A Company Law Jargon Buster

By: John Morris


It won't be scary to set up a company even with all those confusing law terms. Read this jargon buster and you should find it much easier to understand what you need to know.

I. All The Jargon

1. Capital

This is money that is going to be invested in a business. Example: I am starting my business with $5,000 capital, $2,000 of that is my own.

2. Contract

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

3. Director

The people ultimately in charge of a company are its directors. For a large company, there will be a boards of directors, appointed by the shareholders. For a home business, though, you can appoint yourself as the sole director since you are also the sole shareholder (see shareholder).

4. Incorporation

This is the formal name for the process of starting a company. Example: My business was incorporated in March 2000.

5. Insolvency

When a company cannot afford to pay its debts. The type of company you have set up will affect what happens in this situation - you may be liable for all of the debt yourself, or for none.

6. Limited Liability

A limited liability company is one where you agree beforehand how much responsibility you will take if anything goes wrong. This protects you from being destroyed financially if something bad happens to your business.

7. Office

Your companys office isnt just a place with computers - its also a legal concept, meaning where your company is based. Your company must have a registered office, that means that you cant start a company unless you have an address that would be legal to use for this purpose.

8. Private

A home business will be private, that means that members of the public cannot invest by buying shares. This does not stop individuals from buying percentages of your company if you are willing to sell, though. Starting your company as a private one also doesnt stop you from converting it to a public one later on.

9. Proxy

Someone who acts as a proxy for you acts on your behalf - you have given them the legal right to speak for you. For example, if you get a lawyer to handle the incorporation of your company, they will be incorporating it for you by proxy.

10. Shareholders

The shareholders are the people who own the company. In your company, you will be the only shareholder (and so own 100% of your business), unless youve made a deal with someone else for them to own a share.

II. Working With Latin

When youre dealing with law, the amount of Latin involved can be confusing. Here are some Latin terms you might come across when youre setting up your company.

1. Bona fide

Bone Fide means in good faith. This is used to mean that someone says they are telling the truth.

2. De facto

De facto means in fact. Used when something has happened that makes the real situation take precedence from the legal one.

3. De jure

De jure means in law. The opposite of de facto.

4. Ex gratia

This means out of grace. When something will be done for no fee.

5. Prima facie

This means at first sight. Something that seems true is not true.

6. Quid pro quo

This means something for something. When a fee will be charged for a service (or services will be exchanged).

III. Be Careful With Jargon.

Don't start to use jargon with your clients. It will make it so that only insiders will understand what you mean, and everyone else will feel either a little silly or a little annoyed. By the same token, if youre speaking to someone (your accountant, for example) and they use some jargon you dont understand, theres nothing wrong with asking them to explain what they mean - its their fault for using an overly technical word, not yours for not knowing it. If youre not sure, theres a simple rule: jargon is for communicating very specific, technical meanings. Use everyday language with people and keep jargon to the papers.

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