Accounts Payable (AP)
Money a business owes to suppliers, vendors, or creditors for goods and services received but not yet paid for. Accounts payable is recorded as a liability on the balance sheet.

Accounts Receivable (AR)
Money owed to a business by customers for goods or services delivered but not yet paid for. Accounts receivable is recorded as an asset on the balance sheet.

Accreditation
A formal recognition process in which an independent organization evaluates a business or institution against established standards and certifies that it meets those standards. Common in healthcare, education, and professional services.

Accrual Accounting
An accounting method in which revenue and expenses are recorded when they are earned or incurred, regardless of when cash is actually received or paid. Contrasted with cash basis accounting.

Articles of Incorporation
A legal document filed with a state government to formally establish a corporation. Typically includes the company name, business purpose, registered agent, and share structure.

Asset
Anything of economic value owned by a business — including cash, inventory, equipment, real estate, and intellectual property. s are listed on the balance sheet.

At-Will Employment
An employment arrangement in which either the employer or the employee can terminate the relationship at any time, for any reason, without advance notice — provided the reason is not illegal.

Audit
A systematic examination of a business’s financial records, processes, or compliance status. Can be conducted internally or by an external party such as a government agency or independent accounting firm.

Balance Sheet
A financial statement that summarizes a business’s assets, liabilities, and equity at a specific point in time. Represents the equation: Assets = Liabilities + Equity.

Bankruptcy
A legal process through which a business or individual that cannot repay debts seeks relief from some or all of those obligations. Common types include Chapter 7 (liquidation) and Chapter 11 (reorganization).

Brand
The identity of a business as perceived by customers — encompassing its name, visual identity, reputation, values, and the experience it delivers.

Break-Even Point
The level of sales at which a business’s total revenue equals its total costs, resulting in neither profit nor loss. Calculated by dividing fixed costs by the contribution margin per unit.

Business License
A government-issued permit that authorizes a business to operate legally within a specific jurisdiction. Requirements vary by location, industry, and business type.

Business Plan
A formal written document outlining a business’s goals, strategies, target market, competitive landscape, operational structure, and financial projections.

Business Structure
The legal form under which a business operates — such as sole proprietorship, partnership, LLC, S corporation, or C corporation. Structure affects taxation, liability, and governance.

Capital
Financial assets or resources available to a business for use in operations or investment. Can refer to cash, equipment, or other assets used to generate revenue.

Capital Expenditure (CapEx)
Money spent by a business to acquire, maintain, or upgrade long-term physical assets such as equipment, buildings, or technology infrastructure.

Cash Flow
The movement of money into and out of a business over a period of time. Positive cash flow means more money is coming in than going out; negative cash flow means the reverse.

Cash Flow Statement
A financial statement that tracks the inflows and outflows of cash in a business over a specific period, categorized into operating, investing, and financing activities.

C Corporation (C Corp)
A legal business structure in which the company is taxed separately from its owners. C corps can have unlimited shareholders and multiple classes of stock, making them common for businesses seeking outside investment.

Certificate of Occupancy (CO)
A document issued by a local government authority certifying that a building or space complies with applicable codes and is suitable for its intended use.

Collateral
An asset pledged by a borrower to secure a loan. If the borrower defaults, the lender may seize the collateral as repayment.

Commercial Lease
A legally binding agreement between a landlord and a business tenant governing the use of commercial property. Terms typically include rent, lease duration, renewal options, and tenant responsibilities.

Compliance
Adherence to applicable laws, regulations, standards, and internal policies. Non-compliance can result in fines, legal liability, or loss of licensure.

Contractor (Independent Contractor)
A self-employed individual or business hired to perform specific work under a contract. Unlike employees, contractors are responsible for their own taxes and benefits and are not subject to the same labor law protections.

Corporation
A legal entity that is separate from its owners, providing limited liability protection. s can enter contracts, own property, and be sued independently of their shareholders.

Cost of Goods Sold (COGS)
The direct costs associated with producing the goods or services a business sells — including materials and direct labor. Subtracted from revenue to calculate gross profit.

Credit Score (Business)
A numerical rating that reflects a business’s creditworthiness based on its payment history, debt levels, and financial behavior. Used by lenders and vendors to assess risk.

Credentialing
The process of verifying the qualifications, licenses, and professional history of individuals or organizations — particularly relevant in healthcare, finance, and regulated industries.

DBA (Doing Business As)
A registered fictitious name under which a business operates that differs from its legal name. Also called a trade name or assumed name.

Debt Financing
Raising capital by borrowing money, typically through loans or bonds, with an obligation to repay the principal plus interest over time.

Depreciation
The gradual reduction in the value of a long-term asset over time due to wear, obsolescence, or age. is recorded as an expense on the income statement.

