Close Corporation: A close corporation is a shareholder-owned business that doesn’t trade or list its stock on the stock exchange.

Compliance: Compliance means that your business conforms to all the applicable state requirements and has met all appropriate deadlines for your business to remain operational and in good standing.

Consideration: Consideration is what each party bargains for and what changes each party’s situation due to the contract. 

Consolidation: The definition of “consolidation” in business generally refers to combining different departments of a company into one larger unit or combining separate companies into one.

Constituent: A constituent only refers to the merging companies, never a parent company in a merger.

Conversion: Conversion, as it pertains to owning and operating a small business, relates to the conversion of leads into customers. 

Copyright: It’s simply the right to copy. A person who owns the copyright to a piece of intellectual property is the only person who can copy or give permission to copy it.

Corporate Charter: A corporate charter is the document you file with the state to legally create your business.

Corporate Income Tax: Corporate income tax is a tax paid by corporations on their business income.

Corporate Kit: A Corporate Kit is a binder that organizes all your corporate documents in one place and looks professional during meetings.

Corporate Resolution: A corporate resolution is an agreement between agents or owners of a corporation to take on significant projects, make important decisions, or engage in certain activities.

Corporate Seal:  A corporate seal is a unique symbol that represents your company, and signifies that a corporate action is valid.

Corporation: A corporation is a legal entity that is separate from its owners. A corporation can be considered a “legal person” under the law, meaning it can possess the rights and responsibilities of an individual.

Creditor: Creditors are people or businesses that allow others to borrow money to be repaid in the future.

D

DBA: A DBA name is a legal form required whenever a company operates under a name that’s different from its officially registered name. 

Debt Financing: Debt financing is used by many small businesses when they need to raise money for working capital or asset purchases. Here’s a definition of debt financing and the advantages and disadvantages of using it.

Debtor: A debtor is a borrower who is liable to pay a defined sum to a creditor.

Deed of Trust: A deed of trust is a particular type of legal document frequently used in financed real estate transactions. 

Director: A company director is responsible for the day-to-day operations of a company including the business and financial operations and oversight of other employees. 

Dissolution: Dissolution is the official closure of a business entity with the state. You likely need to file documentation with the state to make this official.

Dissolve: To dissolve refers to separating something into its component parts or bringing something to an end.

Distribution: A distribution in business means a disbursement of assets from a fund, account, or individual security to an investor or individual beneficiary.

Dividend: Payments made to shareholders and are a way to share profits with investors. 

Domain Name: A domain name is a website’s “name.” These names can help your business find additional success.

Domestication: Domestication involves moving a legal organization from its state of origin to a new state.

E

eCommerce: The act of selling goods or services online. If you sell through your own company website, eBay, Amazon, or on any other digital platform, you’re engaging in eCommerce.

EIN: An EIN is a unique, nine-digit number used to identify a business entity. This identifier is very similar to a Social Security Number (SSN), but for businesses rather than individuals. 

Employment Agreement: An employment agreement is a formal agreement that spells out the rules of engagement between an employee and an employer.

Entity Type: An entity type is the legal structure of your business.

Entrepreneur: Being an entrepreneur is exciting. It involves creating or offering products and services that the public may have never seen before. However, you’ll need a go-getter mentality and lots of grit to be successful (not to mention product research, funding, etc.).

Equity Financing: Equity financing allows a company to raise money by selling shares of the business to investors.

Expense:  An expense is the cost that a business owner incurs to operate the company. 

F

Family Limited Partnerships: A family limited partnership is a business partnership where the partners are family members.

Fictitious Business Name: A fictitious business name is a name, other than the registered name of the business, that the state gives you permission to use when conducting business. 

Fiduciary Duty: A fiduciary duty is a special type of legal obligation that one party owes to another.

Financial Management: Financial management is the term used to describe how a business tracks, manages, and assesses its overall financial situation. 

Fiscal Year: A fiscal year is a 12-month period that businesses, governments, and other entities use for accounting purposes, financial reporting, and creating and tracking budgets.

Fixed Costs: Fixed costs are the costs that remain the same during a period of time, regardless of production amounts.

Form 2013: Form 1023 is a tax form that non-profit organizations file to get exemption status.

Form 8832: Form 8832 is what certain businesses use to tell the IRS how to classify them for federal tax purposes.

Fractional Share: A fractional share represents owning less than a whole share of stock in a corporation.

Franchise Tax: A franchise tax is a tax paid by certain businesses for the right to operate or form in a particular state.

G

General Corporation: A general corporation is a legal entity owned by shareholders, managed by a board of directors, and run by officers.

Going Public: Going public refers to when a company undertakes its initial public offering by selling shares of its stock to the public for the first time.

Golden Parachute: Golden parachutes are lucrative benefit packages memorialized into contracts for top corporate executives.

Good Faith: Good faith describes honesty and fairness in someone’s conduct during the course of a contractual relationship. 

