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Annual
List~
Business entities in Nevada must file lists annually with the Secretary
of State specifying the names and addresses of the persons or entities
in control of the affairs of the business. Corporations are required to
list the President, Secretary and Treasurer and at least one director.
Limited Liability Companies list the Member(s) and/or Manager(s). Limited
Partnerships list the General Partner(s). Business Trusts list the Trustees.
Annual
Meeting of Shareholders~
Nearly all states require a corporation to hold an annual meeting of shareholders
at which time directors are elected and other corporate issues are voted
on. Officers and directors are determined at the annual meeting.
Apostile~
An apostile is a document issued under the Great Seal of the State of
Nevada by the Secretary of State, which is attached to a certified copy
of documents. Hague Treaty countries require this document as validation
of the authenticity of the certification. (See also Authentication)
Articles
of Incorporation (Certificate of incorporation or charter)~
The articles are the primary legal document of a corporation; they serve
as a corporation's constitution. The articles are filed with the state
government to begin corporate existence. The articles contain basic information
on the corporation as required by state law.
Articles
of Organization~
Limited Liability Companies must file the articles with the proper state
authorities to begin existence. The articles of organization are very
similar to a corporation's articles of incorporation.
Asset~
Anything owned that has monetary value.
Assumed
Name~
See DBA.
Authentication~
An authentication has the same purpose as an apostille. It is a document
issued under the Great Seal of the State of Nevada by the Secretary of
State and is attached to a certified copy of documents. Many foreign countries,
other than Hague Treaty countries, require this document as validation
of the authenticity of the certification.
Authorized
Shares~
The total number of shares a corporation is authorized to sell. This number
is specified in the articles of incorporation. All of the shares authorized
need not be issued.
Authorized
Stock~
The authorized stock of a corporation is the total amount of stock that
a corporation is authorized to issue and must be specified in the Articles
of Incorporation. The authorized stock of a corporation may only be changed
through the filing of an amendment to the articles of incorporation.
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Business
Trust~
An entity provided for by the 1999 Nevada State Legislature.
Bylaws~
Bylaws are the rules and regulations adopted by a corporation for its
internal governance. It usually contains provisions relating to shareholders,
directors, officers and general corporate business. At the corporation's
initial meeting the by laws are adopted. Bylaws are a private document
not filed with any state authority. Bylaws are more flexible than the
articles of incorporation because they are easier to amend. Bylaws are
analogous to the Operating Agreements of LLCs and Partnership Agreements
of LPs.
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Cancellation~
The termination of a Limited Partnership is accomplished by the filing
of a Certificate of Cancellation with the Secretary of State or by failing
to file the annual List of General Partners in a timely manner.
Capital
Gains or Losses~
Capital Gains or Losses are realized from the sale or exchange of Capital
Assets. The amount is determined by calculating the difference between
an asset's purchase and sale price.
Capital
Stock~
See Authorized stock.
Certificate
of Authority~
A Certificate of Authority is a document issued by the Secretary of State
to a foreign business entity granting the business the right to operate
in the state.
Charter~
See Articles of Incorporation.
Close
Corporations~
A close corporation is a corporation that possesses the following traits:
a small number of shareholders, not to exceed 30; no ready market for
the corporation's stock; and substantial participation by the majority
shareholders in the management of the corporation. Nevada provides for
Close Corporations in its statutes (NRS Chapter 78A).
Common
Stock~
Common stock is the primary stock of a corporation. This stock gives shareholders
the right to participate in the management of the corporation and gives
the shareholder a proportionate share of the dividends.
Corporate
Integrity~
If corporate formalities are not followed, it is possible that the corporate
entity will not protect shareholders from corporate debt. Keeping proper
records and holding regular meetings avoid this problem.
Corporate
Record Book~
Maintaining proper records is very important to assure limited liability
protection to corporate officers, directors and shareholders. The corporation
should have a record book that contains a copy of the articles of incorporation,
bylaws, initial and subsequent minutes of directors and shareholders meetings
and a stock ledger. Fountainhead Associates (email at Fountainhead3@hotmail.com)
is a company that specializes in the maintenance of corporate records.
