Basic Business Terms Every New Entrepreneur Should Know

Starting a business is exciting—but it can also feel like learning a new language. Between legal forms, financial jargon, and operational buzzwords, even the most motivated founders can get overwhelmed. Whether you're drafting your first business plan or talking to investors, knowing key terms builds confidence and prevents costly mistakes.

This guide breaks down essential business vocabulary across areas like structure, finance, contracts, and marketing—so you can make smarter decisions from day one.

📘 Business Structure Terms

Choosing your business structure is one of your earliest decisions—and it affects taxes, liability, and daily operations. Here are the basics:

• Sole Proprietorship: A business owned by one person. Easy to set up, but the owner is personally liable for all debts.
   

• LLC (Limited Liability Company): A hybrid structure offering liability protection like a corporation, but with pass-through taxation.
   

• C Corporation: A legal entity separate from its owners. Offers the strongest liability protection but comes with more regulations and double taxation.
   

• S Corporation: Similar to a C Corp but with pass-through taxation. Limited to 100 shareholders.

Before choosing your structure, check resources like IRS business structure comparisons and your state’s Secretary of State website for registration requirements.

✍️ Understanding Letters of Intent

When discussing potential partnerships, sales, or investments, you may come across the Letter of Intent (LOI).

A Letter of Intent is a non-binding document that outlines a preliminary understanding between two parties before a formal agreement is signed. It’s often used to confirm serious interest and lay out key terms like timelines, responsibilities, and pricing.

Businesses often use LOIs to announce upcoming relationships or transactions before definitive documents (like purchase agreements) are in place. If you're preparing for a partnership or M&A deal, consider this resource to learn how LOIs are formatted and how to protect your business’s interests.

💰 Finance & Accounting Basics

Your business’s health depends on understanding the numbers. These terms are core:

For a deeper understanding of small business financials, check out Score.org’s budgeting templates.

📈 Marketing & Growth Terms

Whether you're attracting your first customer or scaling up, these terms come up frequently:

• Customer Acquisition Cost (CAC): The average amount you spend to gain a new customer.
   

• Lifetime Value (LTV): How much revenue you expect to earn from a customer over time.
   

• Conversion Rate: Percentage of users who take a desired action (like signing up or buying).
   

• Funnel: The customer journey from awareness to purchase.
   

• SEO (Search Engine Optimization): Optimizing your website so people can find you via search engines.

Tools like Semrush help you monitor performance and discover keyword opportunities for growth.

🧠 FAQ: What New Entrepreneurs Ask Most

What's the difference between gross and net income?
Gross income is total earnings before expenses; net income is what's left after operating costs, taxes, and interest.

Do I need a business bank account?
Yes—keeping your business finances separate simplifies accounting and protects your personal assets.

What is a business credit score?
It reflects your business’s creditworthiness. Vendors, lenders, and even partners may check it. Services like Nav can help monitor and build your score.

Should I trademark my business name?
If you want exclusive rights and national protection, registering a trademark with the USPTO is a smart move. Start with the USPTO database to check availability.

🔍 Quick List: Other Terms Worth Knowing

• EIN (Employer Identification Number) – Federal tax ID for your business.
   

• Runway – How many months your current cash will last at current burn rate.
   

• KPI (Key Performance Indicator) – Metric used to track business goals.
   

• Depreciation – Accounting method that spreads the cost of an asset over time.
   

• Pitch Deck – A slide presentation summarizing your business to investors.

Need help preparing your first pitch deck? Platforms like Slidebean can streamline the design and story.

🛠️ Spotlight Tool: HoneyBook

If you're a freelancer or service-based entrepreneur juggling proposals, invoices, and payments—HoneyBook is worth a look. It’s an all-in-one platform built for small businesses to manage client workflows, track income, and stay organized without hiring an admin team.

✅ Conclusion

You don’t need an MBA to launch a successful business—but understanding core business terms gives you a serious edge. As you grow, these definitions will shift from “foreign” to familiar—and eventually, second nature.