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7.02 Key Terms
| Term | Definition |
|---|---|
| Acquisition: | The process of taking possession of something (e.g., acquiring another business by purchasing it) |
| Annual report: | A document outlining the financial status of a business |
| Asset(s): | Anything of value that a business or individual owns |
| Better Business Bureau: | A consumer organization that monitors complaints against businesses |
| Board of directors: | A group of people chosen to govern the activities of a corporation |
| Business-format franchise: | A franchise arrangement in which the franchisee must operate under the trade name of the parent company that provides continuous assistance in setting up and operating the business |
| “C” corporation: | A form of business ownership that is considered a separate legal entity from its owners; can be owned by unlimited stockholders and is susceptible to dual taxation; a type of public corporation |
| Capital: | Assets of a business |
| Commission: | A percentage of the total sale amount paid to the individual or business that makes the sale |
| Consolidation: | A form of business growth in which a corporation acquires many smaller companies |
| Corporation: | A form of business ownership that is owned by stockholders who have purchased units or shares of the company; an “artificial being, invisible, intangible, and existing only in contemplation of the law” (U.S. Supreme Court) |
| Dealership: | See product trade-name franchise |
| Dividend: | A sum of money paid to an investor or stockholder as earnings on an investment |
| Dual/Double taxation: | The levying of two taxes on the same income (e.g., tax on a corporation’s income as well as dividends) |
| Exclusive distributorship: | See product trade-name franchise |
| Expansion: | A form of business growth in which a company extends its operations or facilities using new capital or reinvested funds |
| Franchise: | A contractual agreement between a parent company and a franchisee to distribute goods or services |
| Franchisee: | One who buys the right to sell the goods or services of the parent company (franchisor) |
| Franchising: | A method of distributing recognized goods and services through a legal agreement between two parties |
| Franchisor: | A parent company and owner of the name and/or system that is being distributed through a contractual franchising arrangement |
| General partnership: | A type of partnership agreement in which all partners are liable for a business’s losses; also known as ordinary partnership |
| Hybrid structure: | A form of business ownership that combines elements of corporations and either sole proprietorships or partnerships |
| Joint venture: | An arrangement that involves two or more businesses entering into a relationship by combining complementary resources, such as technology, skills, capital, or distribution channels, for the benefit of all parties; the relationship is usually short-term or |
| Licensee: | The buyer of copyrighted, patented, or trademarked material |
| Licensing: | A business structure that requires the authorization or permission from an owner to another entity to use trademarked, copyrighted (e.g., logo, name), or patented material for a specific activity, during a specific time period, for the profit of both part |
| Licensor: | The owner of copyrighted, patented, or trademarked material |
| Limited liability: | Restricted chance of loss; a condition in which business owners risk only the amount of their investment |
| Limited liability company (LLC): | A form of business ownership in which members of a corporation experience limited liability; there is limited taxation on company income and limited life for the business entity |
| Limited liability partnership (LLP): | A form of business ownership that is generally used by business professionals for the purpose of protecting innocent partners from the malpractice of the other partners |
| Limited partnership: | A type of partnership agreement in which a partner has limited liability; the liability is limited to the amount of the investment |
| Master licensee: | A person or firm who helps franchisors find franchisees in a particular region or territory |
| Merger: | Two individual businesses that combine to form one organization |
| Multi-level marketing: | A business structure that pays commission on sales earned by people at two or more levels; the sales representatives usually work independent of the company; the representatives not only sell products but try to get others to sell them |
| Nonprofit corporation: | A legal business structure that primarily operates for the purpose of serving others, not to make a profit; income is used to cover operational expenses; can be exempt from paying some or all taxes |
| Operating agreement: | A written document signed by members of a limited liability partnership or limited liability company that specifies the terms of the business arrangement |
| Partnership: | A form of business ownership in which the business is owned by two or more persons |
| Piggyback franchise: | A form of ownership in which a retail franchise operates within the facilities of another store; often referred to as the host |
| Private corporation: | A type of corporation owned by a few people that does not offer its shares for sale to the general public; also known as closely held, or close, corporation |
| Private enterprise system: | An economic system in which individuals and groups, rather than the government, own or control the means of production; also known as free market economy, private profit system, market system, capitalistic system, or free enterprise system |
| Product trade-name franchise: | A franchise arrangement based on an independent sales relationship between a franchisor and franchisee to stock and sell a specific line of goods; also known as dealership or exclusive distributorship |
| Public corporation: | A type of corporation that usually sells millions of shares of stock to many stockholders; must make its financial information available to the general public |
| Pyramid scheme: | An illegal form of multi-level marketing in which emphasis is placed on collecting initial fees from as many people as possible |
| Royalty: | Fees paid to a parent company that are often based on a percentage of the franchise’s profits; a percentage of actual sales that a licensee pays to a licensor; usually anywhere from 5 to 15 percent. |
| Subchapter “S” corporation: | A type of corporation that is limited to 100 or fewer shareholders, has limited shareholder liability, and requires little financial reporting; taxed as a partnership; also known as an “S” corporation |
| Sole proprietorship: | A business owned by one person who receives all the profits from the business and takes all the risks |
| Stockholder: | Owners of stock; also known as shareholders |
| Unlimited liability: | Requirement that business owners be responsible for paying business debt; personal assets can be used to pay the debt |
Created by:
drakon0130
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