Corporate
Status~
See Status
Cumulative
Voting~
This method of voting is intended to create adequate representation of
minority shareholders. Cumulative voting allows shareholders to aggregate
their votes in favor of fewer candidates than there are slots available.
The articles of incorporation may provide for the allowance of cumulative
voting.
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DBA~
DBA stands for "doing business as" and is equivalent to "assumed
name" or "fictitious name." If a corporation does business
under an assumed name, it may be required to file its fictitious name
with the county or counties in which it is doing business in Nevada. This
is useful if the company wishes to deposit funds into the company account
that are payable to its DBA name.
Directors~
Directors are elected by the shareholders. They manage or direct the affairs
of the corporation. Typically, the directors make only major business
decisions and monitor the activities of the officers.
Dissolution~
Dissolution is the termination of a corporation's or a limited liability
company's legal existence. Dissolution may be caused many ways including,
failure to file annual reports, failure to pay certain fees, bankruptcy,
or voluntary dissolution of the business by the shareholders/members and
directors.
Distribution~
A distribution is money or property paid by an S corporation to a shareholder.
The distributions are subject to taxation on the recipient's return. The
S corporation files a tax return but pays no federal income tax on its
earnings itself.
Dividend~
A dividend is a distribution of money or property paid by a C corporation
to a shareholder. These distributions are subject to a double tax; both
the corporation and the dividend recipient must pay federal taxes on these
earnings. In the case of an S corporation the term used is "Distribution".
Domestic
Corporation~
A business entity is domestic to the state where it has been formed.
Domicile~
A business entity is domiciled in the state in which it is formed.
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E -
Equity~
Equity is the ownership of a shareholder in a corporation.
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Federal
Tax Identification Number~
A Federal Tax Identification Number is a number given to a business entity
by the federal government for tax purposes. This number is identified
with the state in which the application for it was made. Since Nevada
and the IRS do not share financial information, it is advantageous for
Nevada business entities to get Federal Tax Identification Numbers through
the Ogden Regional Office. Banks generally require a tax identification
number to open bank accounts. This number is sometimes referred to as
an EIN or Employer's Identification Number.
Fiscal
Year~
A fiscal year is any twelve-month period designated by a business as its
fiscal accounting period.
Foreign
Business Entity~
A business is referred to as "foreign" in all states except
for the state where it is formed. If an entity conducts business in a
state other than where it was formed, it must register for a certificate
of authority to transact business in the other state or possibly lose
access to that state's courts and may face fines.
Franchise
Tax~
A franchise tax is a tax on the privilege of carrying on business levied
by many states. The value of the franchise tax may be measured by amount
of earnings, total value of capital or stock, or by amount of business
done. Nevada has no franchise tax.
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Holding
Company~
A Holding Company is a corporation that has no other function except owning
other corporations.
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Incorporator~
An incorporator is a person or entity that prepares and files the articles
of incorporation. State Agent and Transfer Syndicate, Inc. acts as an
incorporator for many new companies.
Indemnify~
To indemnify is to reimburse or compensate. Directors and officers of
corporations are often reimbursed or indemnified for all the expenses
they may have incurred during the incorporation process.
Interest~
A member's ownership in an LLC is represented by "interests"
just as a partner has an interest in a partnership and shareholders own
stock in a corporation.
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Limited
Liability Company~
A business entity formed upon filing articles of organization with the
Secretary of State and paying all fees is a Limited Liability Company.
LLCs are a relatively new entity in the United States, although the concept
has long been used internationally. LLCs provide limited liability to
their members, and can be taxed like a partnership, preventing double
taxation. The alternative is filing as a C corporation. Double taxation
then results. LLCs can now be formed in every state.
Limited
Liability Company Record Book~
Maintaining proper records is very important to assure limited liability
protection to members and managers. The LLC should have a record book
that contains a copy of the articles of organization, operating agreement,
initial and subsequent minutes of meetings and a membership ledger. Fountainhead
Associates (email at Fountainhead3@hotmail.com) is a company that specializes
in the maintenance of records.
