Organizational Forms, Corporate Issuer Features, and Ownership

Question 1

What is an “Organizational Form”?

Answer 1

A legal and tax classification of a business, specific to a jurisdiction, that determines the organization’s legal identity, owner-manager relationship, owner liability, taxation, and access to financing.

Question 2

What is a “General Partnership”?

Answer 2

A business organization form owned entirely by general partners.

Question 3

What are “General Partners”?

Answer 3

Owners of a general partnership or limited partnership with unlimited liability and other attributes as specified in the partnership agreement.

Question 4

What is a “Limited Partnership”?

Answer 4

A business organizational form owned by a general partner and limited partners.

Question 5

What are “Limited Partners”?

Answer 5

Owners of a limited liability partnership with limited liability and other attributes specified in the partnership agreement.

Question 6

What is a “Pass-Through Business”?

Answer 6

Business that, by virtue of their organization form and/or other legal and regulatory attributes, do not pay entity-level taxes on incomes or losses; income or loss is passed through to owners, who pay personal taxes.

Question 7

What is a “Limited Liability Partnership”?

Answer 7

A business organizational form available in some jurisdictions owned entirely by limited partners with limited liability.

Question 8

What is a “Limited Company”?

Answer 8

A business owned by shareholders or members with limited liability who elect a board of directors to appoint management.

Generally, limited companies have indefinite life and easier transfer-of-ownership interests than limited partnerships.

Question 9

What is a “Private Limited Company”?

Answer 9

A type of limited company in many jurisdictions with pass-through taxation but restrictions on the number of shareholders or members on the transfer of ownership interest.

Question 10

What are “Shares”?

Answer 10

Units of ownership interest in a limited company.

Question 11

What are “Shareholders”?

Answer 11

Individuals or entities that own a share.

Question 12

What is a “Board of Directors”?

Answer 12

A body or individual selected by a limited company’s member(s) or shareholder(s), in a manner determined by the company’s charter, that manages the company.

Typically for larger companies, boards of directors appoint and oversee executive management.

Question 13

What is a “Public Limited Company”?

Answer 13

A type of limited company in many jurisdictions with entity-level taxation but no restrictions on the number of shareholders or transferability of ownership interest; this is the most suitable organizational form for a company that seeks to go public.

Question 14

What is a “Corporation”?

Answer 14

Another term for “limited companies” though typically used to refer to “Public Limited Companies”.

Question 15

What are “Corporate Issuers”?

Answer 15

Limited companies or corporations that seek financing in financial markets by, for example, issuing debt or equity securities.

Question 16

What are “Voting Rights”?

Answer 16

The power of a shareholder to cast votes in corporate elections for directors and other matters submitted to a shareholder vote.

Question 17

What is “debt”?

Answer 17

A claim against an entity to receive cash, stock, or other assets at a future date.

Question 18

What are “dividends”?

Answer 18

Distributions of profits or net assets from a corporation to its shareholders.

Though typically distributed in the form of cash, they can also be paid in stock or assets, such as property.

Question 19

What is a “Security”?

Answer 19

An evidence of equity or debt interest or in an entity or a related right, such as a derivative.

Often standardized to conform to exchange requirements.

Question 20

What is “Double Taxation”?

Answer 20

The taxation of business income at both the entity level and personal level for owners.

In most jurisdictions, this taxation scheme applies to public limited companies.

Question 21

What is an “Exchange”?

Answer 21

a rules-based, open-access market venue where financial instruments are traded, with price and volume transparency accessible by issuers, investors, and their intermediaries.

Question 22

What is “Free Float”?

Answer 22

The portion of a listed company’s equity securities that are not held by insiders, strategic investors, sponsors, founders, and so on, that are more freely available for trading.

Question 23

What is a “Private company”?

Answer 23

A company, typically a limited company, that does not list its equity securities on an exchange.

Question 24

What are “Sophisticated Investors”?

Answer 24

Individuals or entities that are permitted in a jurisdiction to trade unregistered, or, generally less-regulated securities.