Glossary

Agency
A fiduciary relationship that begins when one person, know as the principle, gives authority to another, usually the agent, to act in their name and bind the principle; the agent usually acts under the control of the principal once the agent has manifested assent to do so.
Agent
The party who acts on behalf of the principal in an agency relationship.
Authority
The power to act or bind an organization or principle; it can be actual or apparent.
Contribution
Made when a party transfers service, property, money, or other valuable assets to an entity in exchange for an ownership interest in that entity or organization; it can also be a promise of a transfer of such assets.
Corporation
A business organization incorporated and formed under a State’s corporation statute.
Default Rules
The rules put in place through state statutes that can be altered by the agreement of the owners and managers of A business entity.
Dissociation
An act completed by the member of a business entity which ends their status of being a partner or member.
Dissolution
The process which starts the liquidation of an organization.  It is not the termination of the organization, but rather is the change in relation by one of the partners that starts the winding up of the organization.  The organization is terminated once liquidation is concluded.
Distribution
When an organization transfers money or property to another person or entity because that person or entity has an ownership interest in the organization.
Entity
An organization that is separate and apart from its owners.
Joint Venture
An entity that is formed by two co-owners or parties, usually in the form of a partnership, for the purpose of a single undertaking and can be for a limited amount of time.
Joint and Several Liability
Liability that can be distributed among many different parties, or to only one or a selected few of the parties, according to the adversary’s discretion.  In essence each party can be responsible for the whole obligation, but the paying party has the right to recover that portion of the obligation attributable to non-paying parties.
Limited Liability Entities
Entities that allow the owners’ risk to be limited to the value contributed to the organization and provides a barrier for further personal liability; examples include LLCs, LLP’s, LLLP’s, corporations, and limited partnerships.
Liquidation
The process by which assets of the organization are sold in order to first pay the debts owed to creditors, then to pay equity holders as determined by their ownership interest status and value.
LLC
Limited liability company.
LLP
A limited liability partnership.
LLLP
A limited liability limited partnership.
Manger
One who has been given the authority to bind an organization.  This authority is derived from internal statues or framework of the organization or by agreement of the owners.  Managers do not necessarily have to be members or owners of the organization.  Generally those who are managers include: officers, directors, partners, general partners, managers of an LLC and members of a member-managed LLC.
Manager-managed LLC
An LLC which is governed in its day to day activities by a Manager who is chosen by the members of the LLC, but who does not necessarily have to be a member of the LLC.  Members of this type of LLC do not have the power to bind the LLC in the ordinary course of business, just because they are members; but the Manager does have the power to bind the LLC on account of being the Manager.
Mandatory Rules
Rules derived from the state statues that may not be changed or deviated from even through negotiation and contract by the owners, managers, or members of the organization.
Member-managed LLC
An LLC that is governed in its day to day activities by a member or members of the LLC. A Member can bind the LLC, with 3rd parties who are unaware of any limitations placed upon that member by the LLC, on account of their status as members of the LLC.
Nonprofit Corporation
A corporation that is formed for public benefit, mutual benefit, or religious corporation.
Ordinary Decisions
Decisions that are made in the ordinary course of business that are expected to arise (or commonplace) in the type of business operated and are similar to decisions made by other companies in the same line of business.
Operating Agreement
The internal statutes or framework adopted in a limited liability company by the owners of that organization that set the basis for rules and decision making within the organization; they can be referred to as regulations, limited liability company agreement, or company agreement.
Partnership
An entity that is a partnership as described by state partnership statutes, and commonly includes LLP’s under the term “General Partnership.”
Pass-Through Organization
An organization who’s tax structure is such that it is not taxed on the organization level, but profits are passed through to the owners of the organization.  These entities avoid double taxation which is common among corporations: the corporation is taxed on its profits, and the owners are taxed on distributions or dividends.
Piercing the Veil
The process by which creditors, through order of the court, can disregard the protection of the organization and hold the owners of the organization personally liable for actions of the organization.  This process can be achieved when the owners fail to observe the formalities of the organization, commingle assets, perpetrate fraud, under-capitalize the organization, or disregard the separateness of the organization.
Principal
The principal, the context of an agency relationship, is the person for whom the agent acts.
RUPA
Revised Uniform Partnership Act
Sole Proprietor
A person who owns or operates a business without the protection of a entity or organization.
Vicarious Liability
The liability placed on the owners or members of an organization solely on account of their being owners or members of that organization.
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