Chapter 5

Glossary

Acquisition – Form of business combination in which one company buys another company’s voting
S tock.
Board of Directors – Group of people, elected by the shareholders, who have the ultimate authority
in guiding the affairs of a corporation.
Chief Executive Officer (CEO) – Person appointed by a corporation’s board of directors to carry
out the board’s policies and supervise the activities of the corporation.
Common Stock – Shares whose owners have voting rights and have the last claim on distributed
profits and assets.
Consolidation – Combination of two or more companies in which he old companies cease to exist
and a new enterprise is created.
Corporation – Legally chartered enterprise having most of the legal rights of a person, including the
right to conduct business, to own and sell property, to borrow money, and to sue nor be sued.
Dividends – Distributions of corporate assets to shareholders in the form of cash or other assets.
General Partnership – Partnership in which all partners have the right to participate as co – owners
and are individually liable for the business’s debts.
Limited Liability Companies (LLCs) – Organizations that combine the benefits of S corporations
and limited partnerships without the drawbacks of either.
Limited Partnership – Partnership composed of one or more general partners and one or more
partners whose liability is usually limited to the amount of their capital investment.
Merger – Combination of two companies in which one company purchases the other and assumes
control of its property and liabilities.
Parent Company – Company that owns most, if not all, of another company’s stock and that takes
an active part in managing that other company.
Partnership – Unincorporated business owned and operated by two or more persons under a
voluntary legal association.
Public Corporation – Corporation that actively sells stock on the open market.
S Corporation – Corporation with no more than 75 shareholders that may be taxed as a partnership.
Shareholders – Owners of a corporation.
Sole Proprietorship – Business owned by a single individual.
Subsidiary Corporations – Corporations whose stock is owned entirely or almost entirely by
another corporation.
Unlimited Liability – Legal condition under which any damages or debts attributable to business
can also be attached to the owner because the two have no separate legal existence.