Guarantor: A guarantor is a person who guarantees something for someone else. In the financial world, the guarantor definition is a person or entity who promises to pay for something on another person’s behalf if that person doesn’t.

H

Holding Company: A holding company is a legal entity used for running multiple companies while limiting financial and legal liability.

I

Income Tax: Income tax is a tax you pay to the government based on the amount of income you make.

Incorporated Business: An incorporated business is one that the government recognizes as a legal entity separate from its owners.

Incorporation: The formation of a new corporation, which is a legal entity formally recognized by the state it’s located in.

Incorporator: An incorporator is an individual responsible for setting up a corporation and registering formal documents with the state where the company will be conducting business. 

Indemnification: Indemnification is a clause in a contract where one party agrees to compensate another party if something happens to a third party. 

Independent Contractor: An independent contractor is a person or business that provides goods or services under a written contract or verbal agreement.

Injunction: An injunction is a court order that commands a person to either do or refrain from doing a specific act.

IPO: An IPO (initial public offering) is when a company first sells shares of its stock to the public.

IRS: Business owners should know what the IRS is and how it works. They will need to be familiar with how their business will be taxed.

J

Jurat: A jurat is a certificate added to an affidavit stating when, before whom, and where it was made.

L

Liability: Businesses have many kinds of liabilities. They include long- and short-term debt as well as potential legal liabilities incurred when operating the business.

Limited Liability Partnership: A limited liability partnership is a type of business entity structure with at least two partners. A distinguishing characteristic of an LLP is limited personal liability, which can be extremely beneficial in running a business.

Limited Liability Company (LLC): An LLC is a legal business entity that provides limited liability protection, meaning that the owners are usually protected from the business’s liabilities and debts.

Limited Partnership: A limited partnership is made up of at least two people. One is the general partner and this person oversees business operations. The others are known as limited partners and their responsibilities don’t involve the business’s management.

Limited Personal Liability: Limited personal liability is when someone’s liability is limited to a set amount, like how much they invested in their business.

Line of Credit: A line of credit is a loan that operates like a credit card. You have a certain amount to draw from and use only as much as you need.

M

Management: An LLC’s or corporation’s management is responsible for making day-to-day decisions to run the business.

Manager: A manager is the person in charge of a business’s day-to-day operations.

Market Correction: A market correction is a dip of more than 10 percent from an asset’s highest price.

Member: A member is an individual or entity holding a membership interest in a limited liability company (LLC). 

Merger: A merger is when two or more companies merge into one company or combine their assets.

MERP: MERPs are a cutting-edge health insurance plan that offers flexibility and favorable tax treatment to employers and employees alike. 

Multi-Member LLC: A multi-member LLC is a statutory business structure with limited liability and flexibility.

N

Name Registration: A name registration is the name you use when registering your business with the state.

Name Reservation: A name reservation means that your business name is saved for your exclusive use for a defined period.

No Par Value Shares: No par value shares are stocks issued without a par value listed on the face of the certificate.

Notice of Litigation: A Notice of Litigation is a legal document that informs the recipient of an impending lawsuit.

O

Operating Agreement: An operating agreement is a document that clearly outlines an LLC’s rules and structure.

Outsourcing: When one company hires another company or person to handle projects.

P

Par Value: Par value refers to a security’s value as stated in a company’s corporate charter.

Partner: A partner is an individual who formally agrees to jointly manage and operate a business with someone else. 

Partnership Agreement: A partnership agreement is a contract that governs how a small business runs its internal affairs.

Pass-Through Taxation: Pass-through taxation is a tax treatment that allows all income, losses, credits, and deductions of a business to pass through to the owner or owners.

Patent: A patent is a type of intellectual property granted to an inventor to help protect their invention from being made or sold by competitors.

Perpetual Existence: Perpetual existence means that a company can remain a legal entity perpetually regardless of a change in ownership.

Preferred Stock: Preferred stock is considered an equity security and it includes features of both common stocks and bonds.

President: A president is a leader in a company’s executive branch. 

Professional Association: A professional association is an organization that benefits people working in a particular industry.

Professional Corporation: A professional corporation is a corporation in which only individuals with state licenses to practice the same profession can own shares of the business.

Professional LLC: A professional limited liability company is an LLC with members who are licensed to provide specific professional services.

Promissory Note: A promissory note is a legally binding agreement between a borrower and a lender.

Promoter: A promoter is a person or a business responsible for financing or acquiring financing for a project or investment activity.

Property Tax: Property tax is a tax levied on property that an individual or legal entity owns.

Proxy: In corporate terminology, a proxy is an agent who attends a corporation’s shareholder meeting and votes for a shareholder who couldn’t attend in person.

Public Benefit Corporation: A public benefit corporation is a for-profit corporation whose purpose is to provide a benefit to society (such as improving the environment or promoting good health) in addition to making a profit for shareholders.

Punitive Damages: Punitive damages are a category of damages a plaintiff can seek against a defendant in a civil lawsuit.

