100 Key Business Legal Terms Without Legal Jargon
Affidavit
A written statement you swear is true, signed officially in front of someone like a notary.
A sworn written declaration where you confirm everything you said is true, signed in front of a qualified officer, and legally usable in court cases.
Arbitration
A way to settle a fight privately without going to court.
A private legal process where two sides agree to let an independent third party, called an arbitrator, make a final decision instead of going through a public trial.
Arm’s Length
When a deal is made fairly, with no friends or family involved.
A business arrangement where both parties act independently, without any relationship that could affect fairness or honesty in the deal.
Articles of Incorporation
Papers you file to officially start a company.
A legal document filed with a government agency that formally creates a corporation and includes basic details like name, address, purpose, and initial directors.
Assets
Valuable stuff a person or business owns.
Resources owned by a person or company, like cash, property, inventory, or rights, that have financial value and can be used to create income.
Bad Faith
When someone acts sneaky or dishonest in a deal.
When a person intentionally lies, cheats, or misleads someone during negotiations, contracts, or any type of business relationship.
Beneficiary
The person who gets money or benefits.
An individual or group legally entitled to receive money, property, or other benefits under a will, insurance policy, trust, or other contract.
Board of Directors
A group that makes big decisions for a company.
A group of individuals elected by shareholders to make major decisions about company policies, goals, leadership, and finances.
Breach (of contract/duty)
Breaking a promise or not doing what you agreed to.
Failure to perform duties or keep promises under a contract or legal obligation, which may allow the harmed party to sue for damages.
By-law
Rules a company writes for how it will run.
Internal rules that outline how a company will operate, hold meetings, appoint leaders, and handle important actions.
Capitalization
How much money a company has from selling shares or getting investments.
The total value of a company based on its stock, debt, and investments, showing how it is funded and how strong it is financially.
Cease and Desist
A letter telling someone to stop doing something wrong.
A formal notice demanding that someone immediately stop illegal or harmful behavior, with a warning of legal action if ignored.
Certificate of Incorporation
Official proof that a company was legally started.
An official government document that certifies a corporation exists and is legally authorized to operate.
Collateral
Something valuable you promise to give if you don’t repay a loan.
Property or assets pledged by a borrower to secure a loan, which the lender can seize if the borrower fails to repay.
Common Stock
Regular shares that give ownership and voting rights.
Shares in a corporation that give shareholders ownership, voting rights in company decisions, and a share of the company’s profits if there are any.
Compliance
Following all the rules and laws.
Acting in full accordance with laws, regulations, standards, and ethical practices that govern a business or activity.
Consideration
Something valuable traded in a contract.
In contract law, anything of value — like money, goods, or services — that both sides agree to exchange, making the contract legally enforceable.
Contingency
A backup plan or event that might happen.
A future event or condition that must happen for a contract obligation to take effect or for a business decision to move forward.
Copyright
Legal protection for creative work.
Exclusive legal rights given to creators to control how their original work — like a book, song, or painting — is copied, used, or shared.
Covenant
A serious promise in a contract.
A legally binding commitment made in a contract where one party agrees to do or not do something important.
Damages
Money you get when someone wrongs you.
Monetary compensation awarded by a court to make up for a loss, injury, or harm caused by another party’s actions.
Debenture
A type of loan not backed by property.
An unsecured loan issued by a company based on its reputation and credit rating, not tied to specific assets.
Debt Financing
Borrowing money to run a business.
Raising money for business activities by taking loans or issuing bonds, which must be repaid over time with interest.
Default
Failing to pay back a loan or keep a promise.
A failure to meet legal obligations, especially not paying back a loan or not fulfilling the terms of a contract, often resulting in legal penalties.
Derivative Action
Shareholders suing for the company’s sake.
A lawsuit filed by shareholders on behalf of the company, usually against executives or board members who harmed the company through misconduct or neglect.
Dilution
When new shares lower your ownership slice.
A decrease in existing shareholders’ percentage of ownership when a company issues more shares to new investors.
