What are Articles of Incorporation and Articles of Organization?

The Articles of Incorporation (for corporations) and the Articles of Organization (for LLCs) declare an individual or group to become a corporation or LLC. These documents spell out certain minimum information about the corporation or LLC that is required by the laws of the state in which the business entity if formed.

What are Corporate Bylaws and Operating and Member Control Agreements?

Bylaws (for corporations) and members agreements (for LLCs) are documents which govern the internal workings of the company. Such matters as voting, when meeting are held, how officers and directors are elected or removed, and how the company's owners may transfer their ownership interests, are set forth in these documents.

Bylaws and Member Control Agreements are typically not filed with the states and exist solely for the corporation/LLC and its shareholders/members.

What do Shareholders and members do?

The shareholders of a corporation and the members of an LLC are the individuals (or other entities) who have as ownership interest in the company. In many cases these people paid for stock or purchased an ownership interest, providing financial capital for the company to operate. Shareholders and members elect the Board of Directors or Board of Governors (LLC). In smaller corporations, shareholders / members serve on the board or directors/ governors and hold the offices of the company.

What do Directors do?

The board of directors manages the corporation or LLC and make business decisions. They in turn choose the officers (President, Vice President, Secretary, and Treasurer), whose responsibility it is to run the day-to-day operations of the corporation or LLC.

Most LLCs don’t have a board of directors as the internal structure is a bit less formal, but LLCs can have boards. In the LLCs we create the members (owners) choose the officers.

How many Directors, Shareholders and Officers does a corporation or LLC need?

All states allow a corporation to have one shareholder. Most states allow an LLC to have only one member.

All states allow one person to hold all offices and comprise the entire Board of Directors.

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What is a Registered Agent?

A registered agent is a person designated to receive legal notices, services of process, and other official documents delivered to the corporation. All corporations must have a registered agent on file with the Secretary of State. The address of the registered agent must be a physical address, not a PO box.

The person designated to be the registered agent may be an employee, officer, director, or shareholder of the corporation or LLC, or he or she may not be affiliated at all with the corporation or LLC at all.

Additionally, the registered agent must be available during normal business hours. If you do NOT have a person who can act as a registered agent in the State in which you are incorporating, Click&Inc can provide one for you simply by clicking on that option during the order process.

What are Shares of Stock? What is par value? Who sets the stock price?

Shares of stock represent the percentage of a corporation a shareholder owns (in LLCs there aren’t shares of stock per se, instead a member simply has an ownership interest, which can but doesn’t have to be indicated on a certificate). Shares of stock are written articles that represent the amount of money invested in the corporation by an individual shareholder. The corporation determines, at the outset of incorporating, how many shares it shall issue and what classes of shares (No Par, Par, Common, Preferred, Participating, etc.) it will issue

Each share represents ownership in the company, and it entitles the holder to certain types of rights (voting rights, dividends, etc). A stock certificate is the document which indicates the number of shares a shareholder of a corporation owns.

Par value is the minimum amount of money for which a share of stock can be sold. Shares can always be sold for an amount greater than the par value. Stock that has no par value is stock means that there is no specific minimum value assigned to it.

The stock price is set by the board of directors of a corporation (the managers or members of an LLC would determine the price of ownership in an LLC). Prospective shareholders can purchase shares for money or obtain them in exchange for goods or services provided to the corporation or LLC.

Do I need a tax ID number?

Yes, all corporations and LLCs must have a federal tax ID number to do business. This number will be required to fill out payroll reports, pay taxes, open a business checking account, etc.

IRS Form SS-4 is the one which is used when applying for an EIN number. Click&Inc is the only online incorporation service that drafts the SS-4 for you at no additional charge, regardless of what incorporation package you select.

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If I incorporate in Nevada or Delaware (or any other state) but operate my business in the state in which I actually live, do I need to also register with my state?

Yes. If you incorporate in State X but operate your business in State Y (where you live), you will need to register as a foreign corporation in your home state. This will likely require filing out a form and paying a filing fee (usually $100 or less).

Each state has different requirements as to when a corporation must register and include situation where you have an office, sales representatives, etc. Check with the state in which you want to register as a forgiven corporation ensure the proper requirements are satisfied.

For more information on when you may need to file as a foreign corporation read the answer to question #19 below.

Do I need a Corporate Seal?

This may be one of the most misunderstood elements of any incorporation. The fact is, you will rarely, if ever, need a corporate seal. Corporate seals are the embossed stamps that contain the name of a corporation and it’s date of formation. No state’s require corporate seals any more. Many online incorporation sell corporate seals because there is a high profit margin...and for no other reason. You don’t need a corporate seal, but if you really want one, we have high quality, steel ones for just $45.

