Business Essentials Ch. 3

Acquisition

the purchase of one company by another

Board of Directors

governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations while remaining responsible for sustaining its assets

Business Plan

document in which the entrepreneur summarizes his or her business strategy for the proposed new venture and how that strategy will be implemented

Chief Executive Officer (CEO)

top manager who is responsible for the overall performance of a corporation

Closely Held (or Private) Corporation

corporation whose stock is held by only a few people and is not available for sale to the general public

Cooperative

form of ownership in which a group of sole proprietorships or partnerships agree to work together for common benefits

Corporate Governance

roles of shareholders, directors, and other managers in corporate decision making and accountability

Corporation

business that is legally considered an entity separate from its owners and is liable for its own debts; owners liability extends to the limits of their investments

Divestiture

strategy whereby a firm sells one or more of its business units

Double Taxation

situation in which taxes may be payable both by a corporation on its profits and by shareholders on dividend incomes

Employee Stock Ownership Plan (ESOP)

arrangement in which a corporation holds its own stock in trust for its employees, who gradually receive ownership of the stock and control its voting rights

Entrepreneur

business person who accepts both the risks and the opportunities involved in creating and operating a new business venture

Entrepreneurship

the process of seeking business opportunities under conditions of risk

Established Market

one in which many firms compete according to relatively well-defined criteria

First-Mover Advantage

any advantage that comes to a firm because it exploits an opportunity before any other firm does

Franchise

arrangement in which a buyer (franchisee) purchases the rights to sell the good or service of the seller (franchiser)

General (or Active) Partner

partner who actively manages a firm and who has unlimited liability for its debts

General Partnership

business with two or more owners who share in both the operation of the firm and the financial responsibility for its debts

Institutional Investor

large investor, such as a mutual fund or a pension fund, that purchases large blocks of corporate stock

Joint Venture

strategic alliance in which the collaboration involves joint ownership of the new venture

Limited Liability

legal principle holding investors liable for a firm's debts only to the limits of their personal investments in it

Limited Liability Corporation (LLC)

hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability

Limited Partner

partner who does not share in a firm's management and is liable for its debts only to the limits of said partner's investment

Limited Partnership

type of partnership consisting of limited partners and a general (or managing) partner

Master Limited Partnership

form of ownership that sells shares to investors who receive profits and that pays taxes on income from profits

Merger

the union of two corporations to form a new corporation

Multinational (or Transnational) Corporation

form of corporation spanning national boundaries

Niche

a segment of a market that is not currently being exploited

Officers

top management team of a corporation

Professional Corporation

form of ownership allowing professionals to take advantage of corporate benefits while granting them limited business liability and unlimited professional liability

Publicly Held (or Public) Corporation

corporation whose stock is widely held and available for sale to the general public

S Corporation

hybrid of a closely held corporation and a partnership, organized and operated like a corporation but treated as a partnership for tax purposes

Small Business

independently owned business that has relatively little influence in its market

Small Business Administration (SBA)

government agency charged with assisting small businesses

Small Business Development Center (SBDC)

SBA program designed to consolidate information from various disciplines and make it available to small businesses

Small Business Investment Company (SBIC)

government regulated investment company that borrows money from the SBA to invest in or lend to a small business

Sole Proprietorship

business owned and usually operated by one person who is responsible for all of its debts

Spin Off

strategy of setting up one or more corporate units as new, independent corporations

Stockholder (or Shareholder)

owner of shares of stock in a corporation

Strategic Alliance

strategy in which two or more organizations collaborate on a project for mutual gain

Tender Offer

offer to buy shares made by a prospective buyer directly to a target corporation's shareholders, who then make individual decisions about whether to sell

Unlimited Liability

legal principle holding owners responsible for paying off all debts of a business

Venture Capital Company

group of small investors who invest money in companies with rapid growth potential