Q

Quorum:  A quorum is the minimum number of voting members that need to attend a meeting for the meeting to be effective.

R

Receiver: A receiver is a person appointed to care for your business when you need help managing your credit, property, assets, or operations.

Recession: A recession is a significant decline in economic activity in a given region that lasts for an extended period of time.

Record Date: A record date is the cut-off date established by a corporation’s board of directors to determine which shareholders are eligible to receive a dividend or distribution.

Registered Agent: A registered agent is a person or entity that serves as a business’s legal point of contact. 

Regulations: Regulations are authoritative rule[s] dealing with details or procedures for businesses.

Reinstated Articles of Incorporation: Restated Articles of Incorporation is a business document that combines a corporation’s Articles of Incorporation with any amendments on file. 

Reinstatement: Reinstatement is the process of having your business go from being in bad standing to being in good standing with the government. 

Resolution: A corporate resolution is a legal document detailing and confirming a formal decision made by the board of directors.

Respondeat Superior: A Respondeat Superior is a doctrine that holds an employer legally and financially accountable for injuries and property damage caused by its employees while they are working.   

Retained Earnings: Retained earnings are a company’s earnings that remain in the business after paying shareholder dividends.

Rights of First Refusal: A contract containing a right of first refusal gives the holder the right to purchase an asset or enter into a business contract before anyone else. 

S

S Corporation (S Corp): An S corp is a tax classification. The “S” refers to Subchapter S of the Internal Revenue Code. LLCs and C corporations (the default form of corporation) can apply to be taxed as an S corp if they meet the IRS’s criteria. 

Sales tax: Sales taxes are taxes state and local governments levy on the consumer for goods and services. Retailers collect sales taxes and remit them to the government. 

Securities Laws: Securities laws are the laws, rules, and regulations governing the purchase and sales of securities.

Self-Directed IRA: A self-directed IRA entails retirement accounts that you, as the account holder, manage.

Series LLC: A Series LLC involves forming a parent LLC and then designating separate series entities under the parent.

Service of Process: Service of process relates to a legal procedure that officially notifies an individual or business that a legal action has been taken against it. 

Share: A share is a unit of ownership of a corporation. When a corporation is created, the creators of the business will issue a certain amount of shares or ownership units in the company.

Secretary of State: The Secretary of State is the chief clerk for the government who’s responsible for important state records, including business documentation. 

Security: Securities are tradable financial instruments used to raise capital in public and private markets.

Shareholder Agreement: A shareholder agreement is a legally binding contract among shareholders that outlines how the company will operate and defines the shareholders’ rights, protections, and obligations.

Single-Member LLC: A single-member LLC is a type of limited liability company that has only one owner, referred to as a member. 

Small Business Administration: The Small Business Administration is a federal government agency that provides resources to small businesses.

Sole Proprietor: A sole proprietorship is an unincorporated business that has only one owner. Sole proprietors are required to pay personal income taxes on any profits that the business earns. 

Startup Costs: Startup costs are what you’ll spend to create or investigate opening a new business or trade. 

Statement of Information: A statement of information is a document that keeps the state informed about your business’s important registration information.

Statutes: Statutes are acts of a corporation or of its founder intended as permanent rules.

Stock: Stocks are a type of security that indicates an ownership interest in a company. They are used to help a company grow. Corporations issue stock to help a company grow and to fund all kinds of business purposes and operations.

Stock Certificate: A stock certificate is a physical piece of paper that represents a shareholder’s ownership in a company.

Statutory Agent: A statutory agent is an individual or legal entity appointed to accept service of process on a company’s behalf.

Subscription Business Model: A subscription business model is founded on the idea of selling a product or service to receive automatic recurring revenue. 

Subsidiary: A subsidiary is a company owned by another company, called a parent company or holding company.

T

Takeover: A takeover is when one company assumes control of another company.

Tax Elections: Tax elections are selections regarding tax treatment where the taxpayer elects how they want the Internal Revenue Service (IRS) and state taxing agency to tax their income.

Tax Shelter: Tax shelters are legal strategies that can decrease or defer your tax liability. They come in a variety of different forms and methods and can offer significant benefits if used properly.

Tort: A tort is a wrongful act or omission that harms another person, resulting in civil legal liability.

Treasurer: A treasurer is the person in charge of managing and accounting for funds within a business organization. 

U

Underwriter: Underwriters are a part of the business loan and business insurance process. They can help approve applications based on several factors.

V

Venture Capital: Venture Capital, by definition, is start-up money you receive from an investor in exchange for giving that investor a piece of your business.

Voluntary Dissolution: Voluntary dissolution involves closing your business on your terms with the shareholders’ or owners’ approval.

Voting Rights: Voting rights are the rights of shareholders to make decisions about the company.

W

Website: A website is a collection of digital pages on the World Wide Web and accessible through the internet.

Winding Up: Winding up is one step in dissolution, where the owners work to “wind up” the business operations.

Working Capital: Working capital equals your company’s assets minus your company’s liabilities.