When elected, an 83(b) election allows the recipient of incentive stock to pay ordinary income taxes on the shares as of the date of receipt. In exchange, when the shares are sold, the proceeds are taxed in accordance with capital gains rules. If the 83(b) election is forgone, there is no tax at the issuance of the shares; however, upon sale the proceeds are treated as ordinary income.

The ASC reorganizes the thousands of United States Generally Accepted Accounting Principles (GAAP) pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure. It also includes relevant United States Securities and Exchange Commission (SEC) guidance that follows the same topical structure in separate sections in the codification.

An organization providing certification for qualified business appraisers based upon established guidelines and performance standards.

An individual or firm who provides an opinion whether the financial statements (the information being verified) are fairly stated in accordance with accounting standards. The auditor gathers evidence to determine whether the statements contain material errors or other misstatements.

The legal status of a person or entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.

The act of combining two or more companies or businesses into a single entity and allocating the purchase price into various assets and liabilities acquired from the transaction.

The partial or full disposal of a business unit through sale, exchange, closure or bankruptcy. Most business divestitures result from a management decision to no longer operate a business unit because it is no longer part of the business’ strategy.

The process by which a Subchapter “C” corporation, legally changes its tax status to a Subchapter “S” corporation. C corporation earnings are taxed at the entity level; whereas, S corporation earnings are taxed at the shareholder level. In-other-words, the profits are “passed through” to the shareholders for tax purposes.

An ownership interest in a company received at inception for services rendered or to be rendered by the recipient. Usually the interest is granted without regard to capital contribution. Carried interests vary significantly in their terms and payoff structures.

A company with no existing ready market for the trading of shares. Many such entities are owned and managed by a small group of businesspeople or companies, although the size of such a corporation can be as large as many public corporations.

A company with no existing ready market for the trading of shares. Many such entities are owned and managed by a small group of businesspeople or companies, although the size of such a corporation can be as large as many public corporations.

A situation in which a person or organization is involved in multiple interests (financial, emotional, or otherwise), one of which could possibly corrupt the motivation of the individual or organization.

An amount or percentage by which the pro rata value of a controlling interest exceeds the pro rata value of a noncontrolling interest in a business enterprise, to reflect the power of control.

The last stage of the process (liquidation) by which a company (or part of a company) is terminated, and the assets and property of the company are redistributed.

The circumstance business owners find themselves in when owners no longer agree on the management of the business and decide to separate.

The consolidation or merging of two companies into one.

A contract that derives its value from the performance of an underlying asset. This underlying asset can be a commodity, interest rate, currency, market index, security or other asset. The asset is often called the “underlying”. Derivatives can be used for a number of purposes - including insuring against price movements (hedging), increasing or decreasing exposure to price movements for speculation or getting access to otherwise hard to trade assets or markets. Derivatives include futures, options, and swaps, among others.

A reduction in the value of an interest in an entity due to the inability to influence the management of its operations. Discount for lack of control is often referred to as a minority interest discount.

A reduction to the value of an investment in an asset due to the lack of an established market in which to purchase or sell the interest. The inability to convert the asset into cash quickly relative to assets which trade in fluid markets, with minimum transaction costs, and with a high degree of certainty as to the amount of net proceeds, results in a reduction of the value of the asset.

The federal law that establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries.

A qualified retirement plan designed to invest employee retirement funds into the stock of their employer. A secondary goal of an ESOP is to incentivize the employees and endear loyalty to the company. In an ESOP, companies provide employees with stock ownership, often at no up-front cost to the employees. Shares are held by the ESOP trust and allocated to employees according to their pay. The trust will continue to hold the shares until the employee leaves the company, at which time the employee has a put back to the employer to repurchase the shares at fair market value.

A levy paid to the government by the estate of a person for the transfer of assets from the estate to the heirs.

Statements made in court by an individual who by virtue of education, training, skill, or experience, is believed to have expertise and specialized knowledge in a particular subject beyond that of the average person their expertise.

The act of accepting and following Financial Accounting Standards Board (FASB) pronouncements.

The price for an Asset at which a buyer and seller would transact assuming that that both the buyer and seller were knowledgeable, willing and unpressured. This level of value is usually used for federal tax purposes and is promulgated in Revenue Ruling 59-60 of the Internal Revenue Code.

The price for an Asset at which a buyer and seller would transact assuming that that both the buyer and seller were knowledgeable, willing and unpressured. This level of value is usually used for federal tax purposes and is promulgated in Revenue Ruling 59-60 of the Internal Revenue Code.