To order one go to www.corporate-seal.net. If any online incorporation service tells you that you need a corporate seal, run away as fast as you can.

What do I have to do on an Annual basis?

Your corporation will have to file an annual tax return (IRS Form 1120 or 1120S). Annual tax returns are also filed by sole proprietorships (Schedule C to IRS Form 1040), limited liability companies (IRS Form 1065) and general partnerships (IRS Form 1065).

Almost all states require all business entities to file an annual report each year which updates the address of the corporation, its officers and directors, and its registered agent for service of process. There is a small fee (in most cases).

Finally, Click&Inc suggests that you consult your accountant for any additional information required for filling out corporate tax returns, quarterly tax payments, employment payroll records, etc.

Does it matter where (in which State) I incorporate?

Not really. Incorporating in a state other than the one where you live and work will generally involve additional costs. You must have registered office / registered agent in the state in which you incorporate. Unless you have a person (over 18) in the state of incorporation who will agree to be your registered agent, it’ll cost about $125-$200 per year to have a registered agent.

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Further, the state in which you live and actually operate your business may require that you file as a foreign corporation if you incorporate in another state (technically, your business is registered in a different state). This can cost between $50-$200 (depending on the state).

For the home and small business person there is not compelling reason to incorporate in Nevada or Delaware, despite what you have heard. You nor your assets are any more protected by being in one of these state than you would be in your own state.

How do you know when you are doing business as a foreign corporation?

Here are a few scenarios that you can "generally" apply. Keep in mind that if you have an uncertainty with regard to your status, you should consult an attorney and/or contact the Secretary of State's office of the State in question.

A corporation formed in one State will nearly always be subject to another State's laws, including all taxes, if it is determined to be doing business in that other State.

A Minnesota corporation, with an employee, a warehouse, an office or mailing address in Pennsylvania, will generally have sufficient association with Pennsylvania to bring it under Pennsylvania's jurisdiction as to business or sales done in Pennsylvania.

A California corporation, with an independent contractor sales person, operating in Texas, where orders are taken in Texas then sent to the corporate headquarters in California for acceptance and delivery will generally not be considered as doing business in Texas.

Merely having a Bank Account in Iowa will not, by itself raise sufficient nexus to establish "Doing Business" in Iowa. You are generally evaluated by your level of human resource, capital and asset investment in that State.

Generally, mail order sales from Kentucky, mailed to a corporation in Oregon will not be sufficient nexus (connection) to raise Kentucky jurisdictions.

Remember, if you are not sure, consult with an attorney performing small business in your State and experienced in foreign corporation operating procedures.

What is a "C" Corporation?

The term C Corporation refers to the way in which the corporation is taxed. There is a corporate level income tax on the profits of a C Corporation. In addition, if a dividend is paid to shareholders from retained earnings, the dividend is included on the personal tax return of each shareholder. Thus, the profits of a C Corporation are subject to potential double taxation. Your corporation will be taxed as a C Corporation this year unless you timely file IRS Form 2553 to elect tax treatment as an S Corporation.

To learn about the characteristics of a C corporation, click here.

To view a side-by-side comparison chart of the similarities and differences of C corporations, S corporations and LLCs, click here.

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What is an "S" Corporation?

The term S Corporation refers to the way in which the corporation is taxed. An S Corporation is a pass through entity. There is no corporate level income tax. Instead, a pro rata portion of the annual profit or loss of the S Corporation is included on the personal tax return of each shareholder. If IRS Form 2553 is filed within 75 days after incorporation, the corporation will be treated as an S Corporation for tax purposes. Many start-up businesses benefit by making the election to be taxed as an S Corporation.

To learn about the characteristics of a S corporation, click here.

To view a side-by-side comparison chart of the similarities and differences of S corporations, C corporations and LLCs, click here.

How do "C" Corporations differ from "S" Corporations?

Click here to view an easy to read chart which shows the similarities and differences of S corporations and C corporations.

Does incorporating in Delaware or Nevada allow me to avoid taxes in my home State?

NO!! Corporations are created by each state under its own rules and laws. If an out of state corporation (Foreign Corporation) wants to do business in another state, it must first qualify in that other state. At the moment the foreign corporation qualifies, it becomes subject to all the laws and taxes of that state. No state will permit a foreign corporation to evade its tax law.

