Use our glossary of terms and phrases to help explain some of the common expressions used in business. Click on the letters to take you to the definitions.
The creation of a contract. If you accept an offer, it becomes binding to all members involved. If conditions need to be added to the contract, these must be accepted by all the other members involved before these become binding.
The company's annual meeting must be held once a year, apart from the very first one which can must be held within 18 months of when the company was incorporated.
These are part of the company's constitutional documents which are filed at Companies House. Together with the Memorandum of Association, these two documents are often called "Mem & Arts".
This is a financial document which shows the assets and liabilities of a business on a certain date. From this, the net worth of the business can be calculated. Balance sheets should be drawn up on the same day each year to allow for easy comparison between previous balance sheets.
An agreement is broken by one or more members who are involved with the agreement and its conditions. This could make the contract void.
A 'business angel' is someone who invests in a business, usually in its very early stages. Further information
If you make a gain when you sell your shares in a company, it will be subjected to this tax. Shareholders in unquoted trading companies can get a preferential rate of relief called Business Taper relief.
In order to create a contract, companies may have to tell other companies some confidential information. This agreement means the neither party is allowed to give out this information to anyone else. This is still applicable even if the contract is never made.
Protects written works, software, dramatic, artistic or typographical work against copying, translating, adapting and distributing. It doesn't require any formal registration and the © notice serves as a warning. It lasts for the life of the author plus 70 years (50 years for sound recordings, 25 for typographical arrangements).
Damages are a form of compensation. Someone may desire something which a court cannot allow them, such as possession of a building and so they are paid damages instead.
A type of loan usually for a set period of time and carrying a fixed rate of interest.
This term means the extent to which any new shares issued by a company lessens or 'dilutes' the holdings of existing shareholders. Dilution can be prevented or restricted by special provisions.
Each company must have at least one director and a company secretary, known as the Officers of the company. Directors have day-to-day control of the company and have fiduciary duties - duties of honesty and good faith, as well as a number of statutory duties.
States the legal stance of a company. Can often be used to deny legal responsibility so the company cannot be sued for liable or misrepresentation.
Dividends are that part of a company's profit which is paid to a shareholder.
These rights are usually set out in the Articles of Association where appropriate, giving shareholders who are selling shares the rights to force other shareholders to sell as well.
This is the term for all meetings of shareholders other than the Annual General Meeting.
An individual who is subscribing for shares in a qualifying company, and who is not 'connected' with it, can achieve tax-free capital gains in certain circumstances.
This scheme allows employees in companies with gross assets not exceeding £30 million to enjoy tax advantages on options.
The share capital in the business.
A term used to describe how shareholders release the profit on their investment, often by a trade sale or IPO.
This means you raise finance by selling a debt. If person A owes you £100, you could sell this debt to person B for £80. Person A then pays person B the £100, so person B receives £20 profit. However, this means you lose £20, but it may be worth it if you can get the £80 when you really need the finance.
A firewall protects your computer from certain types of data and files, especially viruses and worms. It means hackers cannot access your computer, and it can restrict you from viewing certain internet pages.
This is an agreement that allows someone to use the products or brand that belongs to someone else. For example, car dealerships are often run by independent sales people, yet they use the brand name of the car manufacturer.
This stands for Financial Times Stock Exchange. This is where shares can be bought or traded. The FTSE 100 shows the share prices for the top 100 companies listed on the London Stock Exchange.
The G8 is a group made up of the worldÃs biggest traders, who meet to discuss world trade. The members are United States of America, United Kingdom, Canada, Italy, Japan, Germany, France and Russia.
The value of all the goods and services produced by an economy over a given period of time.
This is a contract between two firms. Firm A lends firm B some goods or equipment for a certain period of time and must pay monthly instalments to Firm A. If firm B pays all of the instalments, it then owns the equipment. However, firm B can give back the equipment at any time and does not have to pay any more instalments.
This section of the government is responsible for collecting taxes from employers and employees, as well as implementing Ã«custom dutiesÃ to prevent illegal goods entering the country.
This is given by a court of law to stop someone doing something such as breaking the agreement of their contract. This can be given instead of damages.
A company listing on an exchange, such as the London Stock Exchange, NASDAQ, or the Alternative Investment Market (AIM) which is part of the LSE specialising in small companies.
This is when two or more company run a project together, where they share both the costs and benefits of the project. This is different from a merger which is when the two companies join together permanently.