Limited
Liability Provision~
The provision states that directors of corporations will not be held personally
liable for unwise business decisions providing that the directors made
an informed decision and that decision was not tainted by self-interest.
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M -
Manager~
An LLC may be operated by a group of managers who act much like a board
of directors. If an LLC is to be controlled by managers this fact must
be stated in the articles of organization.
Member~
A member is a person who is an owner of a Limited Liability Company. The
members make the business decisions of an LLC unless the articles of organization
provide that the LLC will controlled by a manager or managers.
Merger~
Merger occurs when one entity is taken over by another. The merging documents
specify the surviving entity.
Minutes~
Minutes are the written record detailing the events of the corporation.
These records should be kept in the corporation's record book.
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Name
Reservation~
The name of a corporation, an LLC, a Limited Partnership or a Business
Trust must be distinguishable on the records of the state government.
If the name is not unique, the state will reject the filing of the initiating
document. The test for uniqueness does not include the entity designation
(i.e., Inc., Corp., Ltd., LP, LLC or BT) as part of the name. A name can
be reserved, for 90 days, by applying with the Secretary of State and
paying a fee. State Agent and Transfer Syndicate, Inc. can arrange for
name reservations.
No-Par-Value
Stock~
No-Par-Value Stock is stock with no minimum value. Most states allow no-par
stock. If the stock is no-par stock then the amount of stated capital
is an arbitrary amount assigned by the board of directors. The value of
a share, for filing purposes, is determined as being $1.00 by the State
of Nevada. This may result in higher filing fees in comparison with low
par-value stock.
Not-For-Profit
Corporation~
A Not-For-Profit Corporation is a corporation organized for some charitable,
civil or other social purpose that does not entail the generation of profits
for shareholders. These corporations receive special tax treatment. Not-for-profit
corporations must file not-for-profit articles of incorporation with the
state. If a federal tax status such as 501 (c) 3 application is anticipated,
consideration of special provisions should be explored before filing the
articles of incorporation.
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Officers~
Officers are people appointed by the directors to manage the daily affairs
of the corporation. A corporation's officers usually consist of a president,
vice-president, treasurer, and secretary. In Nevada, one person can fill
all of these roles. In Nevada, at least one director is required.
Operating
Agreement~
The Operating Agreement is an agreement among the members of the LLC's
which govern the LLC's operations and the rights of its members. It is
analogous to corporate bylaws and general partnership agreements.
Organizational
Meeting~
The Organizational Meeting is the initial meeting where the formation
of the business is completed. At the organizational meeting a number of
initial tasks are completed such as the ratification of articles, the
issuance of initial shares, officers are elected, bylaws (operating agreements,
partnership agreements) are approved, and a resolution authorizing the
opening of bank accounts is passed. In Nevada, the initial directors are
named in the articles of incorporation. They will hold the organizational
meeting.
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Paid
in Capital Requirements~
A few states require corporations to have a specified amount of paid in
capital prior to starting business. These states include CT, DC, SD, and
TX and require that the company have $1,000 in paid in capital before
starting business. Nevada does not.
Par
Value~
Par value is the stated minimum value of a share of stock. Stock must
be sold for at least this value or the owner of the stock can face liability.
With low par value stock or no par value stock this liability is minimized.
Pass-Through
Taxation~
S corporations and Limited Partnerships are both pass-through taxation
entities and LLCs can be. Income to the entity is not taxed. Instead the
income is "passed through" to the individual shareholders or
interest holders.
Piercing
the Corporate Veil~
See Corporate Integrity
Preemptive
Rights~
Preemptive Rights are the rights delineated in the articles of incorporation
granting shareholders the first opportunity to buy a new issue of stock
in proportion to their current equity. The shareholder has the right to
buy the new issue of stock, but is not required to make the purchase.
If the shareholder elects not to exercise this right, the shares can be
sold on the open market.
