Reference
Deal & fund glossary
The vocabulary of these transactions is not difficult, but it is unfamiliar — and people tend to meet it for the first time in a document they are being asked to sign. Plain definitions, without the circularity.
Current as of August 2026
Raising capital
- Accredited investor
- A person or entity meeting income, net worth, or professional criteria set by SEC rules, who may participate in private offerings closed to the general public. Under Rule 506(c) every purchaser must be accredited and the issuer must take reasonable steps to verify it.
- Blue sky filings
- State-level securities notice filings, made in the states where investors reside, in addition to any federal filing. Named for early state statutes aimed at speculative ventures backed by nothing but blue sky.
- Capital call
- A request from a fund to its investors to send in some portion of the money they have committed. Investors commit up front and fund over time, as the manager finds deals.
- Carried interest (carry)
- The share of a fund's profits paid to the sponsor or manager, over and above any return of capital to investors. Commonly stated alongside a preferred return, and the two interact.
- Form D
- A brief notice filed with the SEC for an offering made in reliance on Regulation D, due no later than fifteen calendar days after the first sale.
- General solicitation
- Publicly offering securities — advertising, public posts, media, or a seminar whose attendees were invited by public advertising. Permitted under Rule 506(c) and not under Rule 506(b), which is why the choice between them has to be made early.
- Preferred return (pref)
- A return investors receive before the sponsor participates in profits. An 8% pref means investors are paid an 8% annual return on their capital first; what happens after that is the waterfall.
- Private placement memorandum (PPM)
- The disclosure document given to prospective investors in a private offering. It describes the opportunity, the terms, the people, and — most importantly and most often underdone — the risks.
- Regulation D
- The set of SEC rules providing exemptions from securities registration for private offerings. Rule 506 is the one nearly everyone uses, in one of its two forms.
- SPV (special purpose vehicle)
- An entity formed to hold a single investment. Investors see exactly what they are buying, documents are simpler than a fund, and the vehicle winds up when the asset is sold.
- Subscription agreement
- The contract by which an investor commits to buy an interest, makes representations about their status, and is admitted to the entity.
- Waterfall
- The order in which money is distributed — typically return of capital, then preferred return, then a split between investors and sponsor. The order matters more than any single percentage in it.
Buying & selling a business
- Asset sale vs stock sale
- Whether the buyer acquires the company's assets or the ownership interests in the company itself. The choice drives which liabilities transfer, what consents are needed, and the tax outcome for both sides — and buyers and sellers usually prefer opposite answers.
- Change of control
- A contract provision triggered when ownership of a party changes — sometimes requiring consent, sometimes allowing the other side to terminate. A lease or key customer contract with one of these can quietly hold up a sale.
- Earnout
- Part of the purchase price paid later, contingent on the business hitting agreed targets. It bridges a disagreement about value, and it is a common source of disputes afterwards, because the buyer controls the business that has to hit the numbers.
- Escrow / holdback
- A portion of the price held back after closing to cover breaches of the seller's representations. Released after an agreed period if nothing surfaces.
- Letter of intent (LOI)
- A short document setting out the principal terms before full agreements are drafted. Mostly non-binding — but usually binding on exclusivity and confidentiality, which is the part people skim.
- Representations and warranties
- Statements of fact each side makes about itself and, for the seller, about the business. If one turns out to be untrue, it becomes the basis for a claim — which is what the escrow is there for.
- Working capital adjustment
- A post-closing adjustment to the price based on the working capital delivered against an agreed target. Routine, frequently misunderstood, and capable of moving real money after everyone thinks the deal is done.
Real estate
- 1031 exchange
- A structure allowing the deferral of gain on the sale of investment property where the proceeds are reinvested in like-kind property within statutory time limits. The deadlines are short and unforgiving, and the mechanics have to be set up before the sale closes.
- Assemblage
- Combining adjacent parcels into a single development site, often worth more together than separately.
- Floor area ratio (FAR)
- The ratio of a building’s total floor area to the size of the lot it sits on — a limit on bulk rather than height. Under Florida’s Live Local Act the term is defined to include floor lot ratio and lot coverage.
- Live Local Act
- Florida legislation requiring local governments to approve qualifying residential and mixed-use development administratively where a share of units is committed as affordable — overriding local density, floor area ratio, and height limits. More on the Act.
- Entitlements
- The approvals a site needs before it can be developed as intended — zoning, land use, site plan, permits. What a parcel is worth often depends more on its entitlements than on the land itself.
- Setback / stepback
- How far a building must sit from a property line, and how upper floors must recede as a building rises. Both can constrain a building envelope well below a permitted height.
These are general, plain-language descriptions intended to make documents easier to read. They are not legal or tax definitions, not legal advice, and terms are frequently defined differently in a particular agreement — where the agreement’s own definition is the one that governs. Current as of August 2026.
Reading a document you did not write?
If a term in front of you is doing more work than it appears to, that is usually worth a conversation before signing rather than after.