Using This Glossary
The definitions provided in this glossary were prepared by Michael W. Goldstein, a New York Lawyer. These definitions are based upon principles of New York Sate law which are current as of the date this page was written. For legal matters outside of New York State, such as those involving contracts, commercial law, commercial litigation, wills, trusts or estates, as well as accidents occurring outside of New York State, or any other lawsuit or legal matter outside of New York State, the laws of other states will apply, and therefore, the definitions in this glossary may not be applicable.
New York Contracts, Commercial Law, and Commercial Litigation Glossary
Asset Sale of a Business
The bulk sale of all the assets of a business (compare to “stock sale of a business”)
Attorney-in-Fact or (or “Agent”)
The person designated to act in place of the principal or donor under a power of attorney
Confidentiality Agreement
Agreement between two or more parties which provides that they will not disclose any confidential information obtained from the other party in the course of their business dealings.
Confidentiality and Non-Compete Agreements, also referred to as Non-Competition and Non-Disclosure Agreements (NCND)
Agreement that combines the provisions of a Confidentiality Agreement and a Non-Compete Agreement
Corporation
A legal entity that issues shares of stock to its owners, and has authority to act in the its own name. A corporation can sue or be sued it its own name. New York corporations have names that end in Corp., Inc., or Ltd. The stockholders of a corporation have limited liability, which means that they are not personally liable for the corporation’s debts.
Corporations (other than “sub-chapter S corporations”) are subject to double taxation. This means that the corporation’s profits are taxed at the corporate income tax rates, and its shareholders are also taxed at their own rates on distributions of profits (dividends) received by each shareholder.
A business corporation issues shares of stock to its stockholders, as evidence of their ownership interest in the corporation. Corporation shareholders elect a board of directors to manage the business. The board of directors also adopts bylaws, and elects the officers. Annual meetings are required of both the shareholders and the board of directors. Non-profit (not-for-profit) corporations may be established for religious, educational, charitable or public service purposes. Non-profit corporations do not issues shares of stock because there are no stockholders or owners of a non-profit corporation.
Durable Power of Attorney
Power of Attorney that remains in effect even if the person who signs the Power of Attorney becomes mentally or physically incapacitated.
Employee
A person hired to work for another person or business for aa salary or other compensation. The employer usually has the authority to direct the manner in which the work is performed, the location where it is performed, and the time when it is performed. The employer’s level of control is an important factor in distinguishing an employee from an independent contractor.
Independent Contractor
A person or business performing services for a fee, for another person or business, pursuant to an oral or written agreement. The relationship of the independent contractor and the person or business for whom the services are performed is distinguishable from the traditional employment relationship. Unlike an employee, the independent contractor is not subject to the direction and supervision of the person or business for whom the services are performed. The independent contractor usually has the right to control the manner of the work, time of work, location where the work is performed, and the methods utilized to accomplish the work. The independent contractor is also free to perform work for many people or businesses.
An independent contractor is legally responsible to pay his or her own income taxes, Social Security Tax, etc.,since there are no payroll deductions. The independent contractor does not enjoy the fringe benefits that employees regularly receive; such as sick leave, vacation pay, health insurance, retirement benefits, or workers compensation coverage. The Internal Revenue Service is suspicious of independent contractor agreements which might serve to disguise an employer-employee relationship.
Injunction
A court order requiring the person to whom it is directed to perform a particular act or to refrain from performing a particular act.
Joint Venture
A business agreement between two or more parties who agree to work together and share responsibility to achieve a desired result. The parties may also agree to share control, resources, work, profits and losses.
License Agreement
A written contract whereby the licensor who owns a copyright, patent, trademark, or other intellectual property, charges a royalty or fee to permit the other party to use that intellectual property, or to sell copies or sell products containing the licensed intellectual property. The licensor retains ownership of the intellectual property, but the licensee is permitted to make use of it for a specific period of time, or for specific terms of use. Also, in some circumstances, an agreement permitting the limited use of a portion of property might take the form of a license agreement.
Limited Liability Company (LLC)
An unincorporated business that affords limited liability to its owners. Therefore, the members of the LLC are not personally liable for the debts of the company. The members of the LLC may elect for the LLC to be treated as a partnership or “disregarded entity” for income tax purposes, which thereby avoids the double taxation of a corporation.
Limited Liability Company Operating Agreement
Agreement that defines the rights and responsibilities of each of the LLC’s member’s relating top the LLC’s management, as well as capital accounts, membership interests, distributions of profits, capital contributions and capital accounts, transfer of membership interest, etc.. The LLC’s Operating Agreement may includes terms similar to those contained in a corporation’s by-laws, as well as a corporation’s shareholders’ agreement.. In New York State, an LLC is required to have an Operating Agreement, even for single member LLC’s.
Limited Liability Partnership
A business entity where only the general partner has the right to control and manage the business. The general partner remains liable for the partnership’s debts, while the limited partners are protected by limited liability.
Non-Compete Agreement
An agreement not to engage in certain defined businesses or employment activities that may be in competition with the others party’s business, for a specified period of time, and in a designated location or geographic area.
Partnership
A business entity where the partners are personally liable for the partnership’s debts. The partners share income and expenses in proportion to their ownership interest in the partnership. There is no double taxation for a partnership, since the partnership does not pay income tax. Instead, each partner’s share of the partnership’s profits or losses is reported on their respective personal income tax returns.
Partnership Agreement
An agreement among the partners which provides for the management powers and duties of each partner; term (length) of the partnership; termination of the partnership, percentages of ownership of the partners, distribution of profits and losses, and rights and responsibilities relating to the sale of a partnership interest, retirement of a partner, and disability or death of a partner.
Principal of a Power of Attorney
The person who grants legal authority to a designated agent to act under a power of attorney is known as the “principal” of the power of attorney. Previously, the principal of a power of attorney was known as the “donor” of the power of attorney.
Power of Attorney
Legal document that authorize a trusted relative, friend or other designated person to take care of some or all of your legal or financial matters. It can be limited to a particular transaction, or type of transaction, or it may be broad in scope. The Power of Attorney may be effective immediately, or may only become effective in the event that you become mentally or physically incapacitated, or upon some other occurrence.
Shareholders’ Agreement:(Stockholders’ Agreement)
An agreement among the shareholders of a corporation, establishing the shareholders’ rights and responsibilities, including management of the business, rights and responsibilities in the event of a shareholder’s sale of stock interest, retirement, disability, death, etc.
Shareholders’ Derivative Action
A lawsuit commenced by a corporation’s shareholders on behalf of the corporation, which seeks to protect the shareholders’ interests, due to corporate waste or other mismanagement of the corporation.
Stock Buy-Out
One or more shareholders purchasing another shareholder’s stock in a corporation. The shareholders’ agreement often contains provisions that govern stock buy-outs.
Stock Sale of a Business
A method of transferring ownership of a business, by transferring all the shares of stock of the corporation, or all the units of ownership of an LLC that owns the business. The purchaser of a business structured as a stock sale needs to take particular precautions to insure that the purchaser is not buying a business that is subject to undisclosed debts or liabilities.
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