Business Law Ch. 39, 40, 42

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Corporation

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A legal entity formed in compliance with stsutory requirements. The entity is distinct from its shareholders-owners.

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Shareholder

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One who purchases shares of a corporation's stock, thus acquiring an equity interest in the corporation.

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Corporation Taxes

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Whether a corporation retains its profits or passes them on to the shareholders as dividends, those profits are subject to income tax by various levels of government. Failure to pay taxes can lead to the state can suspend the entity's corporate status until the taxes are apid or even dissolve the corporation for failing to pay taxes.

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Articles of Incorporation

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The document filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated; state statutes usually prescribe what kind of information must be contained in the articles of incorporation.

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Bylaws

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A set of governing rules adopted by a corporation or other association.

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C-Corp

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refers to any corporation that, under United States federal income tax law, is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately. Most major companies (and many smaller companies) are treated as C corporations for U.S. federal income tax purposes.

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S-Corp

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S corporation A close business corporation that has met certain requirements as set out by the Internal Revenue Code and thus qualifies for special income tax treatment. Essentially, an S corporation is taxed the same as a partnership, but its owners enjoy the privilege of limited liability.

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Bonds

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A certificate that evidences a corporate (or government) debt. It is a security that involves no ownership interest in the issuing entity.

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Par Value Share

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Corporate shares that have a specific face value, or formal cash-in value, written on them, such as one dollar.

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Book Value

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is the value of an asset according to its balance sheet account balance.

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Market Value

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what a person will pay to sell the stock

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Proxy

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In corporation law, a written agreement between a stockholder and another under which the stockholder authorizes the other to vote the stockholder’s shares in a certain manner.

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SEC

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is a federal agency. It holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States

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Securities Act of 1933-1934

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1933 = 1. "PROSPECTUS" 2. This created the SEC 3. Margin - borrowing money to invest today = 10%

1934 = Secondary Markets. Every trade is regulated by the law.

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Insider Trading

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The purchase or sale of securities on the basis of “inside information” (information that has not been made available to the public) in violation of a duty owed to the company whose stock is being traded.

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IPO's

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Innitial Public Offer = or stock market launch is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time. Vast majority is good to buy them.

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Types of "Bonds"

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1. Government Bond = No State Tax
2. State/Local Government = Municiple Bond/Note = No Federal Tax
3. Savings Bond = Sold at 50% discount

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Limited Liability

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Exists when the liability of the owners of a business is limited to the amount of their investments in the firm.

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"Corporate Veil" - pierce the corporate veil

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To disregard the corporate entity, which limits the liability of shareholders, and hold the shareholders personally liable for a corporate obligation.

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Board of Directors

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People that run the company, and are elected by the stockholders, but are low paid. There main job is to higher Officers.

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Officers

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1. President = CEO
2. Vice President
3. Secretary = CFO
4. Treasure

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Dividends

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A distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held.

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Capital Gains

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is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realized on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price.

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Prospectus

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A document required by federal or state securities laws that describes the financial operations of the corporation, thus allowing investors to make informed decisions.

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Required Officers

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Required to have a President (CEO) and a Security Treasure (CFO) in IL, but everywhere else can either have
1. President
2. Vice President
3. Secretary
4. Treasure

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Securities

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Bond Holders

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Equities

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Stockholders

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Common Stock

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Shares of ownership in a corporation that give the owner of the stock a proportionate interest in the corporation with regard to control, earnings, and net assets; shares of common stock are lowest in priority with respect to payment of dividends and distribution of the corporation’s assets on dissolution.

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Preferred Stock

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Classes of stock that have priority over common stock both as to payment of dividends and distribution of assets on the corporation’s dissolution.

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Straight or Cumulative Voting

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Straight Voting = 2000 votes = 1=500, 2=500, 3=500, & 4=500
Cumulative Voting = 2000 votes = 1=2000, 2=X, 3=X, 4=X

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Sarbanes-Oxley Act

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is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms.

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NYSE

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New York Stock Exchange, is a stock exchange located at New York City. It is the world's largest stock exchange. (Seat) 3 letters or less.

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NASDAQ

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National Association of Securities Dealers Automated Quotations = tech and automated. 4 letters or less

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Mutual Funds

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A specific type of investment company that continually buys or sells to investors shares of ownership in a portfolio.

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Blue Sky Laws

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State laws that regulate the offer and sale of securities.

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Investment Bankers

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A Corporation to help you start a corporation. You go to an Investment Banker to start a corporation.

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Stock

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An equity (ownership) interest in a corporation, measured in units of shares.