A rational and unbiased estimate of the potential market price of a good, service or asset. This level of value is used for compliance with GAAP, shareholder disputes and marital divorces. GAAP defines fair value as “…the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date...” Whereas, the definition of fair value disputes is governed by state law which varies from state to state based on state law.

An agreement setting the pricing and terms of a buy-out between co-owners to protect or continue a business should it experience unforeseen circumstances.

This pronouncement by FASB provides guidance for determining the Fair Value of an asset. FASB defines Fair Value as “…the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement dates (as defined in ASC Topic 820).”

Professional evaluation by a qualified analyst or advisor as to whether the terms of a merger, acquisition, buyback, spin-off, or privatization are fair to the parties. They are typically issued when a company is being sold or entering into a merger or divesting itself of a substantial division of its business.

A limited partnership whose owners are typically related family members which is frequently used to move wealth from one generation to another while continuing the control over the assets. Partners are either General Partners (GP) or Limited Partners (LP). One or more General Partners will be responsible for managing the partnership.

A private, not-for-profit organization whose primary purpose is to establish and improve generally accepted accounting principles (GAAP) in the United States.

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A gift tax is a transfer tax on an asset that one person gives to another.

An intangible asset arising from the purchase of another company when the purchase price exceeds the value of the acquired net assets (total assets - total liabilities). The book value of a firm’s goodwill is tested annually to determine if its book value needs to be marked down to market.

The original monetary value of an economic item. In some circumstances, assets and liabilities may be shown at their historical cost as if there had been no change in value since the date of acquisition. The balance sheet value of the item may therefore differ from its market value.

A company’s examination of existing assets to determine if the recorded carrying cost of the asset exceeds its estimated fair value. The test consists of valuing the reporting unit to determine if the value of the reporting unit exceeds the reporting unit’s book value. However, a company can choose to redeploy the assets and, if this results in a greater value, the write down will be limited to the redeployment value. This test is typically reserved for plant and equipment assets for which technology or other factors have made uneconomical to operate.

Shares of company stock granted or issued to key employees. These shares are used as an incentive to promote or encourage performance by a group of employees during a specified period. Depending on the circumstances when the options are issued, they may be taxed as ordinary income or capital gain income when exercised.

Stock options issued to key employees to engage the employee in the growth of the company and its value.

An income tax is a government levy (tax) imposed on individuals or entities (taxpayers) that varies with the income or profits (taxable income) of the taxpayer. Pass-through entities such as partnerships generally are not taxed; rather, the partners are taxed on their share of partnership’s income. Income tax generally is computed as the product of a tax rate times taxable income.

The process by which an individual or entity who is independent of the seller or the buyer in a business transaction, appraises or values a company or asset.

An asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies), goodwill and brand recognition are all common intangible assets in today's marketplace.

A broad categorical description for the set of intangibles owned and legally protected by a company from outside use or implementation without consent. Intellectual property can consist of patents, trade secrets, copyrights and trademarks, or simply ideas. The concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protective rights that apply to physical property. Most developed economies have legal measures in place to protect both forms of property.

The agency under the Department of Treasury of the United States tasked with collection of taxes and the administration of the Internal Revenue Code.

Significant ownership of shares of stock which are freely traded on a stock exchange or in over the counter markets. In certain circumstances, the size of a block of stock could impair its marketability because the sale of the entire block would depress the trading price of the stock.

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. A limited liability company is not a corporation; it is a legal form of a company that provides limited liability to its owners.

A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). The GP typically has control of the day-to-day operations and most major decisions and is the only partner subject to liability beyond assets of the partnership.

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Non-current assets providing the company with a future economic benefit beyond the current year or operating period. Typically these are investment in fixed assets or subsidiaries.

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The legal termination of marital rights and responsibilities between spouses. Issues commonly involved in dissolutions are grounds for dissolution, classification and division of assets of the spouses, ongoing obligations to provide for a spouse after dissolution, the welfare of any children of the marriage, and tax consequences.

The legal consolidation of two companies into one entity. A merger typically occurs when two companies combine and both sets of owners continue to be shareholders of the surviving entity. An acquisition typically occurs when one company purchases the assets or shares of another company for cash and/or shares of the buyer.

A promissory note evidencing an amount a debtor is committed to repay plus interest.

A contract which gives the buyer (the owner) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The seller has the corresponding obligation to fulfill the transaction – that is to sell or buy – if the buyer (owner) "exercises" the option.

A contract which gives the buyer (the owner) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The seller has the corresponding obligation to fulfill the transaction – that is to sell or buy – if the buyer (owner) "exercises" the option.

