5.13.9: Key Terms

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B corporation: business that meets a very high standard of social and environmental performance, public transparency, and accountability to balance profit with social purpose

business purpose: reason the entrepreneur forms the company and determines who benefits from it, whether it is the entrepreneur, customers, or some other entity

business structure: legal organization of a business; also called entity selection

C corporation: corporation taxed the corporate level, and then again on the owners’ personal income tax returns if corporate income is distributed to the shareholders as dividends

capital: money raised for operating a business

corporation: complex business structure created by filing the appropriate documents with the state of incorporation

economic nexus: virtual connection with a state based on sales volume or number of transactions

enterprise risk management: integrated cross-disciplinary approach to monitoring risk

equity crowdfunding: raising of capital through the online sale of securities to the general public

financial risk: starting a new business with insufficient funds to sustain operations over an extended period of time

for-profit business: business structure designed to create profits that are distributed to the owners

general partnership: business created when two or more individuals or entities agree to work together to operate a business for profit

insurance: spreading risk over a large number of people (policyholders)

joint venture: temporary partnership in which two different enterprises combine for the purpose of mutual benefits such as sharing of expenses and to work toward shared goals and the associated potential revenue

legal risk: risk stemming primarily from a breach of contract, a regulatory violation, and/or the commission of a tort

limited liability company (LLC): hybrid of a corporation and a partnership that limits the owner’s liability

limited liability partnership (LLP): business arrangement for professional partnerships, such as law firms or accounting firms, in which partners are licensed professionals, with limited liability for financial obligations related to contracts or torts, but full liability for their own personal malpractice

limited partnership (LP): business arrangement that has at least one general partner and one or more limited partners

not-for-profit organization (NFPO): business structure that is usually dedicated to furthering a particular social cause or for advocacy related to a common shared interest by using its surplus revenues to achieve its ultimate objective

partnership: business entity formed by two or more individuals, or partners, each of whom contributes something such as capital, equipment, or skills

privately held corporation: company that does not allow members of the investing public to own stock; instead, it is owned by the founder’s family or friends, or a private group of investors

public corporation: quasi-governmental entity, a corporation owned or sponsored by the government

publicly held corporation: entity in which members of the investing public own the stock

S corporation: “pass-through” entity, also known as a small corporation, where shareholders report and claim the business’s profits as their own and pay personal income taxes on it

sole proprietorship: business entity that is owned and managed by one individual that has very little formal structure and no mandatory filing/registration with the state