Glossary of Terms Used in New Jersey LLC Law
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, New Jersey LLC Law Attorney
Vocabulary words have meaning both in life and in the law. Below I have listed the most frequent terms used in this website and what each word means. The terms are listed in alphabetical order. I am certain this glossary will be of assistance to you in your reading.
If we at Hanlon Niemann & Wright can be of assistance to you now or in the future, please do not hesitate to contact me (855) 376-5291 or e-mail me at email@example.com.
Agent – Person authorized by another to act on their behalf. This, 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.
Amended Certificate of Authority – A document issued to a foreign corporation evidencing that the corporation has amended its original certificate of authority.
Annual Meeting of Shareholders – Nearly all states require a corporation to hold annual meetings of members at which time directors are elected and other corporate issues are voted on.
Articles of Organization – Limited liability companies or LLCs must file articles of organization. This parallels the articles of incorporation in many ways.
Asset – Anything owned that has monetary value
Assumed Name – A name under which a LLC conducts business that is not the legal name of the LLC as shown in its articles of formation. Assumed names (also called fictitious name and Doing Business As) are typically filed at the county level with the county recorder’s office. A LLC can use multiple assumed names.
Business Entity – An organization that processes a separate existence for tax purposes. Some types of business entities include corporations and foreign corporations, business trusts, limited companies, and limited partnerships.
Business Judgement – The rule states that directors of a LLC will not be held personally liable for unwise business decisions providing that the directors made an informed decision and that decision was not tainted by self-interest
Bylaws – Bylaws are the rules and regulations adopted by a company for its internal governance. It usually contains provisions relating to shareholders, directors, officers and general company business. At the company’s initial meeting the bylaws are adopted. Bylaws are a private document not filed with any state authority. Bylaws are more flexible than the articles of incorporation because they are easier to amend.
Certificate of Authority – A document issued by the proper state authority to a foreign corporation granting the corporation the right to do business in that state.
Certificate of Good Standing – A certificate issued by a state official as conclusive evidence that a corporation is in existence or authorized to transact business in the state. The certificate generally sets forth the corporation’s name; that it is duly incorporated or authorized to transact business; that all fees, taxes, and penalties owed the state have been paid; that its most recent annual report has been filed; and, that articles of dissolution have not been filed. Also known as a certificate of existence or certificate of authorization.
Corporate Record Book – Maintaining the proper records is very important to assure limited liability to LLC members. The corporation should have a record book which contains a copy of the articles of incorporation, bylaws, initial and subsequent minutes of directors and shareholders meetings and a stock register.
Dissolution – Is the termination of a corporate’s legal existence. Dissolution may be caused many ways including, failure to file annual reports, failure to pay certain taxes, bankruptcy, or voluntary dissolution of the corporation by the shareholders and directors.
Doing Business as (DBA) – A “DBA”, also known as an “assumed name”, is typically completed by making a filing at the county level where the business is located. This filing does not change the official name of the corporation; however, it allows the company to use additional names.
Equity – The ownership of a shareholder in a corporation.
EIN or Employer Identification Number – This form is used to apply for a federal tax ID number. You will receive this form in your corporation kit.
Federal Tax Identification Number – This is a number assigned to a corporation or other business entity by the government for tax purposes. Banks generally require a tax identification number to open bank accounts. The federal tax identification number is also known as the Employer Identification Number (EIN).
Fictitious Name – A name other than the true name, under which a corporation or other business organization conducts business. Also referred to as an assumed name, a trade name or “doing business as” (“DBA”).
Fiduciary Corporation – A relationship in which one party (the fiduciary) must act in good faith and with due regard to the best interests of the other party or parties.
Fiduciary Relationship – A relationship in which one party (the fiduciary) must act in good faith and with due regard to the best interests of the other party or parties.
Fiscal Year – Any twelve-month period used by a business as its fiscal accounting period.
Foreign Corporation – A corporation is referred to as a foreign corporation in all states except for the state for the state where it is incorporated. If a corporation is “transacting business” in a state other than where it is incorporated, it must register for a certificate of authority to transact business in the other state or possibly lose access to that state’s courts and face fines.
