Chapter 15 Vocab

Question 1

a legal entity formed in compliance with statutory requirements that is distinct from its shareholder-owners

Answer 1

corporation

Question 2

a distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held

Answer 2

dividend

Question 3

the portion of a corporations profits that has not been paid out as dividends to shareholders

Answer 3

retained earnings

Question 4

in a given state, a corporation that does business in, and is organized under the law of , that state

Answer 4

domestic corporation

Question 5

in a given state, a corporation that does business in the state without being incorporated therein

Answer 5

foreign coporation

Question 6

a designation in the united states for a corporation formed in another country but doing business in the United States

Answer 6

alien corporation

Question 7

a corporation whose shareholders are limited to a small group of persons, often only family members; the shareholders’ rights to transfer shares to others are usually restricted

Answer 7

close corporation

Question 8

a close business corporation that has most corporate attributes, including limited liability, but qualifies under the Internal Revenue Code to be taxed as a partnership

Answer 8

S corporation

Question 9

a for-profit corporation that seeks to have a material positive impact on society and the environment

Answer 9

benefit corporation

Question 10

the document containing basic information about the corporation that is filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated

Answer 10

articles of incorporation

Question 11

the internal rules of management adopted by a corporation or other association

Answer 11

bylaws

Question 12

generally stocks, bonds, and other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation

Answer 12

securities

Question 13

an ownership (equity) interest in a corporation, measured in units of shares

Answer 13

stock

Question 14

a security that evidences a corporate (or government) debt

Answer 14

bonds

Question 15

shares of ownership in a corporation that give the owner of the stock a proportionate interest in the corporation with regard to control, earnings, and net assets

Answer 15

common stock

Question 16

stock that has priority over common stock as to payment of dividends and distribution of assets on the corporation’s dissolution

Answer 16

preferred stock

Question 17

financing provided by professional, outside investors to new business ventures

Answer 17

venture capital

Question 18

funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it

Answer 18

private equity capital

Question 19

a Latin term meaning “beyond the powers” that in corporate law describes acts of management that are beyond the corporation’s express and implied powers to undertake

Answer 19

ultra vires

Question 20

the action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations

Answer 20

piercing the corporate veil

Question 21

to put funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities

Answer 21

commingle

Question 22

a member of the board of directors who is also an officer of the corporation

Answer 22

inside director

Question 23

a member of the board of directors who does not hold a management position at the corporation

Answer 23

outside director

Question 24

the number of members of a decision-making body that must be present before business may be transacted

Answer 24

quorum

Question 25

a rule that immunizes corporate management from liability for decisions that result in corporate losses or damages if the decision-makers took reasonable steps to become informed, had a rational basis for their decisions, and did not have a contract of interest with the corporation

Answer 25

business judgement rule

Question 26

in corporate law, a written or electronically transmitted form in which a stockholder authorizes another party to vote the stockholder’s shares in a certain manner

Answer 26

proxy

Question 27

a certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation

Answer 27

stock certificate

Question 28

rights that entitle shareholders to purchase newly issued shares of a corporation’s stock, equal in percentage to shares already held, before the stock is offered to outside buyers

Answer 28

preemptive rights

Question 29

a certificate that grants the owner the option to buy a given number of shares of stock, usually within a set time period

Answer 29

stock warrant

Question 30

a suit brought by a shareholder to enforce a corporate cause of action against a third party

Answer 30

shareholder’s derivative suit

Question 31

shares of stock issued by a corporations for which the corporation receives as payment less than the stated value of the shares

Answer 31

watered stock