Due Diligence
A thorough investigation or audit of a business, individual, or transaction before entering into an agreement. Common in mergers, acquisitions, partnerships, and vendor relationships.

EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a business’s core operational profitability, often used to compare performance across companies or industries.

EIN (Employer Identification Number)
A unique nine-digit number assigned by the IRS to identify a business entity for tax purposes. Required for hiring employees, opening business bank accounts, and filing business taxes.

Employee Handbook
A document outlining a company’s policies, procedures, expectations, and benefits for employees. Serves as a reference guide and can have legal significance in employment disputes.

Equity
The ownership interest in a business. In financial terms, equity equals total assets minus total liabilities. In investment terms, equity refers to ownership shares in a company.

Equity Financing
Raising capital by selling ownership stakes in a business to investors, rather than borrowing. Investors receive a share of future profits and decision-making authority in exchange.

Exit Strategy
A plan for how a business owner will eventually transition out of the business — whether through sale, merger, succession, or closure.

Expense
A cost incurred by a business in the course of operations. s reduce net income and are recorded on the income statement.

FICA (Federal Insurance Contributions Act)
A U.S. federal payroll tax that funds Social Security and Medicare. Both employers and employees contribute a percentage of wages.

Fictitious Business Name
See DBA (Doing Business As).

Fiscal Year
A twelve-month accounting period used by a business for financial reporting and tax purposes. Does not have to align with the calendar year.

Fixed Costs
Business expenses that remain constant regardless of production volume or sales — such as rent, salaries, and insurance premiums. Contrasted with variable costs.

Franchise
A business arrangement in which an individual (franchisee) is licensed to operate a business under the brand, systems, and support of an established company (franchisor) in exchange for fees and royalties.

Franchise Tax
A state tax imposed on businesses for the privilege of operating within that state. Not related to franchise businesses — applies to corporations and LLCs in many states.

General Liability Insurance
A standard business insurance policy that covers claims of bodily injury, property damage, and personal injury arising from business operations. Often required by landlords and clients.

General Partnership
A business structure in which two or more individuals share ownership, management responsibilities, and personal liability for the business’s debts and obligations.

Gross Profit
Revenue minus the cost of goods sold (COGS). Represents the profit a business makes before accounting for operating expenses.

Gross Margin
Gross profit expressed as a percentage of revenue. Indicates how efficiently a business converts sales into profit before overhead expenses.

Guarantor
A person or entity that agrees to be responsible for another party’s debt or obligations if that party defaults. Often required by lenders or landlords for new businesses without established credit.

Human Resources (HR)
The department or function within a business responsible for recruiting, hiring, onboarding, managing, and offboarding employees, as well as maintaining compliance with employment laws.

Income Statement
A financial statement that summarizes a business’s revenues, expenses, and profits or losses over a specific period. Also called a profit and loss statement (P&L).

Independent Contractor
See Contractor.

Intellectual Property (IP)
Creations of the mind — such as inventions, brand names, logos, written works, and trade secrets — that are legally protected through patents, trademarks, copyrights, or trade secret law.

Inventory
Goods or materials a business holds for the purpose of resale or use in production. Classified as a current asset on the balance sheet.

Lease
A contractual agreement granting one party the right to use another party’s property for a specified period in exchange for payment.

Leasehold Improvement
Modifications or renovations made to a leased commercial space to suit the tenant’s business needs. May be paid for by the tenant, the landlord, or shared between both.

Liability
A financial obligation or debt owed by a business to another party. Liabilities are listed on the balance sheet and include loans, accounts payable, and accrued expenses.

Limited Liability Company (LLC)
A flexible business structure that provides its owners (called members) with limited personal liability while allowing profits and losses to pass through to their personal tax returns. One of the most common structures for small businesses.

Limited Partnership (LP)
A business structure with at least one general partner who manages the business and has unlimited personal liability, and one or more limited partners who contribute capital but have liability limited to their investment.

Line of Credit
A flexible financing arrangement in which a lender makes a set amount of funds available to a business to draw from as needed, up to a maximum limit.

Liquidity
The ability of a business to meet its short-term financial obligations using available cash or assets that can be quickly converted to cash.

Market Research
The process of gathering and analyzing information about a target market, including customer needs, competitors, pricing, and industry trends, to inform business decisions.

Merchant Account
A type of bank account that allows a business to accept credit and debit card payments. Requires an agreement with a payment processor.

Minimum Viable Product (MVP)
A version of a product or service with the minimum features necessary to satisfy early customers and gather feedback for future development.

Net Income
A business’s total revenue minus all expenses, taxes, and costs. Also called the bottom line or net profit.

Net Profit Margin
Net income expressed as a percentage of revenue. Measures how much of each dollar of revenue translates into profit after all expenses.

Non-Compete Agreement
A contract in which one party agrees not to engage in business activities that compete with another party, typically for a defined period and within a specific geographic area.