In other words, if you incorporate in Delaware, that is fine, but remember that if you live and work in Ohio, you still have to qualify your corporation in Ohio in order to conduct business there and you will pay tax there just as you would had you incorporated there in the first place. So, when all is said and done, you'll probably find it much easier to incorporate in Ohio. Still, the choice is yours.

What do I do if I need to change my S corporation to a C corporation?

There are only a few circumstances in which you would likely need to make such a change:

You plan on having more than 75 shareholders (e.g. new investors are coming in); Foreign nationals (non U.S. citizens / resident aliens) are going to become shareholders; Other corporate entities (LLCs or other corporations) are going to purchase shares.

While there is no official form to file, the company should send a letter to the IRS stating the following:

1. It is revoking its S election under IRS Code Section 1362(a). 2. The total number of shares of issued stock at the time the revocation is made.3. The specific date on which you’d like the revocation to be effective.

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4. The name, address, and tax ID number (EIN) of the corporation.

Note that some states also have their own S-election forms, so you will need to check with them about their conversion policies. We suggest that if you are planning on converting your entity like this that you contact a lawyer or tax professional.

What are the differences in how LLCs are treated for tax purposes versus an S corporation?

First, the following is VERY general. For specific information, see an accountant or tax advisor. As an LLC, you will be treated as a sole proprietor (if you are a one member LLC) or as a partnership (two or more members) for tax purposes. Thus, you will still have to pay self-employment tax, but you will enjoy the limited liability protections of a corporation. As an LLC you can also choose to be taxed like an S or C corporation by filing IRS Form 8832.

One big advantage to an S-corporation is that you don’t have to pay self-employment tax. Of course, you should pay yourself some kind of a salary, which will be subject to FICA (goes toward Social Security and Medicare benefits). But, you can pay yourself some income in the form of a dividend, etc. without incurring additional FICA payments.

Why do a lot of real estate investors choose LLCs?

Rental income from real estate generally isn’t considered self-employment income. Therefore, real estate investors get all of the limited liability protection, but none of the tax burdens.

Glossary

Accrual MethodAn accounting method under which income is subject to tax after all events have occurred which fix the right to receive such income and deductions are allowed when all the events have occurred to fix the obligation to pay the debt.

Aggregate Par ValueAggregate par value is the par value multiplied by the number of authorized shares. This amount is important in determining initial fees and annual franchise taxes in many states.

Annual Meeting of ShareholdersNearly all states require a corporation to hold an annual meeting of shareholders at which time directors are elected and other corporate issues are voted on.

Annual ReportA required annual filing in a state, usually requiring names of the directors (for corporations), members (for LLCs) and financial information. This term can also refer to an annual statement of business and affairs furnished by a corporation to its shareholders.

ApostilleIs a method of certifying a document for use in another country pursuant to the 1961 Hague Convention. With this certification by apostille, a document is entitled to recognition in the country of intended use, and no additional certification or legalization by the embassy or consulate of the

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foreign country where the document is to be used is required. An apostillized copy of the articles of incorporation or articles of organization is often required to open a bank account in another country for a US-incorporated business. Note, certain countries require a certified copy of the articles of incorporation/organization with an appropriate gold seal instead of an apostillized copy.

BizFilings' International Package includes either an apostille or a certified copy with gold seal for the country of intended use.

Articles of Incorporation(Certificate of Incorporation or charter). The articles are the primary legal document of a corporation; they serve as a corporation's constitution. The articles are filed with the state government to begin corporate existence. The articles contain basic information on the corporation as required by state law. BizFilings prepares the articles as part of its incorporation service.

Articles of OrganizationLLCs must file the articles with the proper state authorities to begin existence. The articles of organization are very similar to a corporation's articles of incorporation. BizFilings prepares the articles, as part of its formation service.

AssetAnything having commercial or exchange value that is owned by a business, government, institution, or individual. This can include stocks, bonds, real estate, equipment, a brand name, or the value of a company as an operating business, sometimes known as goodwill.

Assumed NameA name under which a corporation conducts business that is not the legal name of the corporation as shown in its articles of incorporation. Assumed names (also called a fictitious name and Doing Business As or DBA) could be filed at the city, county or state level depending on state requirements. A corporation can use multiple assumed names.

Authorized Shares or StockThe total number of shares a corporation is authorized to issue. This number is specified in the articles of incorporation. All of the shares authorized need not be issued to shareholders; the corporation can have unissued shares that can distributed at a latter time.

