Here is a simple, yet always growing, glossary of entrepreneurship.

Capital Expenditure

Money spent/ Items purchased to improve a business. For example, equipment purchased, building renovations can count as a capital expenditure. Basically, the purchase or improvement of anything that can be counted as an asset is considered a capital expenditure.

C-Corporation

A type of company that is a separate entity from its owners. Owners own shares in the company. The C-Corporation is taxed separately from its owners. C-corporations are highly regulated, requiring strict financial records, records of minutes, and a specific structure of ownership and management.

EBIT

Earnings Before Interests and Taxes, also sometimes referred to as Net Profit.  As the name implies, this is the income of a company minus all expenses, but before interest and taxes are factored in.

Entrepreneur

Someone who undertakes a new venture or starts a new organization, usually associated with a for-profit business.

Franchise

A franchise is a business partnership in which a franchiser grants a license to a franchisee for royalty fees and/or a share of the profits. While many famous examples abound, such as McDonald’s, Subway, Coca-Cola, etc., these well-known franchises only represent a small fraction of the types of franchising available. Franchises like McDonald’s license the entire business process, but some franchises only license out the right to distribution of a product, the brand name, or the right to supply. A wide variety of franchise models exist today.

Gross Profit

Gross Profit is calculated by subtracting the cost of the products from revenues.  Another way to say it is Net Income minus Cost of Goods Sold.  In industries where the product is a service, the cost of delivering the service is subtracted from revenue.  This is different from Net Profit.  Gross Profit is usually a bigger number than Net Profit as Net Profit subtracts more.

LLC

Limited Liability Company- A type of company formation in the United States. An LLC is a separate business entity from its owners, but is a pass-through entity for tax purposes.

Net Profit

Calculated after Gross Profit, this is the amount of money that remains after calculating all expenses- salaries, administration overhead, etc.  This is usually calculated before taxes (EBIT) but is also considered by some to be the profit that remains after taxes.   Net Profit can be calculated after earnings or expenses from the interest on loans.  So, in banking for example, Net Profit can sometimes be higher than Gross Profit.

Pass-Through Entity

A “pass-through entity” is a company that is not taxed directly. Taxes are “passed through” to the owners or investors. This avoids taxes in some instances but can add to taxes in others (i.e. capital expenditures) and can sometimes cause high personal taxation with zero income (when the business holds onto cash instead of paying out to the owners, the owners are still taxed at the end of the year based on their portion of ownership).

S-Corporation

A Corporation that chooses to be classified as a “pass-through” tax entity.  It is basically the same as a C-Corporation, except that shareholders of S-Corporations must report earning on their personal income statements of their share of the profits.  A couple rules:  maximum 100 shareholders, only 1 type of stock allowed, owners must be U.S. citizens or residents.

Social Entrepreneurship

Entrepreneurship that is primarily focused on social or environmental goals or change.  This can take the form of non-profits or businesses with social goals beyond profit.  A significant recent contribution to social entrepreneurship is the book by Muhammad Yunus called Creating a World Without Poverty: Social Business and the Future of Capitalism.

Sole Proprietorship

A business which is owned by one person and is not separate from that person.  All the liabilities and taxes are the responsibility of the owner.  The business does not pay any corporate tax, but the owner must pay self-employment tax.