Preferred
Stock~
Preferred Stock is stock that generally provides the shareholder with
preferential payment of dividends but does not carry voting rights.
Professional
Corporation~
A Professional Corporation is a corporation that is organized for the
purpose of engaging in a learned profession such as law, medicine or architecture.
Professional Corporations must file articles of incorporation with the
Secretary of State which meet the state's requirements for professional
corporations. In Nevada each principal of the corporation named in the
articles must be licensed by the qualifying professional board in Nevada.
Proxy~
If a shareholder can not attend a meeting, the shareholder is allowed
to vote by proxy unless prohibited in the bylaws. A proxy grants another
individual the power to vote on their behalf.
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Quorum~
A quorum is the minimum attendance required to conduct business at a meeting.
Usually, a quorum is achieved if a majority of directors are present (for
directors meetings) or outstanding shares are represented (for shareholder
meetings). The percentage needed for a quorum may be modified in the bylaws.
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Resident
Agent~
The Resident Agent is the agent named in the filed documents creating
the entity. The Resident Agent's principal function is to receive service
of process on the entity and other important documents. The agent must
be named in the articles of incorporation. The Resident Agent can only
be changed through the filing of a Certificate of Change of Resident Agent
signed by an officer and accepted by the new Resident Agent.
Registered
Office~
The registered office is the office named in the articles of incorporation.
The registered office must be where the resident agent is located, and
need not be the principal office or place of business of the corporation.
Reinstatement~
A revoked corporation may be reinstated to Current Status (see Status)
with the Secretary of State by paying all back filing fees, back penalties
and a reinstatement fee within five years of being revoked. After five
years the entity is permanently revoked and must be revived (see Revival)
in order to conduct business.
Resolution~
A resolution is a formal decision of the corporation that has been adopted
by either the shareholders or the board of directors.
Revival~
A permanently revoked entity may regain Current Status by paying all back
filing fees, back penalties, a reinstatement fee plus refiling its articles.
A search of state records to establish dates of origin and file number
may incur fees.
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S
Corporation~
A Subchapter S Corporation or S Corporation is a small corporation that
elects subchapter S tax treatment. This tax treatment allows the corporation
to avoid federal level taxation. The application for such election is
designated as an IRS form 2553.
Share~
A share represents an interest in a corporation. The total ownership of
a corporation is divided into shares of stock.
Shareholder~
A shareholder is any holder of one or more shares in a corporation. Shareholders
usually have evidence that they are shareholders, represented by a stock
certificate.
Sole
Proprietorship~
A sole proprietorship is a business carried on by the owner as an individual.
The owner of a sole proprietorship is personally liable for all of the
debts of a business; thus, personal property could be taken to pay business
debts.
Stated
Capital~
The stated capital is the par value of shares multiplied by the number
of shares outstanding. The amount of stated capital could affect the ability
to pay dividends.
Status~
The status of a business entity is determined by the currency of documents
filed with the Secretary of State. Current Status indicates that the business
has filed its initial or annual list. Default Status indicates that the
business has not filed its list prior to the first day of the month following
the anniversary month and a late penalty is applied. The company may remain
in Default for nine months at which time its status is designated as Revoked.
An additional penalty is applied to the filing fee to restore the company
to Current Status. A company that has been revoked for five years becomes
Permanently Revoked.
Stock~
Stock is equity or ownership interest in a corporation, measured in shares.
Ownership of shares is demonstrated by stock certificates.
Stock
Certificate~
Stock Certificates are written instruments that show ownership of shares
in a corporation.
Stockholder
~
See shareholder.
Stock
Ledger~
The Stock Ledger is a record book that lists the owners of shares of stock
in a corporation. It is also known as the Stock Transfer Book or Stock
Register.
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T -
Treasury
Shares~
Treasury shares are shares of stock that were issued and later reacquired
by the corporation.
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U -
Unanimous
Written Consent~
Nearly all states allow directors to act without a meeting if they each
give their consent to specific corporate actions in writing.
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