Lawyers and legal agreements have their own language, and they typically forget that everyone doesn’t speak legalese. If you are a small business owner you’re going to run across a lot of legal terms in the course of operating your business and it’s better to know what’s going on than just ignore it. This isn’t an exhaustive list but it’s a good place to start:
- Breach of Contract - actual failure or refusal to perform an obligation under a contract
- Governing Documents - the articles of incorporation, articles of organization, operating agreement, bylaws, partnership agreement, or similar documents that dictate how your company is run
- Corporate Formalities - the practice of a company keeping its accounts in order, maintaining separate bank accounts, holding and documenting regular meetings, keeping governing documents updated
- Business Entity - an organization created by one or more persons to carry on a trade or business, common examples are LLC’s and Corporations
- Sole Proprietorship - form of ownership where one individual assumes all the benefits and risks of running a business; there is no legal distinction between the assets and liabilities of the business and the owner
- Partnership - when two or more individuals pool resources (money, skills, etc.) and share in the profit and loss of the business; typically no legal distinction between the assets and the liabilities of the business owners
- Limited Liability Company (LLC) - a business entity that is separate from the owners (members); allows for the limited personal liability and can be taxed as a sole proprietorship, partnership, S-corporation or C-corporation
- Corporation - a business entity that is separate from the owners (shareholders); allows for limited personal liability and is taxed as either a C-corporation or S-corporation
- S-Corporation - not an actual business entity, but instead refers to the way a business has chosen to be taxed under the Internal Revenue Code
- Operating Agreement - agreement used by LLC’s to outline ownership, decision making and internal rules and regulations
- Bylaws - the rules of a corporation, established by the board of directors when starting the company; govern how the company is operated and what powers/responsibilities stakeholders have
- Partnership Agreement - written agreement between the individuals in a partnership; states the nature of the business, capital contributed by each partner and their rights and responsibilities
- Force Majeure - unforeseeable circumstances that prevent someone from fulfilling part or all of a contract
- Negligence - doing something that an ordinary, reasonable person would not do, or not doing something that an ordinary reasonable person would do. For example, if you fail to fix the roof in your office and it falls on a client's head injuring them, you as the business owner would be negligent and owe damages to the client
- Buy/Sell Agreement - a legally binding contract between the owners of a business that stipulates how an ownership share may be purchased under certain circumstances, such as when an owner dies, wants out, gets divorced, etc.
- Intellectual Property - creations of the mind, such as inventions; literary works; designs; symbols, names and images used in business; common types are trademarks, patents, trade secrets and copyrights
- Trademark - distinctive design, logo, graphics, symbols, words or a combination of them that uniquely identify a business or its goods and services
- Copyright - exclusive right in original works of authorship (musical, literary, artistic); works can be reproduced, published or sold; examples could be blog posts, how to manuals, computer code
- Trade Secret - your business's proprietary knowledge and information, it’s what you wouldn’t want the public to know about; a good example is the formula for Coca Cola
- Patent - protect new ideas, concepts or inventions. This includes unique improvements to current techniques or concepts
- Alternative Dispute Resolution - methods such as mediation and arbitration to resolve a dispute instead of litigation or a court trial
- Infringement - violation of the terms of any agreement or disregard of someone else’s rights, such as using their exclusive right of intellectual property
- Contract - a voluntary and legally binding agreement between two or more people or businesses
- Master Service Agreement - a contract between parties where they agree to most of the terms that will govern future transactions or agreements
- Indemnify - to compensate someone, or a business, for harm or loss
- Notice - usually a contract provision that is an agreement between the parties on how to receive notice about contractual matters
Need help deciphering legal nonsense or just want to discuss legal risk in your business? Contact us for a free consultation.