This approach to management was developed in Japan. It involves improving your products or services gradually over time in small incremental steps. This process is always on-going.
This means legally responsible. If your business breaks a contract, then you may be liable for it. This is important because you may be held financially responsible.
A right to use another right, often of Intellectual Property Rights (IPR).
A shareholder, owner or partner in a business may have limited liability. This means if the business has financial difficulties, the shareholder will only lose the money they have invested. Unlimited liability means the owner could find personal possessions such as houses being used to pay off the debts of the business.
This is when the management of a company buys most or a whole company from its owners or shareholders.
This means a country that is a member of the European Union.
Part of the Company's initial constitional documents filed at Companies House, describing the objectives and powers of the company.
This is a document setting out the rules between parties concerning the confidentiality of information.
The nominal value of a share rather than the total amount paid for it.
Options are opportunities granted to employees to buy shares at a fixed priced at some point in the future. If the value rises, buying the shares can be of great benefit to the employee, otherwise they are of little value.
This is a resolution by shareholders in a business, and needs more than 50% to vote in favour.
Patents protect inventions for products and processes which must be novel, involve an inventive element, and be capable of industrial application. Patents must be registered in order to protect against anyone else making, using or selling the product or process, and gives a period of protection of 20 years; patent renewal fees must be paid annually.
These rights are contained in the Articles, and may require existing shareholders to be offered the first opportunity to buy any other shares subsequently issued or offered for sale.
Usually give the holder enhanced rights concerning the payment of dividends.
The amount of goods that are allowed in a country. This can be restricted by the government to protect UK exporters, though they should not impose quotas on importers from the EU.
The Retail Price Index is a measure of inflation. The Consumer Price Index is now the preferred measure of inflation as it is thought to be more accurate.
These protect the appearance or individual character of a product, such as its features, ornamentation, texture and so forth. Like Patents and Trade Marks, they must be registered and renewed, protecting the holder for 25 years.
Return on investment means how beneficial an investment is going to be or has been. It can be calculated by working out the annual benefit of the investment, and then divide this by the initial investment amount.
These are people holding shares in the company, have key constitutional decisions, and share in the profits of the company.
A tax-advantageous plan for all employees to purchase or be awarded an amount of shares each year.
The amount paid for a share in excess of its nominal value.
This sets out the terms between the shareholders, and between them and the company.
Small and medium enterprise(s). Small enterprises are said to have fewer than 50 employees and have turnover of less than €10 million. Medium sized enterprises have less than 250 employees and turnover which is less than €50 million.
This is a resolution by shareholders in a business, and needs more than 75% to vote in favour.
Those shares bought by the first shareholders in a company.
A strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture.
To win a contract for a specific job, you may have to submit a tender. This means you should state much you would want to be paid and why you think you are the best person for the job. For more normal tenders, you should include all your costs and revenues made.
Trade Marks protect distinctive words, symbols and logos which are used to identify the goods or services of the company, and they can also cover features like smell and shape. They can be registered, and can be renewed indefinitely.
The United Nations is a group made up of members from most countries in the world. They discuss peacekeeping measures, promote human rights and aim to reduce poverty.
An owner of a business may choose to have unlimited liability. This means if the business has financial difficulties, the owner will be liable (responsible) for paying the debts. This may mean selling own personal possessions such as their house to gain finance. Limited liability means the owner, shareholder or partner will only lose the money they have invested.
A specialist company investing usually substantial amounts of money in other companies in return for equity. Further information on VC companies and Venture Capital Trusts is available in the Money section of Resources.
This is a programme on your computer that could cause damage. It may be used to copy your personal details such as credit card information, or it may delete files on your computer. You can get a virus by opening an attachment or downloading programmes from the internet. This means having up to date anti-virus software is essential.
Current assets minus current liabilities. This figure shows you the value of any liquid assets available to the company. If the number is negative, you may not be able to grow easily.
This is when families on low income with children pay a reduced amount of income tax. To be eligible for this, you should contact HM Revenue and Customs.
This means producing a budget that does not take into account what has happened in the past or any previous experiences. Instead, each part of the budget is assigned finance individually. This is more time consuming, but could be beneficial if previous budgets have been unsuccessful.
These explanations are for guidance only, and we strongly recommend you seek professional assistance on specific items such as company formation, finance and legal issues.