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Business Law

Basic Business Law Terminology

If you are new to the field of business law, the amount of terminology that there is to learn can be overwhelming. Here are ten basic business law terms used during the formation or dissolution of a business that you may need to know as you proceed.

Business/Commercial/Corporate Law– the terms business law, corporate law, and commercial law are often used interchangeably to describe the branch of law that deals with the formation and running of a business. Often commercial law refers to sales and transactions relating to the business, while business or corporate law refer to aspects such as shareholders, contracts, mergers, etc.

Shareholders

A shareholder is one who owns or invests in a business. Shareholders also hold stock in the business and generally have a say in certain decisions regarding the business.

Contract/Breach of Contract

A contract is a written agreement between two parties which, if breached, is enforceable. A contract is valid only when both parties are in agreement, and the contract is legal and binding. A breach of contract occurs when either party breaks the terms of the agreement leading to legal action.  

 

Partnerships

A partnership is a business which is created when two parties agree to work together in order to form and operate the business.

Litigation

Litigation is the process by which arguments or disputes are resolved in court. In business law, the suit may be filed by an individual towards a business, by a business against a business, or by a business against an individual.

Articles of Incorporation

The Articles of Incorporation are crucial documents that are filed with the state and are the genesis of a new business. This document includes the name of the business as well as other important information such as the purpose of the corporation and the authorized shares.

Authorized Shares

Authorized shares are the amount of shares stated in the Articles of Corporation that are allowed to be sold or issued by the business.

Judicial Dissolution

Judicial Dissolution is when a business or corporation is ordered by the court to dissolve. The court may reach this decision as a result of the requests of a creditor, shareholders, or the state attorney general.

Merger

When multiple businesses combine to create one unified business or corporation, it is called a merger.

Incorporator

The incorporator is the individual who begins a corporation by planning, creating, and organizing the business and then filing the Articles of Incorporation.

Directors and Officers

After the incorporator files the Articles of Incorporation and starts the business, the officers and directors are appointed. Directors are voted in by shareholders and make important decisions regarding shares, acquisitions, and mergers. Directors also vote in officers. Officers are positions such as President and CFO that manage the business. Until these positions are filled, the incorporator has the power to make decisions for the business.

Although there are dozens of terms associated with business law and the formation of a new corporation, these ten words will give you a head start as you seek to educate yourself in the field.

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