SolveYourProblem
Article Series:
Start
A Home Business
Business
Law Terms and Jargon
by Jeff Cohen
Business law is full of confusing terms, and
if you don't know what they mean then setting up a company
can start to look far more scary than it really should be.
Read through this jargon buster and you should find it much
easier to understand what starting up is all about.
Capital. This is money that is going to be invested in a business.
Example: 'I am starting my business with $5,000 capital, $2,000
of which is my own'.
Contract. When you sign a legal document, you are entering
into a contract. Starting a business lets you sign and enter
into contracts on behalf of the business. These contracts will
be between the other person and your company, not you personally.
Director. The people ultimately in charge of a company are
its directors. For a large company, there will be boards of
directors, appointed by the shareholders. For a home business,
though, you can appoint yourself as the sole director since
you are also the sole shareholder (see 'shareholder').
Incorporation. This is the formal name for the process of
starting a company. Example: 'My business was incorporated
in March 2000'.
Insolvency. When a company cannot afford to pay its debts.
The type of company you have set up will affect what happens
in this situation. You may be liable for all of the debt yourself,
or for none.
Limited
liability. A limited liability company is one where
you agree beforehand how much responsibility you will take
if anything goes wrong. This protects you from being destroyed
financially if something bad happens to your business.
Office. Your company's 'office' isn't just a place with computers
-- it's also a legal concept, meaning where your company is
based. Your company must have a registered office, which means
that you can't start a company unless you have an address which
would be legal to use for this purpose.
Private. A home business will be private, which means that
members of the public cannot invest by buying shares. This
does not stop individuals from buying percentages of your company
if you are willing to sell, though. Starting your company as
a private one also doesn't stop you from converting it to a
public one later on.
Proxy. Someone who acts as a proxy for you acts on your behalf.
In essence, you have given them the legal right to speak for
you. For example, if you get a lawyer to handle the incorporation
of your company, they will be incorporating it for you by proxy.
Shareholders. The shareholders are the people who own the
company. In your company, you will be the only shareholder
(and so own 100% of your business), unless you've made a deal
with someone else for them to own a share.
Latin
When you're dealing with law, the amount of Latin involved
can be confusing. Here are some Latin terms you might come
across when you're setting up your company.
Bona
fide: 'in good faith'. This is used to mean that someone
says they are telling the truth.
De
facto: 'in fact'. Used when something has happened that
makes the 'real' situation take precedence from the legal one.
De
jure: 'in law'. The opposite of de facto.
Ex
gratia: 'out of grace'. When something will be done for no
fee.
Prima
facie: 'at first sight'. Something that seems true but is
wrong.
Quid
pro quo: 'something for something'. When a fee will
be charged for a service (or services will be exchanged)....
"Quid pro quo, Dr. Lecter", said Clarice
Starling (Silence of The Lambs).
Be Careful with Jargon
However much jargon you might begin to encounter as you start
your business, don't start to use it yourself. It will make
it so that only 'insiders' will understand what you mean, and
everyone else will feel either a little silly or a somewhat
annoyed. By the same token, if you're speaking to someone (your
accountant, for example) and they use some jargon you don't
understand, there's nothing wrong with asking them to explain
what they mean -- it's their fault for using an overly technical
word, not yours for not knowing it.
If you're not sure, there's a simple rule: jargon is for communicating
very specific, technical meanings. It shouldn't be used to
replace everyday language, as it does nothing but cause confusion.
# # # # # SolveYourProblem.com : 2007
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