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Board of DirectorsThe governing body of a corporation. Elected by shareholders, the directors are responsible for selecting the officers and their supervisory roles, and the general control of the corporation.

Business EntityAn organization that possesses a separate existence for tax purposes. Some types of business entities include corporations and limited liability companies.

Business PlanA written document that details a proposed or existing venture. It will typically explain the vision, current status, expected needs, defined markets, and projected results of the business.

BylawsBylaws are the rules and regulations adopted by a corporation for its internal governance. It usually contains provisions relating to shareholders, directors, officers and general corporate business. The bylaws are adopted at the corporation's initial meeting.

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Capital Gains or LossesGains or losses realized from the sale or exchange of capital assets. The amount is determined by calculating the difference between an asset's purchase and sale price.

Capital StockSee Authorized stock.

Cash MethodAn accounting method under which income is subject to tax when actually received and deductions are allowed when actually paid.

C CorporationA C corporation is simply a standard business corporation. It is called a C corporation because it is taxed under subsection C of the IRS code.

Certificate of Authority or Application for AuthorityIs a document issued by the proper state authority to a foreign corporation granting the corporation the right to do business in that state upon filing an application of authority. See our Foreign Qualification service for more information.

Certificate of Good StandingA certificate issued by a state official as conclusive evidence that a corporation or LLC is in existence or authorized to transact business in the state. The certificate generally sets forth the corporation's or LLC’s name; that it is duly incorporated or organized and authorized to transact business; that all fees, taxes and penalties owed the state have been paid; that its most recent annual report has been filed; and, that articles of dissolution have not been filed. Also known as a certificate of existence or certificate of authorization.

Common StockThe primary stock of a corporation. This stock gives shareholders the right to participate in management of the corporation and give the shareholder a proportionate share of the dividends.

ConversionThe process of converting a corporation to an LLC or converting an LLC to a corporation. Not all states allow this procedure, and the fees vary within the states that do.

Corporate KitA binder usually containing essential items for the routine maintenance and administration of a corporation. Corporate kits include sample minutes, resolutions and bylaws, stock certificates, a corporate seal, and stock ledger.

Corporate Record BookMaintaining the proper records is very important to assure limited liability to corporate shareholders. The corporation should have a record book which contains a copy of the articles of incorporation, bylaws, initial and subsequent minutes of directors and shareholders meetings and a stock register.

Corporate SealA device made to either emboss or imprint certain company information onto documents. This information usually includes the company's name and date and state of formation. Corporate seals are often required when opening corporate bank accounts, distributing stock or conducting other corporate business.

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Delayed Effective DateCertain states allow for a business to choose an effective date for when the business will officially be formed as a corporation or LLC in that state. For instance, a business owner submitting a formation order in November of 2004 can choose an effective date of January 1, 2005, when his company will be officially recognized as a corporation or LLC in that state.

DirectorsDirectors are elected by the shareholders. They manage or direct the affairs of a corporation. Typically, the directors make only major business decisions and monitor the activities of the officers.

DissolutionThe termination of a corporation's legal existence. Dissolution may be caused in many ways including, failure to file annual reports, failure to pay certain taxes, bankruptcy, or voluntary dissolution of the corporation by the shareholders and directors. BizFilings performs voluntary dissolution filings. See the dissolution product page for more information.

DividendA dividend is a distribution of money or property paid by the corporation out of the corporation's profits to shareholders. Dividend payments are subject to double taxation, the corporation pays tax on its profits and the dividend recipient must pay income taxes on the dividend payment, the same money is taxed twice. The directors of the corporation decide if a dividend payment is to be made.

Doing Business As (DBA)A "DBA", also known as an "assumed name", is typically completed by making a filing at the county level where the business is located. This filing does not change the official name of the corporation; however, it allows the company to use additional names.

Domestic CorporationA corporation is a domestic corporation in the state where it has incorporated.

Double TaxationCorporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Thus, to the extent that earnings are distributed to shareholders as dividends, there is a double tax on earnings at the corporate and shareholder level. S corporations and LLCs are pass-through entities which are not subject to the double tax.

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EquityThe ownership of a shareholder in a corporation.

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Fictitous NameSee "Doing Business As".

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Fiscal YearAny twelve-month period used by a business as its fiscal accounting period.

Federal Tax Identification NumberThis is a number assigned to a corporation or other business entity by the federal government for tax purposes. Banks generally require a tax identification number to open bank accounts. The federal tax identification number is also known as the Employer Identification Number (EIN).

