Glossary

Business terms, in plain English

Every acronym and legal phrase a first-time owner hits, defined simply — with links to go deeper when you need to.

A

Articles of Organization: The formation document you file with the state to legally create an LLC. Some states call it a Certificate of Formation or Certificate of Organization. It lists basic facts like your business name, address, and registered agent. Read more →

Bookkeeping: The routine recording of a business's financial transactions — money in and money out. Good bookkeeping keeps you tax-ready, shows whether you're profitable, and separates business finances from personal ones. Read more →
Bootstrapping: Funding and growing a business using its own revenue and the founder's own money, rather than outside investment or loans. Bootstrapped businesses trade slower growth for full ownership and control. Read more →
Break-Even Point: The level of sales at which total revenue exactly covers total costs, so the business makes neither a profit nor a loss. Everything sold beyond the break-even point contributes to profit.
Business Bank Account: A bank account held in the business's name, kept separate from the owner's personal accounts. Separating finances is essential for clean bookkeeping and, for an LLC or corporation, for preserving liability protection. Read more →
Business License: A government permit that grants legal permission to operate a business, often issued at the city or county level. The licenses you need depend on your industry, location, and activities. Read more →
Business Plan: A document that describes what a business does, who it serves, how it makes money, and how it will grow. It can be a formal plan for lenders or a lean one-page plan to guide your own decisions. Read more →

C Corporation (C Corp): A corporation taxed as a separate entity from its owners. Profits can be taxed twice — once at the corporate level and again when distributed as dividends — but C corps can raise money by issuing stock, which makes them the standard for venture-backed startups.
Cash Flow: The movement of money into and out of a business over time. A business can be profitable on paper yet still fail if cash flow is negative and it can't pay bills when they come due.

DBA (Doing Business As): A registered trade name that lets a business operate under a name different from its legal one. A DBA doesn't create a separate legal entity or provide liability protection — it's just a name registration. Read more →

EIN (Employer Identification Number): A free federal tax ID number issued by the IRS that identifies a business, much like a Social Security number does for a person. You need one to open a business bank account, hire employees, and file many taxes. Read more →

Franchise Tax: A recurring tax or fee some states charge a business for the privilege of operating there, separate from income tax. It may be a flat amount or based on revenue or net worth, and it's owed whether or not the business is profitable.

Limited Liability: Legal protection that generally shields an owner's personal assets — home, car, savings — from the business's debts and lawsuits. It's the main reason people form an LLC or corporation instead of operating as a sole proprietor. Read more →
LLC (Limited Liability Company): A business structure that combines the liability protection of a corporation with the simpler taxes and flexibility of a sole proprietorship or partnership. Profits pass through to the owners' personal tax returns by default. Read more →

Market Research: The work of learning about your potential customers, competitors, and demand before or while building a business. It ranges from customer interviews and surveys to studying competitors and search trends. Read more →

Operating Agreement: An internal document that sets out how an LLC is owned and run — who owns what share, how decisions are made, and how profits are split. Most states don't require filing it, but it's strongly recommended even for single-member LLCs.

Pass-Through Taxation: A tax treatment where business profits are not taxed at the business level but instead 'pass through' to the owners, who report them on their personal tax returns. It's the default for sole proprietorships, partnerships, and most LLCs. Read more →
Profit Margin: The share of revenue that remains as profit after costs, usually shown as a percentage. It tells you how much of each dollar of sales you actually keep, and it's a key input when setting prices. Read more →

Registered Agent: A person or company designated to receive legal documents and official mail on behalf of a business. Every LLC and corporation must have one with a physical address in the state of formation; you can serve as your own or hire a service. Read more →

S Corporation (S Corp): A tax election — not a separate business type — that lets an LLC or corporation pass profits to owners while potentially reducing self-employment tax. Owners who work in the business must pay themselves a reasonable salary. Read more →
Seller's Permit: A state authorization that lets a business collect sales tax on taxable goods and services. It's typically required before you make your first taxable sale in states that levy sales tax. Read more →
Sole Proprietorship: The simplest business structure, where one person owns an unincorporated business. It requires no formation filing, but the owner and the business are legally the same, so there's no liability protection. Read more →
Startup Costs: The one-time and early expenses required to get a business open, such as registration, equipment, inventory, a website, and initial marketing. Estimating them helps you budget and decide how much funding you need. Read more →

Value Proposition: A clear statement of the benefit you offer customers, for whom, and why it's better than the alternatives. A sharp value proposition guides your marketing, pricing, and product decisions.

Scafflow explains each step as you reach it, in the order that matters for your business.