1. Acquisition of Business License vs. Provision of Legal Protection
2. Differences Between Business Registration and Incorporation
3. Piercing of Corporate Veil
4. Cost of Incorporation vs Business Registration
5. Complexity in Filing Paperwork

Updated October 14, 2020: 

The difference between the date of incorporation vs date of registration is that the incorporation date marks the creation of a separate legal entity. The formation of a corporation entitles the owner to legal protection from other entities who may want to sue a business and use the owner's personal assets to settle business debts.

Some of the common business entities include:

  • LLCs
  • S corporations
  • C corporations

A business registration does not constitute an incorporation. As such, it doesn't provide legal protection to the personal assets of the business owner.

Registering a business enables the business owner to acquire a business license (a requirement in some jurisdictions) — which is necessary to conduct certain business activities.

To incorporate a business, owners must

  • file an article of incorporation and
  • pay the necessary filing fees to the Secretary of State.

States have the legal authority to incorporate businesses, though they require annual filings to ensure that the corporation remains in good standing.

Differences Between Business Registration and Incorporation

The major difference between a business registration and incorporation is that law courts honor the corporate veil in the case of an incorporated business. For instance, if a company is sued for distributing defective products, the court will stipulate that the payment of damages should only come from the corporation's assets.

Piercing of Corporate Veil

However, the corporate veil of an incorporated business can be pierced if there is substantive proof of fraud. The court then allows the personal assets of the corporation's owners to be included in the damage award.

Since an incorporated business may need to acquire business licenses to carry out business activities in certain jurisdictions, it's best to register the business. On the other hand, a registered business doesn't have to be incorporated.

Once a business is registered, the public can research the names and contact information of the business owners.

Cost of Incorporation vs Business Registration

Depending on the jurisdiction, the cost of business registration and incorporation will vary. Usually, the cost of incorporation is higher than business registration. Incorporated businesses pay for special licenses and must file yearly reports, which may involve additional fees.

Conversely, a business registration must be renewed since it expires after one year. Some businesses require additional permits — which increases the overall costs of complying with the jurisdiction's registration laws.

Complexity in Filing Paperwork

There are also differences in the complexity of paperwork required for business registration and incorporation. Although business owners can incorporate their business without professional assistance, it's best to hire a business incorporation service or incorporation lawyer to do so.

On the other hand, business registration is a simple, straightforward process that can be done by the business owner, without the need for professional help.

The state provides the business' incorporation date unless the business owner requests a future file date. Such requests must be sent as an attachment or included in the articles.

A corporation begins to exist as soon as the Division of Corporation receives and files the articles unless the articles specify an alternative effective date that is acceptable.

The effective date must be within 90 days after the Division receives the articles or five business days prior.

If business owners are incorporating between October and December, and don't want to carry out business activities till the next calendar year, they can avoid filing the annual report by listing January 1st as their effective date.

This means that the corporation will come into existence on January 1st even though the Division has received and filed the articles in its records. Such an effective date allows business owners to postpone their corporation's obligation to file annual reports until the next calendar year.

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