Incorporator – The person or entity that prepares files and signs the articles of incorporation; everything necessary for incorporation. This could entail raising funds and bringing in the people who will be investing. This preparatory work also includes preparing and filing the required documents.
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.
Limited Liability Company – A Limited Liability Company is a hybrid between a partnership and a Corporation. The advantage of a Limited Liability Company is that most States require fewer formalities in an LLC in comparison to a corporation.
Majority – More than 50 Percent; commonly used as the percentage of votes required to approve certain corporate actions.
Manager – An LLC may be operated by a group of managers who act much like a board of directors. If an LLC is to be controlled by managers this fact must be stated in the articles of corporation.
Membership Interest – A member ownership of an LLC is represented by “interests” just as a partner has an interest in a partnership and shareholders own stock in a corporation.
Member – A Member is a person or entity who is an owner of some or all of a Limited Liability Company. The business decisions of an LLC are made by the members unless the articles of organization provide that the LLC will be controlled by a manager or managers.
Merger – A merger occurs when two corporations join together into one, with one corporation surviving and the other corporation disappearing. The assets and liabilities of the disappearing entity are absorbed into the surviving entity.
Minutes – A written record which details the events of the corporation. These records should be kept in the corporation’s or LLC’s record book.
Name Reservation – The name of a corporation or LLC must be distinguishable on the records of the state government. If the name is not unique, the state will reject the articles of incorporation or article of organization (for LLCs). A name can be reserved, usually for 120 days, by which applying with the proper state authorities and paying fee.
Officers – The directors appoint officers. They manage the daily affairs of the corporation. A corporation’s officers usually consist of a president, Vice-president, treasurer and secretary. In most states, one person can hold all of these posts.
Operating Agreement – An agreement among the LLC’s members which govern the LLC’s operations and the rights of its members. It is analogous to corporate bylaws.
Organizational Meeting – The initial meeting where the formation of the corporation is completed. At the organizational meeting a number of initial tasks are completed such as; the articles of incorporation are ratified, the initial shares are issued, officers ae elected, bylaws approved, and a resolution authorizing the opening of bank accounts is passed. If the initial directors are named in the articles of incorporation, they can hold the organizational meeting. If they are not named then the organizational meeting is held by the incorporator.
Pass-Through Taxation – The Income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is “passed through” the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. S corporations and LLCs are both pass-through tax entities.
Piercing the Corporate Veil – If corporate formalities are not followed, it is possible that the corporate entity will not protect shareholders from corporate debt. Keeping proper records and holding regular meetings help solve this possible problem.
Proxy – If a shareholder cannot attend a meeting, the shareholder is allowed to vote by proxy. A proxy grants another individual the power to vote on their behalf.
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 meeting) or outstanding shares are represented (for shareholder meeting). The percentage needed for a quorum may be modified in the bylaws.
Registered/Resident Agent – According to state laws, corporations and LLCs located out of state must have a registered agent. This agent must be named in the articles of incorporation and be located in the state of incorporation or organization in order to receive legal notifications. The registered agent will receive important legal and tax documents, such as franchise tax forms and annual report forms. Also known as a Statutory Agent.
Registered Office – The office 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 resolution is a formal decision of the corporation which has been adopted by either the shareholders or the board of directors.
Stock purchase Agreement – A stock purchase agreement is an agreement between the shareholders and the corporation. It provides a mechanism to regulate the transfer and sale of corporate stock. Often, a stock purchase agreement will provide a right refusal in favor of the corporation or remaining shareholders in the event of a proposed sale of stock by a shareholder. A stock purchase agreement can also provide for a purchase upon death, disability, retirement, discharge, resignation, or bankruptcy of a shareholder.
Ultra Vires – Traditionally, the purpose of a corporation was closely spelled out in its articles of incorporation. If the corporation acted beyond its described purpose these actions were unenforceable against the corporation or by the corporation. However, most modern statutes allow corporate purposes to be any lawful activity.
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.
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LLC Law Attorney serving these New Jersey Counties:
Monmouth County, Ocean County, Essex County, Cape May County, Camden County, Mercer County, Middlesex County, Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County