A business owner who is not personally involved in the management or operations of a business.

The method that is used to record a business's revenue and expenses for tax purposes.

The period of time in which financial activity is recorded and financials are prepared.

One of the two primary accounting methods, recognizes income and expenses based on when they are "accrued" or when they actually occur.

An adjustment made to the income or expenses in a financial statement when calculating the true earnings capacity of a business (i.e., SDE or EBITDA).

The purchase, or acquisition, of a smaller company that is added on to a larger platform company by a private equity firm or strategic buyer, to compliment the acquirer’s business...

An accounting or tax term for the original cost of an asset recorded on the books less any adjustments to the value of the asset, such as depreciation.

Adjustments to the value of working capital, made after the closing, that affect the purchase price.

The allocation of the purchase price of a business among various classes of assets, such as inventory, goodwill, land, buildings, etc., for tax purposes.

An individual who invests their personal capital in early-stage, potentially high-growth companies.

To convert a figure from a partial year, such as January to March, into a figure for an annual basis (e.g., January to December).

The set of initial formation documents that are filed with the Secretary of State to form a corporation.

The set of initial documents that are filed with the Secretary of State to form a limited liability company (LLC).

One of the two ways to structure an acquisition for legal purposes in which the buyer purchases the individual assets of the seller, as opposed to purchasing the stock held...

The transfer of rights from one person or entity (the assignor) to another (the assignee).

A fictitious name used by an entity that does not wish to do business publicly using its legal entity or corporate name.

The minimum threshold amount that must be met before a seller becomes liable for the buyer’s losses caused by the seller’s breach of representations and warranties (reps & warranties).

A legal term that obligates the parties to make their best attempts to accomplish an objective outlined in a contract.

The document with which ownership of the assets of a business are transferred from seller to buyer if the sale is structured as an asset sale.

A group of individuals, typically composed of technical and industry experts, who provide guidance and feedback to the company’s managers and board of directors.

A group of experienced people, elected by the shareholders of an entity, who act as representatives of the shareholders and make major decisions for the company on behalf of the...

The value at which an asset is carried on the balance sheet, usually calculated by subtracting accumulated depreciation from the original cost of the asset.

A fee paid by a seller to a potential buyer if a transaction is not consummated for reasons specified in a purchase agreement, such as the seller terminating the agreement...

When a business sells nearly all of its inventory to a single buyer and the transaction is not in the ordinary course of business.

An agreement among the shareholders of a company, governing how the owners of a business can sell their interests in the business, to whom, when, and at what price.

A written statement made by the buyer of a business that assists the seller in evaluating the buyer’s ability to purchase and operate the business.

The internal, written rules that govern how a company operates. These are created by the company’s board of directors when the company is formed.

A corporation that has been elected to be taxed as an entity separate from its shareholders in accordance with Subchapter C of the Internal Revenue Code.

Abbreviation for “Common Area Maintenance Fee,” which is a fee paid collectively by the owners of individual units of a property for the maintenance and upkeep of the non-exclusive areas...

An asset that has a useful life longer than one year and that is not intended for sale during the normal course of inventory.

An investment a company makes in the fixed or capital assets of the company that have a useful life longer than one year or that are not intended for resale.

The profit earned from the sale of property that is held for more than one year. A tax on the profit earned from the sale of a capital asset.

An earnings-based method of valuing a company by multiplying its earnings by an expected rate of return.

The rate of return based on the income that an investment generates.

A method used to expense an asset over its useful life.

Carry-back financing is when a seller acts as the lender and carries a promissory note for the purchase of a business. A buyer makes a down payment on the business...

The amount of cash generated in a business after all expenses, inflows, and outflows of cash.

A financial report that states the cash coming into a company from its operations and investments, as well as the cash going out of a company for the payment of...

One of two primary accounting methods, this method reports income when it’s received and expenses when they are paid out.