You are currently viewing Starting or Reorganizing a Business? Understanding the Legal Language of Business Structures Can Help.

Starting or Reorganizing a Business? Understanding the Legal Language of Business Structures Can Help.

  • Post category:Business Law

ward-angela-Lancaster-County-PennsylvaniaBy Angela M. Ward, Attorney

Founding an association, business, or private club is a labyrinth of legal challenges. Whatever the organization, there are thorny questions about how to structure it, the form and function of charters, articles, and by-laws, and forging business, member, or employee contracts.  To make matters worse, dense “legalese” language can make it challenging to understand the laws and regulations that apply. As a result, Pennsylvania’s organization laws can be especially inaccessible.

While the best way to navigate these complex legal frameworks is working with an experienced Pennsylvania business law attorney, understanding the definitions of these terms is useful to any business.

Articles of Association/Incorporation

In corporate terms, the term “articles of association or incorporation ” refers to a document that is filed with the State and describes an organization’s primary purpose and the operational parameters it will follow. Articles of Association/Incorporation are typically brief, but they can include details of the organizational structure.


An agent for business purposes is a person who is authorized by a person or entity to represent the person or entity in business affairs.


Arbitration is a type of dispute resolution often included in business contracts. Two parties (e.g., private citizens, corporations, associations, etc.) in dispute agree to allow a mutually approved and impartial third party to settle the matter. By entering arbitration, parties collectively agree to accept the ruling of the neutral third party and recognize the ruling as final and binding. Arbitration is used to resolve disputes outside of the judiciary system. However, the results are legally binding and therefore enforceable through the courts – unless both parties explicitly agree otherwise.

Board of Directors

In most corporations, the board of directors is an elected body that helps govern the corporation. They serve as representatives of the corporation’s shareholders and establish management and oversight policies. Boards of directors hire executives or officers to run the day-to-day operations of the business and play an essential role in setting the corporation’s goals, among many other things.



The bylaws of a corporation are the governing rules by which the corporation operates.

Collective Agreement

In labor law, a collective agreement refers to a contract between a union representing workers and their employer. Collective agreements usually detail things like working conditions, wages, dispute resolution processes, benefits, and the terms and conditions of employment at the firm. Generally, collective agreements serve as an official or unofficial way to prevent strikes, slowdowns, and work stoppages (“wildcat” strikes or other actions not approved by the union not included). Under these agreements, the union generally agrees to keep the workup, and the employer agrees to treat them fairly under the listed conditions.

C Corporations

The term “C Corporation” (sometimes abbreviated as “C-Corp) refers to a type of corporation whose owners are taxed separately from the company. C-corps can have an unlimited number of shareholders who have no liability to the corporation’s debts. C-corps are also permitted to take investments from other corporations. However, these benefits have some strings attached: C-corps are subject to double taxation because profit is taxed first from the corporation and then taxed a second time from the dividends paid to shareholders.

Comfort Letter

Much like a reference letter, a comfort letter is a document written by an independent auditor to confirm that a party can fulfill their expectations. For instance, someone may get a comfort letter to ensure a potential investor that they can satisfy financial obligations or meet the terms of a contract.


In contract law, consideration refers to something of value to each party in a contract they receive when they enter into or fulfill the contract. Both parties must get some form of consideration for a contract to be valid. This can be money, goods, services, or an agreement not to take a specified action

Exclusion Clauses

An exclusion clause is a part of a contract excluding or limiting one party’s liability under certain circumstances. A life insurance contract, for instance, might have an exclusion clause that prevents payment for death by suicide.

Joint Liability

In any partnership between two or more people, the term “joint liability” refers to their collective, equal liability for any debts or legal penalties against the partnership.

Limited Liability Company (LLC)

An LLC has characteristics of a partnership combined with those of a corporation. LLC owners enjoy both the liability protection of a corporation and the tax advantages that come with a partnership because the profits or losses are taxed to them personally and not to the corporation.


Non-Compete Agreement

A non-compete agreement is a contract agreed upon by an employee and their employer where the employee promises not to work for the competition (or become a competitor). These agreements can last for the duration of their employment or a specified period after leaving their position. These agreements are often used to prevent their employees from quitting and bringing proprietary information to their competitor(s).

Non-Executive Director

A non-executive director is an adviser to a company who is independent of that company; usually, they are on the board of directors and have similar duties and liabilities to the executive director. They are not part of the management team, nor are they official employees of the company.


A partnership is a business form with two or more partners as owners. Each partner contributes a part of the money or work in return for ownership of part of the company. Similarly, each partner is liable for any debts of the partnership and entitled to a share of the profits based on the percent of ownership.


In law, as in politics and other areas, quorum refers to the number of members of a voting body that must be present for the group to conduct business or vote on an issue. This often applies to boards of directors, homeowners associations, or similar organizations. Quorum is usually set as a majority of members (more than half), but organizations can specify the number in their bylaws.

S Corp

S-Corp is any entity that elects to be taxed under Subchapter S of the IRS Code.  S Corps are pass-through entities, meaning profits from the business pass through to the owners’ personal income and are reported in personal IRS Form 1040.  An S corporation can be a Limited Liability Company, a Limited Liability Partnership, and a traditional Corporation.

Service Contract

Service contracts are contracts between a company and its customer. One example is a work agreement between a contractor and a property owner. Service contracts usually outline details such as what work will be done, the price, and the deadline or date of completion.

Unfair Terms

In contract law, an “unfair term” is defined as any condition that takes undue advantage of a party with a significantly weakened bargaining position. This might include an exclusion of liability or an unnecessarily harsh penalty.


Contracts that have no effect and cannot be enforced are considered void. These include contracts that are rescinded or declared fraudulent.

Want to Learn More?

The Law Offices of Going and Plank in downtown Lancaster can help Lancaster Countians determine the best format for organizing their businesses, draft bylaws and articles of incorporation, secure EIN tax numbers, and company seals, create sound business contracts, and offer legal representation. Contact us today for legal assistance in all business matters.


Want to find out more about Angela M. Ward? Read these articles and blogs:

Discover Why so Many Lancaster County Businesses Rely on Employee Handbooks to Protect Their Company.

Don’t Let a Bad Contract Ruin Your Business

Why You Need an Experienced Business Attorney

9 Reasons Lawyers Should Review Contracts

5 Key Points to Include in Business Contracts

Choose the Business Form That’s Right for You

Lancaster County Employee Handbooks


Proud to participate with MetLife Legal Plan