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llcs-corporations-partnerships

Pass-through taxation

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Definition

Refers to how individual owners of a business pay taxes on income derived from that business on their personal income tax returns. Pass through taxation applies to sole proprietorships, partnerships, and S-Corporations. This is opposed to traditional, or C-Corporations, where the company itself pays corporate taxes on income the corporation derives.

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Partner

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Definition

A co-owner or investor in a business, called a partnership, who shares profits from that business with at least one other person. Partners are agents of the partnership and may enter into contracts on behalf of the partnership.

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Par value

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Definition

Dollar value a corporation assigns to a stock. Par value is noted in the stock certificate and is the amount a purchaser pays for the stock.

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Operating agreement

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Definition

Governing contract adopted by members of a Limited Liability Company (LLC). It may be used to regulate nearly all aspects of the LLC's affairs, including how the business is managed, how assets are used and how revenues are shared. An operating agreement will override any default rules presented by a state LLC statute, which controls in the absence of an operating agreement.

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Offshore corporation

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Definition

Corporation chartered under the laws of a country other than the United States. Offshore corporations often do not engage in active business in the country in which they are incorporated. Some advantages companies attain from incorporating offshore often include favorable tax treatment and lower management fees and regulations.

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No-par stock

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Definition

Stock with no set value assigned to it in the corporate charter. No-par stock has become the most common type of stock issued by corporations and presents tax advantages, since most states tax based on par value.

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