Business Law Vocabulary List (001)

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Acquisition
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The process of taking possession of something, e.g., acquiring another business by purchasing it
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Annual report
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A document outlining the financial status of a business
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Asset(s)
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Anything of value that a business or individual owns
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Better Business Bureau
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A consumer organization that monitors complaints against businesses
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Business-format franchise
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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
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Capital
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Assets of a business
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Commission
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A percentage of the total sale amount paid to the individual or business that makes the sale
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Consolidation
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A form of business growth in which a corporation acquires many smaller companies
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Corporation
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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”
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Dealership
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See product trade-name franchise
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Dividend
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A sum of money paid to an investor or stockholder as earnings on an investment
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Dual/Double taxation
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See product trade-name franchise
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Exclusive distributorship
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See product trade-name franchise
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Expansion
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A form of business growth in which a company extends its operations or facilities using new capital or reinvested funds
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Franchise
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A contractual agreement between a parent company and a franchisee to distribute goods or services
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Franchisee
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One who buys the right to sell the goods or services of the parent company (franchisor)
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Franchising
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A method of distributing recognized goods and services through a legal agreement between two parties
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Franchisor
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A parent company and owner of the name and/or system that is being distributed through a licensing arrangement
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General partnership
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A type of partnership agreement in which all partners are liable for a business’s losses; also known as ordinary partnership
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Hybrid structure
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A form of business ownership that combines elements of corporations and either sole proprietorships or partnerships
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Joint venture
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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 for a single project/transaction
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Licensee
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The buyer of copyrighted, patented, or trademarked material
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Licensing
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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 parties
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Licensor
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The owner of copyrighted, patented, or trademarked material
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Limited liability
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Restricted chance of loss; a condition in which business owners risk only the amount of their investment
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Limited liability company (LLC)
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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
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Limited liability partnership (LLP)
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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
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Limited partnership
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A type of partnership agreement in which a partner has limited liability; the liability is limited to the amount of the investment
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Master licensee
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A person or firm who helps franchisors find franchisees in a particular region or territory
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Merger
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Two individual businesses that combine to form one organization
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Multi-level marketing
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A business structure that pays commission on sales earned by people at two or more levels; the sales representatives usually work independently of the company; the representatives not only sell products but try to get others to sell them
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Nonprofit corporation
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A legal business structure that primarily operates for the purpose to serve others—not to make a profit; income is used to cover operational expenses; can be exempt from paying some or all taxes
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Operating agreement
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A written document signed by members of a limited liability partnership or limited liability company that specifies the terms of the business arrangement
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Partnership
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A form of business ownership in which the business is owned by two or more persons
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Piggyback franchise
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A form of ownership in which a retail franchise operates within the facilities of another store; often referred to as the host
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Private corporation
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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
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Private enterprise system
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An economic system in which individuals and groups, rather than the government, own or control the means of production—the human and natural resources and capital goods used to produce goods and services. Also known as free market economy, private profit system, market system, capitalistic system, or free enterprise system
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Product trade-name franchise
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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
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Public corporation
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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; also known as an open corporation
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Pyramid scheme
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An illegal form of multi-level marketing in which emphasis is placed on collecting initial fees from as many people as possible
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Royalty
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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
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Sole proprietorship
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A business owned by one person who receives all the profits from the business and takes all the risks
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Stockholders
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Owners of stock; also known as shareholders
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Subchapter “S” corporation
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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
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Unlimited liability
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Requirement that business owners be responsible for paying business debt; personal assets can be used to pay the debt

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