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What is the business perception of identifying yourself as the Principal vs the Owner? I assume they are largely synonymous (please tell me if there are subtle differences, but in a small business sense, they seem interchangeable). Using "Principal" to me has always sounded fancier :)

Also, as a small issue: Is "Principal" the correct spelling? It's not "Principle" is it? My spelling skills are terrible!

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4 Answers 4

up vote 6 down vote accepted

"Principal" has a specific meaning in the context of commercial law. From Wikipedia:

a principal is a person legal or natural–who authorizes an agent to act to create one or more legal relationships with a third party

Effectively, this means that the principal is the business. In the case of a corporation, say General Electric, the principal is General Electric itself, while Jack Welch was one of its agents during the 80s and 90s. In the case of a sole-proprietorship, the business and its owner are effectively one-and-the-same, so a person might realistically be called the principal in that situation, but pretty much no other.

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1  
Fan-fricken-tastic... That's perfect... So to the nature of my question: Is putting "Principal/Owner" in your email signature going to make it painfully obvious that you're a small business? Your definition makes it pretty clear that this would be the case. –  Rikon Aug 14 '11 at 18:21
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Not necessarily in theory (there could be a large company that's a sole-proprietorship, though I'm not aware of any offhand), but in practice, yeah, probably. –  wfaulk Aug 14 '11 at 18:24
    
Note that IANA lawyer or businessman of any type. –  wfaulk Aug 14 '11 at 18:26

In Business school, we were taught the differences between all the different types of companies in our new world economy. Things have changed dramatically. First off, if you were the CEO, CFO, President, Owner, Manager, General Manager, Vice President, Secretary, Treasurer, you would sign as such.

You may ask why, and that is a great question. Let me provide an example.

In the Corporate world you are considered a ? of the company, in an LLC you are considered a ? of the company.

In a Incorporated company, you are considered a ? of the company. In a Sole Proprietorship you are considered a ? of the company.

In each case in this example, the company, involves 2 or more people, even in a legally formed Sole Proprietorship. Assigning a "Principal" to your name usually involves a legal document. For instance, you may be asked to sign a new dealer application, and it may ask for a Principal owner of the company. The Principal of the company will hold legal responsibility, will own a portion, or could own all of the company. As a sole proprietorship that may mean the only legal person in which can sign the document. The Legal Definition of Principal, For Legal purposes:

Law

a. a person who employs another to act as his agent

b. the person primarily responsible for an obligation

c. A partner or owner of a business.

This is primarily the only reason you would use the word principal in the world of business. In Business terms, Principal has one meaning, you would be a part of a company with a financial interest in that company. I would not sign a document, or a letter that stated "John Doe, Principal of IBM", Rather John Doe, CEO of IBM". However if a legal document asks for the Principal owner to sign, then I would sign "John Doe". If the Document asked for a signature of a Principal of the company IBM, then I would Sign "Jane Doe, Treasurer of IBM".

In non business terms, it can mean many different things. The head of a grammar school, my Principal has a masters degree, I thought they had to hold a P.H.D.! Principal in the context of a construction site, The principal of those beams come together and holds the upper floor together nicely. Meaning, many beams attached to the same place is the top load. It all depends on the context as to the meaning.

Ref: Webster Dictionary for business

Ref: Webster's Dictionary for Law

Ref: Webster's Dictionary for General terms in American English

As a footnote, one thing I can say, and repeat, it's Context, Context, Context.....

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I think I can shed some light on this subject. I will use an industry I am familiar with to illustrate. Many law firms these days are considered "small businesses." I live in a county with about 1.3 million residents, and some of the attorneys I am friends with refer to themselves as one of the following:

"Founder" "Owner" (less common) "Principal" "Partner" "Founding Partner"

As far as the most popular designation, it's tough to say. Partners tend to use "Partner" or "Founding Partner," while attorneys who are founders of a non-partnership structured firm, such as a professional corporations or professional limited liability company, tend to use, "Principal" or, "Principal Attorney." A good number of solo practitioners also simply use (Esq.), but some attorneys do not think this is in good taste (I have no idea why not).

I myself am a founder/owner of a Virginia criminal defense firm registered as a Professional Limited Liability Company (PLLC). I don't go around telling people I'm "Principal so and so," with the exception being my email signature. It is: FIRST NAME, MIDDLE INITIAL, LAST NAME, Principal Attorney. Quite frequently, people who call my firm do ask if they are talking to a firm leader (or something similar). This is the only reason why I see any benefit using "Principal." It makes people more comfortable and likely to trust they are contacting a decision maker.

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Whoever thinks using the term "principal" is suggestive of a small business needs to get out more. I know two guys my age, 50. Each owns his own business and applies the term "principal" in regard to his respective position. The first privately owns a company that does about 13 million a year in gross revenue. Margins, including G&A, are in the 30-40% range. He sold his business for 35 million. The other "principal" markets 11 products as a manufacturers rep. He works with his son. His annual pay is around $450,000 while his son collects around $100,000. Hey, you can call me principal anytime.

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