Dissolution
Shutting down a company officially.
The legal process of closing a business, settling its debts, and distributing any leftover assets to its owners.
Dispute Resolution
Ways to settle fights without court drama.
Methods like negotiation, mediation, and arbitration used to resolve disagreements without going through a full court trial.
Divestiture
Selling part of a business.
The process of selling assets, a division, or a subsidiary of a business to focus on core activities or raise funds.
Doing Business As (DBA)
A business name different from the owner’s real name.
A registered name that a business owner uses instead of their personal name or the company’s official legal name, often for branding purposes.
Due Diligence
Investigating carefully before signing a deal.
A detailed process of checking and verifying facts, finances, and legal matters before signing major contracts or finalizing business deals.
Earn-Out
Extra money later if a sold company does well.
A payment structure where the seller of a business gets additional money based on the business meeting certain performance targets after the sale.
Easement
Permission to use someone else’s land for something specific.
A legal right to use part of another person’s land for a specific purpose, like building a driveway or running utility lines.
Encumbrance
A claim against a property that could cause problems.
A legal restriction, claim, or lien on a property that can affect its transfer or reduce its value.
Endorsement
Official support or signature for approval.
A formal approval or agreement, often by signing a document like a check, insurance policy, or legal paper.
Equity
How much of something you actually own.
The value of ownership interest in a business or property, calculated by subtracting debts from total assets.
Escrow
A safe holding place for money or documents until a deal is done.
A legal arrangement where a neutral third party holds money, documents, or property until certain conditions are met in a transaction.
Exclusivity
Agreeing to work only with one person or company.
A contractual agreement where one party promises not to engage in certain business relationships with others for a specific time.
Executor
The person who makes sure a will gets carried out.
An individual named in a will to manage and distribute a deceased person’s property according to the instructions in the will.
Exemption
Being excused from a rule, duty, or payment.
A legal permission that allows a person or business to avoid a normal requirement, such as paying a tax or following a regulation.
Fiduciary Duty
The responsibility to put someone else’s interests first.
The legal obligation to act honestly, fairly, and in the best interests of another person or group, like a company’s shareholders.
Force Majeure
An unexpected disaster that makes contracts impossible to keep.
A clause in contracts that frees both parties from obligations when extraordinary events, like natural disasters or wars, prevent performance.
Franchise
Buying the right to use another company’s brand and system.
A legal arrangement where one business (the franchisee) pays to use another business’s (the franchisor’s) name, products, and methods.
General Partner
Someone who owns part of a business and is personally responsible for its debts.
A business partner who shares profits and losses and is personally liable for the debts and legal responsibilities of the partnership.
Goodwill
The extra value of a company’s good reputation.
An intangible asset representing the brand reputation, customer loyalty, and business relationships that make a company worth more than its physical assets alone.
Guarantor
Someone who promises to pay if another person can’t.
A person or company that agrees to take responsibility for someone else’s debt or obligation if they fail to pay.
Indemnification/Indemnity
Covering someone’s losses if something bad happens.
A promise to protect and compensate someone for harm, loss, or legal costs caused by another party’s actions.
Injunction
A court order to stop doing something or make someone do something.
A legal ruling that orders a person or company to immediately start or stop a certain action to prevent harm.
Insolvency
When you can’t pay your debts anymore.
The financial state where a person or company cannot meet their debt obligations when they come due.
Intellectual Property
Creations like inventions, logos, and songs that you legally own.
Legal rights protecting original creations like inventions, brand names, designs, written works, and technology.
Interest (in business context)
Ownership or a financial stake in something.
The legal right to a share of profits, property, or earnings from an investment or loan.
Joint Venture
Two businesses teaming up for a project.
A business arrangement where two or more companies work together on a project, sharing profits, losses, and control, but staying legally separate.
Jurisdiction
The power of a court to make legal decisions.
The authority given to a court or legal body to hear cases and enforce laws in a specific area or type of case.
Key Person Insurance
Insurance that pays if an important worker dies or leaves.