Foreign CorporationA corporation is referred to as a foreign corporation in all states except for the state where it is incorporated. If a corporation is "transacting business" in a state other than where it is incorporated, it must register for a certificate of authority to transact business in the other state or possibly lose access to that state's courts and face fines. See Foreign Qualification for more information.

Franchise TaxIs a tax on the privilege of carrying on business as a corporation or LLC in a state. The value of the franchise tax may be measured by amount of earnings, total value of capital or stock, or by amount of business done. In some states, like California, the franchise tax is simply an income tax.

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Holding CompanyA corporation that owns a large number of shares in other companies. Holding companies use the voting rights that come with their shares to exert influence over the companies under them.

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IncorporationThe act of creating or organizing a corporation under the laws of a specific jurisdiction.

IncorporatorThe person or entity that prepares, files and signs the articles of incorporation. BizFilings acts as an incorporator for many new companies.

Involuntary DissolutionThe termination of a corporation's legal existence pursuant to an administrative or judicial proceeding; dissolution forced upon a corporation rather than decided upon by the corporation.

IRS Form 1023This form is used to apply for tax-exempt status with the IRS.

IRS Form 1120This form is used to report the income, gains, losses, deductions, credits, and to figure the income tax liability of a corporation.

IRS Form 1120SThis form is used to report the income, deductions, gains, losses, etc. of a domestic corporation that has elected to be an S Corporation by filing Form 2553, and whose election is in effect for the tax year.

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IRS Form 2553This form is used to apply for S corporation status.

IRS Form 8822This form is used to change your address on file with the IRS.

IRS Form SS-4This form is used to apply for a federal tax ID number.

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Judicial DissolutionInvoluntary dissolution of a corporation by a court at the request of the state’s Attorney General’s office, a shareholder or a creditor.

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Limited Liability Company (LLC)A business entity formed upon filing articles of organization with the proper state authorities and paying all fees. LLCs provide the limited liability to their members, and are taxed like a partnership, preventing double taxation. LLCs can be formed in every state.

LLC KitA binder usually containing essential items for the routine maintenance and administration of a limited liability company. LLC kits include membership certificates, an LLC seal and sample operating agreements.

LLC SealA device made to either emboss or imprint certain company information onto documents. This information usually includes the company's name and date and state of formation. LLC seals may be required when opening bank accounts, distributing membership certificates or conducting other company business.

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ManagerAn LLC may be operated by a group of managers who act much like a board of directors. If an LLC is to Controlled by managers this fact must be stated in the articles of organization.

MemberA member is a person or entity who is an owner of some or all of a LLC. The business decisions of an LLC are made by the members unless the articles of organization provide that the LLC will controlled by a manager or managers.

Membership InterestA member's ownership of an LLC is represented by "interests" just as a partner has an interest in a partnership and shareholders own stock in a corporation.

Merger

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A merger occurs when two corporations join together into one, with one corporation surviving and the other corporation disappearing. The assets and liabilities of the disappearing entity are absorbed into the surviving entity.

MinutesA written record which details the events of the corporation. These records should be kept in the corporation's or LLC's record book.

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Name ReservationThe name of a corporation or LLC must be distinguishable on the records of the state government. If the name is not unique, the state will reject the articles of incorporation or articles of organization (for LLCs). A name can be reserved, usually for 120 days, by applying with the proper state authorities and paying a fee. See "Other Filings" for more information.

No-Par-Value StockStock with no minimum value. Most states allow no-par stock. If the stock is no-par stock then the amount of stated capital is typically an arbitrary amount assigned by the board of directors. Some states, though, assign a value of $1.00 to stock when filed as being no-par-value stock. Further, the value of capital for franchise tax purposes is determined by the state and this may result in higher franchise taxes in comparison with low par-value stock.

Not For Profit (or Nonprofit) CorporationA corporation organized for some charitable, civil or other social purpose which does not entail the generation of profits for shareholders. These corporations can apply for tax-exempt status at both the federal and state level. Not-for-profit corporations, also often called nonprofit corporations, must file not-for-profit articles of incorporation with the state.

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OfficersThe directors appoint officers. They manage the daily affairs of the corporation. A corporation's officers usually consist of a president, vice-president, treasurer, and secretary. In most states, one person can hold all of these posts.

Operating AgreementAn agreement among the LLC's members which govern the LLC's operations and the rights of its members. It is analogous to corporate bylaws.

Organizational MeetingThe initial meeting where the formation of the corporation is completed. At the organizational meeting a number of initial tasks are completed such as: the articles of incorporation are ratified, the initial shares are issued, officers are elected, bylaws approved, and a resolution authorizing the opening of bank accounts is passed.

