A Company Law Jargon Buster

Company law is full of confusing terms, and if you don't know what they mean, starting a company can start to look a lot scarier than it really should. Read this article and it will become much easier for you to understand what a startup is.

Capital. 

This is the money that will be invested in the business. Example: "I start my business with $5,000 capital, of which $2,000 is my own."

Contract. 

When you sign a legal document, you are entering into a contract. Starting a business allows you to sign and enter into contracts on behalf of the business - the contract will be between another person and your company, not you.

Director. 

Ultimately, the people in charge of a company are its directors. For a large company, there will be a board of directors appointed by the shareholders. However, for a home business, you may choose to appoint yourself as the sole director as you are also the sole shareholder (see "Shareholder").

Registration. 

This is the official name of the process of creating a company. Example: "My business was registered in March 2000."

Insolvency. 

When a company cannot afford to pay off its debts. The type of company you set up will affect what happens in this situation - you can be liable for all the debt on your own or for nothing.

Limited liability. 

A limited liability company is a company where you agree in advance on how much liability you will take if something goes wrong. This will protect you from financial ruin if something bad happens to your business.

Office. 

Your company's "office" isn't just a place with computers - it's also a legal term for where your company is located. Your company must have a registered office, which means that you cannot form a company unless you have an address that can be legally used for that purpose.

Private. 

The home business will be private, which means members of the public cannot invest by buying shares. However, this does not prevent individuals from buying shares in your company if you are willing to sell them. Making your company private also won't prevent you from going public later.

Proxy. 

Someone acting as your proxy is acting on your behalf - you have given them the legal right to speak on your behalf. For example, if you have hired a lawyer to register your company, he will do it for you by proxy.

Shareholders. 

Shareholders are the people who own the company. In your company, you will be the sole shareholder (and thus own 100% of your business) unless you have made a deal with someone else to have them own the share.

Latin.

When you're dealing with the law, the amount of Latin used can be confusing. Here are some Latin terms that you may come across when starting your company.

In good faith: 

"in good faith." This is used to indicate that someone is saying they are telling the truth.

De facto: 

"actually". Used when something has happened that puts the "real" situation above the legal one.

De jure: 

"according to the law." De facto opposite.

Ex gratia, 

"out of grace." When something is done for free.

At first glance,

 at first glance. Something that seems to be true but is wrong.

Quid

 pro quo, something for something. When the service will be charged (or services will be exchanged).

Be careful with jargon.

No matter how much A Company Law Jargon you encounter when you start your business, don't start using it yourself. This will make it so that only "their own people" will understand what you mean, and everyone else will feel either a little stupid or a little annoyed. Similarly, if you're talking to someone (like your accountant) and they use some jargon that you don't understand, there's nothing wrong with asking them to explain what they mean - it's his fault that he uses too technical language. word, not yours, because you did not know it.

If you're not sure, there's a simple rule: A Company Law Jargon Buster is meant to convey very specific technical meanings. It should not be used as a substitute for everyday language, as it does not cause confusion.