Glossary – Corporations

affidavit of mailing notice A written declaration under oath that notice of a meeting has been
properly sent to the Shareholders or Directors.

agent A person authorized by another to act on his or her behalf. Thus, an agent can enter into
contracts and other such legal binding functions on behalf of another. Usually, the corporation's
Officers act as corporate agents.

aggregate par value Aggregate par value is the par value multiplied by the number of authorized
shares. This amount is important in determining initial fees and annual franchise taxes in many
states.

amendment To make an addition or change to the provisions contained in the Articles of

Incorporation, an amendment must be filed with the proper State authority.

annual meeting of shareholders A yearly meeting of Shareholders where Directors are elected
and Shareholders are able to vote on other major corporate issues.

annual statement A required yearly state filing, this document typically contains information
concerning the Directors, Officers and basic corporate financial information. The annual
statement is also often called the annual report.

articles of incorporation A corporation’s primary legal document; they serve as a corporation's

constitution. Articles of Incorporation, which are filed with the State government to begin
corporate existence, contain the basic information on the corporation as required by State law.
Articles of Incorporation are also called a Certificate of Incorporation or a Charter. The
incorporation document for corporations in Massachusetts is also called the Articles of
Organization.

asset Anything owned, tangible or intangible, that has monetary value.

authorized shares/authorized stock The total number of shares a corporation is authorized to

issue. This number is specified in the Articles of Incorporation. Not all of the authorized shares
need to be issued to Shareholders. Corporations can have un-issued shares that can be issued at a
later date.

board of directors See Directors.

bylaws The rules and regulations governing a corporation’s internal affairs. This document is
adopted at the organizational meeting of Directors, and usually contains provisions relating to
Shareholders, Directors, Officers, and general corporate business.

capital gains or losses Gains or losses 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.

common stock The primary stock of a corporation. This stock gives Shareholders the right to
participate in management of the corporation and a proportionate share of any dividend.
corporate seal This is a device use to imprint certain corporate information such as the name of
the corporation and the State of incorporation onto corporate documents. Corporate seals may be
required when a corporation attempts to open a bank account.

directors Directors manage or direct the affairs of corporation, but do not handle the day-to-day
operations. Typically, Directors make only major business decisions and monitor the activities of
the officers. Directors are elected by the Shareholders.

distribution A transfer of money or property from a corporation to a Shareholder.

dividend An optional distribution of money or property paid by the corporation to Shareholders

out of the corporation's profits.

equity The ownership of a Shareholder in a corporation.

executive committee A common committee created within a corporation’s Board of Directors

that is responsible for performing the functions of the entire Board in between meetings.

fiscal year Any twelve-month period used by a business as its fiscal accounting period.

franchise tax Tax on the privilege of carrying on business as a corporation or limited liability
company in a state. 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.

implied authority Authority that is inherent in the office. For example, the President of a
corporation typically has the implied authority to sign ordinary contracts on behalf of the
corporation. The President would not need a resolution granting him or her the express authority
to sign such ordinary contracts.

indemnify 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. Also, Articles of Incorporation may provide for the indemnification of Directors for
breach of their fiduciary duty to Shareholders.

informal action An action of Shareholders or Directors done by unanimous written consent in

lieu of holding a formal meeting.

initial meeting of directors See organizational meeting.

initial meeting of shareholders This meeting typically takes place after the organizational
meeting of Directors, and ratifies the Directors’ actions taken at their organizational meeting.

liabilities Things for which a person or business entity is responsible or liable. A debt or
obligation is often called a liability.

limited liability A restriction on the level of liability Shareholders have in regards to the
business. The Shareholders of a corporation are typically not personally responsible for debts and
liabilities of the corporation because the corporation is an entity that exists separately from the
Shareholders. Their amount of liability is typically limited to their amount invested in the
company.
minutes A written record detailing the events and actions from a corporation’s meetings, such as
Directors meetings and Shareholders meetings. Minutes should be kept in the corporation's record
book.

nominating committee A common committee created within a corporation’s Board of Directors

that is responsible for nominating people to fill vacancies on the board.

no par value stock 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.

notice of litigation See service of process.

notice of meeting(s) Corporations are required to inform their Shareholders and Directors of
meetings by written notice typically 60 to 100 days before the meeting is to be held. A notice is
not required if a corporation will hold its meeting by unanimous written consent.

officers People who oversee the day-to-day activities of a corporation. A corporation’s Board of
Directors appoints the Officers, which typically may be a President, Vice President, Treasurer,
and Secretary. In most states, one person can hold all of these posts.

organizational meeting The initial meeting of a corporation’s Directors where the formation of
the corporation is completed. A number of initial tasks happen at this meeting, such as ratifying
the Articles of Incorporation, issuing initial shares of stock, electing Officers, approving the
Bylaws, and passing a resolution authorizing the opening of bank accounts.

par value The stated minimum value of a share 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.

piercing the corporate veil The term for a corporation losing limited liability protection for
Shareholders. Not following corporate formalities is one common cause by which the corporate
veil may be pierced.

preferred stock Stock that generally provides the Shareholder with preferential payment of
dividends or on dissolution of the corporation but does not carry voting rights. If a corporation is
to have preferred stock, this fact must be stated in the Articles of Incorporation.

proxy A proxy grants to another the power to vote on behalf of the Shareholder. If a Shareholder
cannot attend a meeting, the Shareholder is allowed to vote by proxy.

public record Documents kept by a governmental unit to which the public has access. For
example, Articles of Incorporation that have been filed with the State are a matter of public
record.

quorum 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).

record date The date on which a person must be registered as a Shareholder in the corporation’s
stock transfer in order to receive a dividend or be eligible to vote.
registered agent The agent named in the Articles of Incorporation, who must be located in the
State of incorporation, and is responsible for receiving service of process and other important
documents on behalf of the corporation.

registered office The office named in the Articles of Incorporation. The registered office must be
where the registered agent is located, and need not be the principal office or place of business of
the corporation.

resolution A formal decision of the corporation, which has been adopted by either Shareholders
or the Board of Directors.

service of process (also called notice of litigation) The paperwork that begins a lawsuit. With
corporations, service of process is made or served to the corporation’s registered agent.

share An ownership interest in a corporation. The total ownership of a corporation is measured in

shares of stock.

shareholder (also called stockholder) Any holder of one or more shares in a corporation. A
Shareholder usually has evidence that they are a Shareholder; this evidence is represented by a
stock certificate.

statute A law enacted by a legislature.

stock An equity or ownership interest in a corporation, measured in shares. Ownership of shares

is demonstrated by stock certificates.

stock certificate A written instrument that shows ownership of shares in a corporation.

stockholder See Shareholder.

stock transfer book/ledger A record book that lists the owners of shares of stock in a
corporation, how many shares owned, and records dates of all stock transfers.

transferability of interest The ability to sell or otherwise transfer one’s ownership in a

corporation or other business entity.

unanimous written consent Nearly all states allow Directors and Shareholders to act without a
meeting if they each give their consent to specific corporate actions in writing.

unlimited life One of the fundamental corporate characteristics, it provides that a corporation’s
life will continue without limitation. This attribute is unlike a partnership or sole proprietorship,
as the life of the corporation is not tied to its owners.

voting agreement An agreement by two or more Shareholders to vote their shares in a particular
manner. Voting agreements are most typically used for the election of Directors.

waiver of notice The voluntary relinquishing of the right to a notice of a meeting of Shareholders
or Directors.