A policy that provides financial protection to a business when a vital employee or executive unexpectedly dies or becomes disabled.
Lien
A legal claim on someone’s property until they pay what they owe.
A legal right that allows a lender or creditor to keep possession of property until the debt attached to it is paid off.
Limited Liability
Only losing what you invested, not your house or car.
A legal protection where an investor’s financial loss in a business is limited to their investment, and personal assets are safe.
Limited Liability Company (LLC)
A type of company that protects owners from losing their personal stuff if the business fails.
A business structure that shields owners from personal responsibility for company debts while offering flexible tax options.
Liquidation
Selling everything a company owns to pay off debts.
The process of closing a business by selling its assets to pay creditors before distributing any remaining money to owners.
Majority/Minority Shareholder
A majority shareholder owns more than half; a minority owns less.
A majority shareholder controls more than 50% of a company’s voting stock, while a minority shareholder owns a smaller portion with limited control.
Material Adverse Change
A big event that makes a business deal way worse.
A major negative event that seriously affects the value, operations, or financial condition of a company involved in a business deal.
Mediation
A way to settle a dispute with help from a neutral third person.
A negotiation process where a neutral mediator helps two sides find a solution without going to court.
Merger
When two companies combine into one.
A legal process where two or more companies join together to form a single new company, often to grow faster or save money.
Non-Arm’s Length
When a deal happens between people who know each other too well.
A transaction between parties who have a close relationship, possibly affecting fairness and market value.
Non-Compete Agreement
A contract promising not to work for or start a rival business.
A legal agreement where a person agrees not to enter into competition with a former employer or business partner for a set time or area.
Non-Disclosure Agreement (NDA)
A promise to keep secrets about business stuff.
A legal contract where someone agrees not to reveal confidential information to others.
Novation
Switching old contracts for new ones with everyone’s okay.
The replacement of one contract with another, transferring all rights and obligations to a new party with agreement from all involved.
Offer (in contract law)
When someone proposes a deal the other side can accept.
A clear proposal made by one party that, if accepted by another party, forms a legally binding contract.
Operating Agreement
The rulebook for how an LLC will work.
A document that sets out the ownership, structure, and operating procedures of a Limited Liability Company.
Option (stock/options)
The chance to buy or sell stock at a certain price.
A contract giving someone the right, but not the obligation, to buy or sell shares at a set price by a specific date.
Partnership
A business owned by two or more people.
A legal arrangement where two or more individuals share ownership, profits, responsibilities, and liabilities of a business.
Patent
The right to stop others from copying your invention.
A government-granted right giving an inventor exclusive control to make, use, and sell their invention for a certain number of years.
Perpetuity
Something that lasts forever.
A legal concept meaning something continues indefinitely without an end date, often used in contracts and investments.
Piercing the Corporate Veil
When owners are personally blamed because they misused the company.
A legal action that holds business owners personally liable for the company’s debts or actions when they abuse the corporate structure.
Pledge
A promise to give something valuable if you don’t pay up.
A borrower’s promise to hand over assets as security to a lender if a loan is not repaid.
Power of Attorney
Giving someone else permission to act for you.
A legal document that lets one person authorize another to act on their behalf in financial, medical, or legal matters.
Preferred Stock
Shares that get paid before regular stock but might not vote.
A type of stock that offers priority in dividends and asset distribution but usually without voting rights.
Principal (in agency law)
The person who asks someone else to act for them.
In law, the party who gives an agent authority to act on their behalf in a business transaction or legal matter.
Pro Bono
When a lawyer works for free to help someone.
Professional legal work offered voluntarily and without charge, typically to help people who cannot afford legal services.
Profit Center
A part of a business that makes money on its own.
A division or part of a company treated separately for financial reporting because it directly earns revenue and profits.
Promissory Note
A written promise to pay back a loan.
A legal document where one party promises in writing to pay a definite sum of money to another party at a future date.
Proxy
Letting someone else vote for you in a meeting.
A legal authorization allowing one person to act and vote on behalf of another at shareholder meetings.
