Legal Dictionary

Corporation. An entity (usually a business) having authority under law to act as a single person distinct from the shareholders who own it and having rights to issue stock and exist indefinitely. See our Business Formation page for more information.

• C-corporation. A corporation whose income is taxed through it rather than through its shareholders.
• charitable corporation. A nonprofit corporation that is dedicated to benevolent purposes and thus entitled to special tax status under the Internal Revenue Code.
• close corporation. A corporation whose stock is not freely traded and is held by only a few shareholders (often within the same family).
• professional corporation. A corporation providing services of a type requiring a professional license. A professional corporation may be made up of architects, accountants, lawyers, physicians, veterinarians, or the like.
• S-corporation. A corporation whose income is taxed through its shareholders rather than through the corporation itself.

Covenant. A formal agreement or promise, usually in a contract or deed, to do or not do a particular act.

• covenant not to compete. A promise usually in a sale-of-business, partnership, or employment contract, not to engage in the same type of business for a stated time in the same market as the buyer, partner, or employer.
• restrictive covenant. A promise made in a deed or implied by law; especially an obligation in a deed burdening or favoring a landowner.

Deed of Trust. A deed conveying title to real property to a trustee as security until the grantor repays a loan. This type of deed resembles a mortgage.

Foreclosure. A legal proceeding to terminate a mortgagor’s interest in property, instituted by the lender (the mortgagee or beneficiary) either to gain title or to force a sale in order to satisfy the unpaid debt secured by the property.

Garnishment. A judicial proceeding in which a creditor (or potential creditor) asks the court to order a third party who is indebted to or is bailee for the debtor to turn over to the creditor any of the debtor’s property (such as wages or bank accounts) held by that third party.

Lien. A legal right or interest that a creditor has in another’s property, lasting usually until a debt or duty that it secures is satisfied.

• attachment lien. A lien on property seized by prejudgment attachment.
• banker’s lien. The right of a bank to satisfy a customer’s matured debt by seizing the customer’s money or property in the bank’s possession.
• charging lien. An attorney’s lien on a claim that the attorney has helped the client perfect, as through a judgment or settlement.
• execution lien. A lien on property seized by a levy of execution.
• judicial lien. A lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.
• mechanic’s lien. A statutory lien that secures payment for labor or materials supplied in improving, repairing, or maintaining real or personal property, such as a building, an automobile, or the like.
• possessory lien. A lien allowing the creditor to keep possession of the encumbered property until the debt is satisfied.

Limited-Liability Company (LLC). A company — statutorily authorized in certain states — that is characterized by limited liability, management by members or managers, and limitations on ownership transfer. See our Business Formation page for more information.

Easement. An interest in land owned by another person, consisting in the right to use or control the land, or an area above or below it, for a specific limited purpose (such as to cross it for access to a public road).

Estate planning. The preparation for the distribution and management of a person’s estate at death through the use of wills, trusts, insurance policies, and other arrangements, esp. to reduce administration costs and transfer-tax liability. See our Estate Planning p age for more information.

Partnership. A voluntary association of two or more persons who jointly own and carry on a business for profit. See our Business Formation page for more information.

• family limited partnership. A business partnership in which the partners are related and are frequently used to transfer wealth from one generation to another.
• general partnership. A partnership in which all partners participate fully in running the business and share equally in profits and losses (though the partners’ monetary contributions may vary).
• limited-liability partnership. A partnership in which a partner is not liable for a negligent act committed by another partner or by an employee not under the partner’s supervision.
• limited partnership. A partnership composed of one or more persons who control the business and are personally liable for the partnership’s debts (called general partners), and one or more persons who contribute capital and share profits but who cannot manage the business and are liable only for the amount of their contribution (called limited partners).

Power of Attorney (POA). An instrument granting someone authority to act as agent or attorney-in-fact for the grantor. See our Power of Attorney page for more information.

• advanced health care directive. A document that takes effect upon one’s incompetency and designates a surrogate decision-maker for healthcare matters.
• durable power of attorney. A POA that remains in effect during the grantor’s incompetency.
• general power of attorney. A POA that authorizes an agent to transact business for the principal.
• special power of attorney. A POA that limits the agent’s authority to only a specified matter.

Probate. The judicial procedure by which a testamentary document is established to be a valid will; the proving of a will to the satisfaction of the court. See our Probate page for more information.

Promissory Note. An unconditional written promise, signed by the maker, to pay absolutely and in any event a certain sum of money either to, or to the order of, the bearer or a designated person.

Receiver. A disinterested person appointed by a court, or by a corporation or other person, for the protection or collection of property that is the subject of diverse claims (for example, because it belongs to a bankrupt or is otherwise being litigated).

Tax. A charge, usually monetary, imposed by the government on persons, entities, transactions, or property to yield public revenue.

• capital-gains tax. A tax on income derived from the sale of a capital asset.
• estate tax. A tax imposed on the transfer of property by will or by intestate succession. — Also termed death tax; death duty.
• generation-skipping tax (GST). A tax on a property transfer that skips a generation. The tax limits the use of generation-skipping techniques as a means of avoiding estate taxes.
• gift tax. A tax imposed when property is voluntarily and gratuitously transferred. Under federal law, the gift tax is imposed on the donor, but some states tax the donee.
• income tax. A tax on an individual’s or entity’s net income.
• inheritance tax. A tax imposed on a person who inherits property from another (unlike an estate tax, which is imposed on the decedent’s estate).
• progressive tax. A tax structured so that the effective tax rate increases more than proportionately as the tax base increases, or so that an exemption remains flat or diminishes.
• property tax. A tax levied on the owner of property (esp. real property), usu. based on the property’s value.

Trusts. The right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds the legal title; a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary). See our Trusts page for some of the various types of trusts.

Wills. The legal expression of an individual’s wishes about the disposition of his or her property after death; esp., a document by which a person directs his or her estate to be distributed upon death. See our Wills page for more information.

• duplicate will. A will executed in duplicate originals by a testator who retains one copy and gives the second copy to another person.
• holographic will. A will that is handwritten by the testator.
• joint and mutual will. A single will executed by two or more people — to dispose of property they own separately, in common, or jointly — requiring the surviving testator to dispose of the property in accordance with the terms of the will.
• joint will. A single will executed by two or more testators, usu. disposing of their common property by transferring their separate titles to one devisee.
• last will. The most recent will of a deceased; the instrument ultimately fixing the disposition of real and personal property at the testator’s death.
• mutual will. One of two separate wills in which two persons, usu. a husband and wife, establish identical or similar testamentary provisions disposing of their estates in favor of each other.

Unlawful Detainer. The unjustifiable retention of the possession of real property by one whose original entry was lawful, as when a tenant holds over after lease termination despite the landlord’s demand for possession.

Note: The above definitions were taken and edited from Black’s Law Dictionary, (9th ed. 2009).