You’re filling out formation forms.
But the language is confusing. “Articles of Organization”? “Registered Agent”? “Beneficial Owner”? What do these terms even mean?
You’re not alone.
Legal jargon makes formation forms intimidating. But these terms have simple meanings. Once you understand them, the forms make sense.
This glossary translates everything.
Common terms. Plain English definitions. Real examples. What they mean in practice. How to use them.
Read this. Understand the terms. Fill out your forms confidently.
Key Takeaways
- Legal jargon on formation forms is intimidating but has simple meanings—most terms are straightforward once translated to plain English
- Common terms like 'Articles of Organization,' 'Registered Agent,' and 'Beneficial Owner' have clear definitions that make forms easier to complete
- Understanding these terms helps you fill out forms correctly and avoid mistakes that cause rejections
- Most formation terms are standard across states, so learning them once helps with all future filings
- Professional formation services handle the jargon for you, but understanding terms helps you verify accuracy and make informed decisions
Table of Contents
Why Legal Jargon Exists
Legal terms exist for precision.
Why it’s used:
- Precise meanings
- Legal consistency
- Historical tradition
- Professional communication
Why it’s confusing:
- Unfamiliar words
- Technical meanings
- No context
- Assumes legal knowledge
The reality: Legal terms have simple meanings. Once translated, they’re easy to understand.
The solution: This glossary translates legal jargon into plain English.
Formation Documents
Here are terms related to formation documents:
Articles of Organization
Legal term: Articles of Organization
Plain English: The official document you file to form an LLC.
What it means: This is the form that creates your LLC. It includes basic information like your business name, address, and registered agent.
Example: “File your Articles of Organization with the Secretary of State to form your LLC.”
Also known as: Certificate of Organization, Articles of Formation (some states)
Articles of Incorporation
Legal term: Articles of Incorporation
Plain English: The official document you file to form a corporation.
What it means: This is the form that creates your corporation. It includes basic information like your business name, address, and registered agent.
Example: “File your Articles of Incorporation with the Secretary of State to form your corporation.”
Also known as: Certificate of Incorporation, Charter (some states)
Certificate of Formation
Legal term: Certificate of Formation
Plain English: Another name for Articles of Organization (used in some states).
What it means: Same as Articles of Organization. Some states use this term instead.
Example: “File your Certificate of Formation to create your LLC.”
Operating Agreement
Legal term: Operating Agreement
Plain English: The document that governs how your LLC operates.
What it means: This document sets the rules for your LLC. It covers ownership, management, profit distribution, and other operational details.
Example: “Create an Operating Agreement to define how your LLC will be managed.”
Note: Not required to file in most states, but highly recommended.
Bylaws
Legal term: Bylaws
Plain English: The document that governs how your corporation operates.
What it means: This document sets the rules for your corporation. It covers shareholder rights, board structure, meetings, and other operational details.
Example: “Create Bylaws to define how your corporation will be governed.”
Note: Not required to file in most states, but highly recommended.
Pro tip: Formation documents are just forms with basic information. Don’t let the names intimidate you.
Entity Terms
Here are terms related to business entities:
Limited Liability Company (LLC)
Legal term: Limited Liability Company or LLC
Plain English: A business structure that protects your personal assets from business debts.
What it means: An LLC is a type of business that separates your personal assets from your business assets. If your business is sued or goes into debt, your personal property is generally protected.
Example: “Form an LLC to protect your personal assets from business liabilities.”
Corporation
Legal term: Corporation or Corp.
Plain English: A business structure that’s a separate legal entity from its owners.
What it means: A corporation is a business that exists independently of its owners. It can own property, enter contracts, and be sued in its own name.
Example: “Form a corporation to create a separate legal entity for your business.”
S-Corporation
Legal term: S-Corporation or S-Corp
Plain English: A corporation that elects special tax treatment with the IRS.
What it means: An S-Corp is a regular corporation that files an election with the IRS to be taxed like a partnership. This avoids double taxation (corporate tax + personal tax).
Example: “Elect S-Corp status to avoid double taxation on corporate profits.”
C-Corporation
Legal term: C-Corporation or C-Corp
Plain English: A corporation that’s taxed separately from its owners.
What it means: A C-Corp is a corporation that pays taxes on its profits, and then shareholders pay taxes again on dividends. This is “double taxation.”
Example: “C-Corps face double taxation but can offer more flexibility for investors.”
Sole Proprietorship
Legal term: Sole Proprietorship
Plain English: A business owned and operated by one person with no legal separation.
What it means: A sole proprietorship is the simplest business structure. There’s no legal separation between you and your business. You’re personally liable for all business debts.
Example: “A sole proprietorship offers no liability protection but is the simplest structure.”
Pro tip: For most solo founders, an LLC is the best choice. It offers liability protection without the complexity of a corporation.
Registered Agent Terms
Here are terms related to registered agents:
Registered Agent
Legal term: Registered Agent
Plain English: A person or business that receives legal documents on behalf of your company.
What it means: Every LLC and corporation must have a registered agent. This is who receives lawsuits, tax notices, and other important legal documents. The agent must have a physical address in the state where you’re formed.
Example: “You must designate a registered agent when forming your LLC.”
Also known as: Statutory Agent, Resident Agent, Agent for Service of Process
Statutory Agent
Legal term: Statutory Agent
Plain English: Another name for Registered Agent (used in some states).
What it means: Same as Registered Agent. Some states use this term.
Example: “Designate a statutory agent when filing your formation documents.”
Agent for Service of Process
Legal term: Agent for Service of Process
Plain English: Another name for Registered Agent.
What it means: This is the person who receives “service of process” (legal documents like lawsuits). Same as Registered Agent.