Quorum
The minimum number of people needed to make a meeting official.
The smallest number of members who must be present at a meeting to make the proceedings valid under the organization’s rules.
Registered Agent
The person or company that accepts legal papers for a business.
An official point of contact responsible for receiving legal documents and government notices on behalf of a company.
Release
A document saying you give up your right to sue.
A legal agreement where one party agrees not to pursue any further legal claims against another party.
Rescission
Canceling a contract and acting like it never happened.
The legal cancellation of a contract, restoring the parties to the positions they held before the agreement.
Retained Earnings
Profits a company saves instead of paying out.
Net profits that a company keeps rather than distributing to shareholders as dividends, usually reinvested into the business.
S-Corporation
A special type of company that skips double taxes.
A corporation that passes income, losses, deductions, and credits straight to shareholders to avoid paying corporate taxes.
SBA (Small Business Administration)
The U.S. agency that helps small businesses grow.
A government organization that provides support like loans, counseling, and training to small businesses.
Secured Loan
A loan backed by something valuable you own.
A loan protected by collateral, meaning the lender can take the pledged asset if the borrower fails to repay.
Securities
Investment products like stocks and bonds.
Financial instruments that can be bought and sold, representing ownership (stocks) or creditor relationships (bonds) with companies or governments.
Series LLC
A flexible LLC that can split into smaller protected parts.
A special kind of LLC that allows one main company to create separate divisions, each with its own assets, debts, and legal protections.
Settlement
An agreement to end a legal fight without going to trial.
A negotiated resolution between disputing parties to avoid or end a lawsuit, usually involving payment or some other agreement.
Shareholder Agreement
A contract between company owners explaining their rights.
An agreement between shareholders that outlines how the company will be run, how ownership is handled, and what happens in certain events like sales or deaths.
Shrinkage
Losing inventory because of theft, mistakes, or damage.
The loss of products between manufacturing and sale, often due to theft, employee error, fraud, or damage.
Single Member LLC
An LLC owned by one person.
A Limited Liability Company with only one owner, offering the same legal protections as multi-member LLCs.
Sole Proprietorship
A business owned and run by one person without special paperwork.
The simplest business structure where one individual owns and operates the entire business, with no legal separation between the person and the company.
Subrogation
When someone else collects money from the wrongdoer after paying you.
The legal process where an insurer or party who paid a claim steps into the shoes of the injured party to recover the money from the responsible third party.
Subsidiary
A company owned by another company.
A separate legal entity controlled by a parent company, often operating under its own brand and management.
Successor Liability
Taking on debts or problems of a company you buy.
The legal situation where a company that buys or merges with another company can be held responsible for the liabilities of the previous company.
Surety
Someone who guarantees that someone else’s promises will be kept.
A person or business that agrees to be responsible for another party’s debt or obligations if they fail to meet them.
Trademark
A logo, name, or symbol that legally belongs to your brand.
A legal protection for symbols, words, or designs that identify and distinguish a brand or company’s goods and services.
Ultra Vires
When a company does something it’s not allowed to do.
An action taken by a company or its officers that goes beyond the powers granted by its corporate charter or laws.
Unsecured Loan
A loan given without needing to pledge collateral.
A loan that is not backed by any specific asset, relying only on the borrower’s creditworthiness and promise to repay.
Valuation
Finding out how much a business is worth.
The process of determining the current or projected worth of a company, often used for selling, investing, or financial reporting.
Vesting
Earning the right to keep stock or benefits over time.
The process by which an employee earns full ownership of employer-provided benefits, like retirement funds or stock options, over a set period.
Waiver
Giving up a right you could have used.
A voluntary legal agreement where a person decides not to enforce a known right or claim.
Warranties
Promises that a product or service will work properly.
Guarantees made by a seller or manufacturer that a product or service will meet certain standards or conditions.
Withholding (tax context)
Taxes taken out of your paycheck before you get it.
The automatic deduction of taxes from an employee’s wages by an employer, sent directly to the government.