Non-Disclosure Agreement (NDA)
A legally binding contract in which one or more parties agree to keep specified information confidential. Commonly used when sharing proprietary business information with employees, contractors, or potential partners.

Operating Agreement
A legal document that governs the internal operations of an LLC, including ownership percentages, management structure, voting rights, and profit distribution. Not always required by law but strongly recommended.

Operating Costs
The ongoing expenses associated with running a business’s core operations — including rent, utilities, payroll, and supplies.

Overhead
Ongoing business expenses that are not directly tied to producing a product or service — such as rent, administrative salaries, utilities, and insurance.

Partnership
A business structure in which two or more individuals share ownership and management of a business. Partners share profits, losses, and liability according to their agreement.

Payroll
The total compensation a business pays to its employees, including wages, salaries, bonuses, and withheld taxes.

Payroll Tax
Taxes withheld from employee wages and/or paid by the employer based on employee compensation. Includes federal income tax withholding, Social Security, Medicare, and state income taxes.

Personal Guarantee
A promise by a business owner to personally repay a debt or fulfill an obligation if the business cannot. Often required by lenders and landlords for new or small businesses.

Profit and Loss Statement (P&L)
See Income Statement.

Pro Forma
Financial statements based on projected or hypothetical figures rather than historical data. Used to forecast future performance or evaluate the impact of a potential business decision.

Promissory Note
A written legal document in which one party promises to pay a specified sum of money to another party under defined terms, including interest rate and repayment schedule.

Registered Agent
A person or business entity designated to receive official legal and government correspondence on behalf of a business. Required in most states for LLCs and corporations.

Return on Investment (ROI)
A measure of the profitability of an investment, calculated by dividing the net gain from the investment by its cost and expressing the result as a percentage.

Revenue
The total income generated by a business from its core operations before any expenses are deducted. Also called gross sales or top-line revenue.

Risk Management
The process of identifying, assessing, and mitigating potential risks that could negatively impact a business’s operations, finances, or reputation.

S Corporation (S Corp)
A tax designation that allows a corporation to pass income, losses, and deductions through to shareholders’ personal tax returns, avoiding double taxation. Subject to eligibility requirements including a limit on the number of shareholders.

Scalability
The ability of a business to grow and handle increased demand without a proportional increase in costs or resources.

Secretary of State
The state government office responsible for business registrations, including LLCs, corporations, and other business entities. The primary filing authority for most business formation documents.

Sole Proprietorship
The simplest business structure, in which a single individual owns and operates the business with no legal distinction between the owner and the business. The owner has unlimited personal liability for all business debts.

Standard Operating Procedure (SOP)
A documented set of step-by-step instructions for carrying out a routine business process consistently and correctly.

Startup Costs
One-time expenses incurred in the process of establishing a new business before it begins generating revenue — including legal fees, licenses, equipment, and initial marketing.

Succession Plan
A strategy for transferring leadership and ownership of a business to another person or entity when the current owner retires, exits, or is no longer able to operate it.

Tax Deduction
An expense that reduces a business’s taxable income, lowering the amount of tax owed. Common business deductions include rent, payroll, equipment, and professional services.

Tax ID Number
See EIN (Employer Identification Number).

Trade Name
See DBA (Doing Business As).

Trademark
A legally registered symbol, name, logo, or phrase that identifies and distinguishes a business’s goods or services from those of others. Protected under federal and state law.

Triple Net Lease (NNN)
A commercial lease in which the tenant pays base rent plus a proportionate share of property taxes, building insurance, and maintenance costs. Common in retail and commercial real estate.

Underwriting
The process by which a lender, insurer, or investor evaluates the risk of a loan, insurance policy, or investment before agreeing to provide it.

Unemployment Insurance (UI)
A government program that provides temporary income to workers who have lost their jobs through no fault of their own. Funded through payroll taxes paid by employers.

Variable Costs
Business expenses that change in proportion to production volume or sales — such as raw materials, shipping, and sales commissions. Contrasted with fixed costs.

Vendor
A company or individual that supplies goods or services to a business. Managing vendor relationships effectively is a critical operational skill for any business owner.

Venture Capital (VC)
A form of private equity financing provided by investors to startups and early-stage businesses with high growth potential, in exchange for equity ownership.

Vesting
A schedule by which an employee or founder earns full ownership of equity, benefits, or retirement contributions over time, typically as an incentive for continued service.

Workers’ Compensation Insurance
A mandatory insurance program in most states that provides wage replacement and medical benefits to employees injured on the job, in exchange for relinquishing the right to sue the employer.

Working Capital
The difference between a business’s current assets and current liabilities. Represents the liquid resources available to fund day-to-day operations.

Zoning
Local government regulations that designate how land and buildings in specific areas may be used — residential, commercial, industrial, etc. laws directly affect where a business can legally operate.