A set of exclusive rights granted to an inventor or assignee for a limited period of time in exchange for detailed public disclosure of an invention. An invention is a solution to a specific technological problem and is a product or a process. Patents are a form of intellectual property.

A set of exclusive rights granted to an inventor or assignee for a limited period of time in exchange for detailed public disclosure of an invention. An invention is a solution to a specific technological problem and is a product or a process. Patents are a form of intellectual property.

A company owned by a relatively small number of shareholders, private investors, or owners and is not traded in an open market.

A company owned by a relatively small number of shareholders, private investors, or owners and is not traded in an open market.

A legal instrument, agreement or contract made between a lender and a borrower by which the lender conveys to the borrower a sum or other consideration known as principal for which the borrower promises repayment of the principal plus interest under conditions set forth in the agreement.

A corporation, whose shares are traded on a public stock exchange (for example, the New York Stock Exchange or Nasdaq in the United States) where shares of stock of corporations are bought and sold by and among the general public.

The regulated process of offering securities of a company to the public. The offering requires the issuing company to publish a prospectus detailing the terms and rights attached to the offered security, as well as information on the company itself and its finances.

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Process by which an acquiring company allocates the purchase price of an acquisition among the assets and liabilities purchased. The process involves conducting an appraisal of fixed and intangible assets at their fair value, the allocation of the purchase price among these assets and the allocation of the balance to goodwill.

Common stock issued under specific terms with restrictions from resale for a designated period of time.

Common stock issued under specific terms with restrictions from resale for a designated period of time.

Is a pronouncement by the Internal Revenue Service which generally provides the approach, methods and factors to be considered in valuing shares of the capital stock of closely held corporations for estate tax and gift tax purposes. The revenue ruling has been modified to broaden its scope in subsequent revenue rulings over the years.

These restricted shares of stock are acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer Shares. Control securities are those held by an affiliate of the issuing company. An affiliate is a person, such as an executive officer, a director or large shareholder, in a relationship of control with the issuer. If one wishes to sell Rule 144 Shares, they must comply with the following rules: (i) they must meet the required holding period, usually at least one year, (ii) there must be adequate current information about the issuing company publicly available before the sale can be made, (iii) in most cases, the number of shares sold during any three-month period cannot exceed the greater of 1% of the outstanding shares of the same class being sold, or if the class is listed on a stock exchange, the greater of 1% or the average reported weekly trading volume during the four weeks preceding the filing of a notice of sale on Form 144, (iv) the sales must be handled in all respects as routine trading transactions, and brokers may not receive more than a normal commission and (v) affiliates must file a notice with the SEC on Form 144 if the sale involves more than 5,000 shares or the aggregate dollar amount is greater than $50,000 in any three-month period.

An independent agency of the United States federal government responsible for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, the nation’s securities exchanges.

An employer-employee method of incentive compensation that provides a company’s workforce with an ownership interest in the company in exchange for enhanced performance. The shares are a part of employees’ remuneration for work performed and are allocated to employees.

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A corporation that pays federal taxes on its profits in accordance with the Internal Revenue Code and distributes taxable dividends to its shareholders.

A corporation that does not pay federal taxes on its profits in accordance with the Internal Revenue Code. As a result, the shareholders include their portion of the company’s profits on their tax return and pay the corresponding taxes. The shareholders will receive Form K-1 from the company delineating the profits they should include in their tax return. Distributions from these companies are not taxable.

The process by which taxpayers comply with tax laws and, more importantly, accurately report their income and deductions honestly on the appropriate return. The purpose of tax planning is to discover how to accomplish all of the other elements of a financial plan in the most tax-efficient manner possible. Tax planning thus allows the other elements of a financial plan to interact more effectively by minimizing tax liability.

A recognized symbol or design that identifies a product or service.

An ownership right to use and possess a property that is shared among co-owners, with no co-owner having exclusive right to any portion of the property. Under this type of ownership, title to real or other property is held by two or more persons without specifying the interests of each party by percentage or description of a portion of the property. Such interests are typical between joint tenants, tenants in common, tenants by the entirety.

An ownership right to use and possess a property that is shared among co-owners, with no co-owner having exclusive right to any portion of the property. Under this type of ownership, title to real or other property is held by two or more persons without specifying the interests of each party by percentage or description of a portion of the property. Such interests are typical between joint tenants, tenants in common, and tenants by the entirety.

The quality control standards applicable for real property, personal property, intangibles, and business valuation appraisal analysis and reports in the United States and its territories.

Holders of voting common stock are able to influence the corporation through votes on establishing corporate objectives and policy, stock splits, and electing the company's board of directors. Non-voting stock often is identical to voting stock except the non-voting stock has no right to vote on the above matters.