OrganizerThe person who or the entity that prepares, files and signs the articles of organization. BizFilings serves as an organizer for many new companies.

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Paid in Capital

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A few states require corporations to have a specified amount of paid in capital prior to starting business. Broadly defined it is all the money and other property belonging to a corporation.

Parent CorporationA corporation that owns a controlling interest in another corporation.

PartnershipA partnership is an association of two or more persons. In contrast to a corporation, a general partnership can come into existence without the need to file any formal papers with any state official. The owners of a partnership are personally and fully liable for all business debts; thus, personal property could be taken to pay business debts.

Par-ValueThe stated minimum value of a share of stock.

Pass-Through TaxationThe income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is "passed through" the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. S corporations and LLCs are both pass-through tax entities.

Preferred SharesA class of shares that entitles the holders to preferences over the holders of common shares, usually with regard to dividends and distributions of assets upon dissolution or liquidation.

Professional CorporationA corporation which is organized for the purpose of engaging in a learned profession such as law, medicine or architecture. Professional Corporations must file articles of incorporation with the state which meet the state's requirements for professional corporations.

ProxyIf a shareholder can not attend a meeting, the shareholder is allowed to vote by proxy.

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QuorumThe minimum attendance required to conduct business at a shareholder or board of directors meeting. Usually, a quorum is achieved if a majority of directors are present (for directors meetings) or outstanding shares are represented (for shareholder meetings).

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Registered AgentThe agent named in the articles of incorporation. The agent will receive service of process on the corporation and other important documents. The agent must be named in the articles of incorporation, and must be located in the state of incorporation or organization.

Registered OfficeThe office named in the articles of incorporation. The registered office must be where the registered agent is located, and need not be the principal office or place of business of the corporation.

Reinstatement

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Returning a corporation or LLC that has been administratively dissolved or had its certificate of authority revoked, to good standing with the state of formation or qualification.

ResolutionA resolution is a formal decision of the corporation, which has been adopted by either the shareholders or the board of directors.

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S CorporationA corporation which elects subchapter S tax treatment. This tax treatment allows the corporation to avoid entity level taxation.

Section 1244 StockAn individual investor in a corporation which meets the Section 1244 requirements is entitled to treat up to $50,000 (or $100,000 if filing a joint return) of losses on the 1244 section stock as ordinary losses.

ShareAn interest in a corporation. The total ownership of a corporation is divided into shares of stock.

ShareholderAny holder of one or more shares in a corporation. A shareholder usually has evidence that they are a shareholder; this evidence is represented by a stock certificate.

Shelf CompanyCompanies (either corporations or LLCs) that are formed, but have never been used. Each shelf company created by BizFilings was filed for the specific purpose of being a shelf company. BizFilings' shelf companies include a certificate of incorporation and franchise tax documents that have been filed with the Secretary of State.

Sole ProprietorshipA business carried on by the owner as an individual. The owner of a sole proprietorship is personally and fully liable for all business debts; thus, personal property could be taken to pay business debts.

Stated CapitalThe par value of shares multiplied by the number of shares outstanding.

StockAn equity or ownership interest in a corporation, measured in shares. Ownership of shares is demonstrated by stock certificates.

Stock CertificateA written instrument that shows ownership of shares in a corporation.

StockholderSee shareholder.

Stock Transfer BookA record book, also called a stock transfer ledger, which lists the owners of shares of stock in a corporation.

Subsidiary

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A corporation that is either wholly owned or controlled through ownership of a majority of its voting shares, by another corporation or business entity.

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Tax-exempt OrganizationAny organization that is determined by the IRS to be exempt from federal taxation of income. This determination is based off of IRS acceptance of Form 1023. A tax-exempt organization may be required to operate exclusively for charitable, religious, literary, educational or similar types of purposes.

Treasury SharesShares of stock which were issued and later acquired or bought back by the corporation.

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UnderwriterA company that purchases shares of a corporation and arranges for sale of the shares to the general public.

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Voluntary DissolutionAction taken by shareholders, incorporators or initial directors to dissolve a corporation. Or action taken by members or organizers to dissolve an LLC. The process is completed by filing Articles of Dissolution with the Secretary of State.

Voting RightsRights of shareholders to vote their shares pursuant to provisions of state statutes, the articles of incorporation and the bylaws.

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WithdrawalThe statutory procedure whereby a foreign corporation or foreign LLC obtains he consent of a state to terminate its authority to transact business there.

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