Example: “Your agent for service of process receives all legal documents.”
Commercial Registered Agent
Legal term: Commercial Registered Agent
Plain English: A professional business that provides registered agent services.
What it means: A company that specializes in providing registered agent services. They handle receiving and forwarding legal documents for multiple businesses.
Example: “Many businesses use commercial registered agents for privacy and reliability.”
Pro tip: Professional registered agent services provide reliable service and privacy protection. See our registered agent guide for details.
Ownership Terms
Here are terms related to ownership:
Member
Legal term: Member
Plain English: An owner of an LLC.
What it means: In an LLC, owners are called “members.” They have ownership interests in the company.
Example: “Each member of the LLC owns a percentage of the business.”
Shareholder
Legal term: Shareholder
Plain English: An owner of a corporation.
What it means: In a corporation, owners are called “shareholders.” They own shares (stock) in the company.
Example: “Shareholders elect the board of directors.”
Beneficial Owner
Legal term: Beneficial Owner
Plain English: A person who actually owns or controls a business, even if not listed as the official owner.
What it means: A beneficial owner is someone who owns 25% or more of a company or exercises substantial control over it. This term is used in BOI (Beneficial Ownership Information) filings.
Example: “BOI filings require identifying all beneficial owners of the company.”
Managing Member
Legal term: Managing Member
Plain English: A member of an LLC who manages the business.
What it means: In a member-managed LLC, all members can manage. In a manager-managed LLC, only managing members (or appointed managers) can manage.
Example: “The managing member makes day-to-day business decisions.”
Board of Directors
Legal term: Board of Directors
Plain English: A group of people who oversee a corporation.
What it means: The board of directors makes major decisions for a corporation. They’re elected by shareholders.
Example: “The board of directors sets corporate strategy and policies.”
Pro tip: Understanding ownership terms helps you complete formation forms correctly and understand your business structure.
Compliance Terms
Here are terms related to compliance:
Annual Report
Legal term: Annual Report
Plain English: A yearly filing that updates your state on your business information.
What it means: Most states require annual reports. You file them each year (or every two years in some states) to update your business information and pay required fees.
Example: “File your annual report by the deadline to maintain good standing.”
Good Standing
Legal term: Good Standing
Plain English: Your business is in compliance with all state requirements.
What it means: Good standing means you’ve filed all required reports, paid all required fees, and met all compliance obligations. Your business is active and compliant.
Example: “Maintain good standing by filing annual reports and paying fees on time.”
Franchise Tax
Legal term: Franchise Tax
Plain English: A tax some states charge for the privilege of doing business in that state.
What it means: Franchise tax is a fee (not really a tax) that some states charge. It’s separate from income tax. Not all states have it.
Example: “Delaware charges franchise tax for corporations formed there.”
Dissolution
Legal term: Dissolution
Plain English: The process of officially closing your business.
What it means: Dissolution is the legal process of ending your business entity. You file dissolution documents with the state to formally close your business.
Example: “File dissolution documents to officially close your LLC.”
Reinstatement
Legal term: Reinstatement
Plain English: The process of restoring a business that lost good standing.
What it means: If your business loses good standing (usually for not filing annual reports), you can reinstate it by filing missing reports and paying fees and penalties.
Example: “File for reinstatement to restore your business to good standing.”
Pro tip: Compliance terms are important for maintaining your business. See our compliance dashboard guide for tracking requirements.
State-Specific Terms
Here are terms you might see in state-specific contexts:
Secretary of State
Legal term: Secretary of State
Plain English: The state agency that handles business formations.
What it means: The Secretary of State (or similar agency) is where you file formation documents. They maintain business records and handle compliance.
Example: “File your Articles of Organization with the Secretary of State.”
Note: Some states use different agency names (e.g., Division of Corporations, Department of State).
Foreign Qualification
Legal term: Foreign Qualification
Plain English: Registering your business to operate in a state other than where you formed it.
What it means: If you form your business in one state but want to operate in another, you must “qualify” in that other state. This is foreign qualification.
Example: “If you formed in Delaware but operate in California, you need foreign qualification in California.”
Domestic Entity
Legal term: Domestic Entity
Plain English: A business formed in the state where it’s operating.
What it means: A domestic entity is formed in the state where it primarily operates. This is the opposite of a foreign entity.
Example: “An LLC formed in California is a domestic entity in California.”
Foreign Entity
Legal term: Foreign Entity
Plain English: A business formed in one state but operating in another.
What it means: A foreign entity is formed in one state but operates in another. It must qualify in the state where it operates.
Example: “A Delaware LLC operating in New York is a foreign entity in New York.”
Pro tip: State-specific terms vary by state. Check your state’s requirements. See our state-by-state checklist for guidance.
Your Next Steps
Understand the terms. Fill out your forms. File successfully.
This Week:
- Review this glossary
- Bookmark terms you see on your forms
- Reference this guide while filling out forms
- Complete your formation documents
This Month:
- File your formation documents
- Use this glossary for any confusing terms
- Create your operating agreement or bylaws
- Set up compliance tracking
Going Forward:
- Refer to this glossary as needed
- Understand your business structure
- Stay compliant with all requirements
- Learn as you operate
Need help? Check out our paperwork guide for form help, our form examples guide for correct vs. incorrect examples, and our LLC formation guide for detailed instructions.
Stay informed about business strategies and tools by following us on X (Twitter) and signing up for The Initiative Newsletter.
Sources & Additional Information
This glossary explains general business formation terms. Specific definitions and usage may vary by state.
For plain-English form help, see our Paperwork Guide.
For form examples, see our Form Examples Guide.
For state-specific requirements, see our State-by-State Checklist.
