Key Takeaways

  • Incorporation refers to the process of legally forming a corporation, while corporation refers to the resulting entity that exists after incorporation.
  • A corporation is a separate legal entity that can own property, enter into contracts, and be taxed independently of its owners.
  • The articles of incorporation—sometimes called a corporate charter—serve as the founding document for a corporation, detailing its structure, purpose, and registered agent.
  • Businesses that complete incorporation gain limited liability protection, separating personal and business assets.
  • The term "Inc." or "Corp." in a business name reflects completion of the incorporation process and must remain consistent in all legal filings.
  • Understanding incorporation vs corporation helps business owners choose the right legal structure and stay compliant with state laws.

What Is a Corporation?

Incorporation vs. corporation is a common comparison made by business owners as they decide which business entity will be the best option. A corporation is a separate business entity that is granted specific rights by the law and is treated similarly to a person. Corporations can conduct business in their names, take legal action, and own property. Corporations can also grant shares, which are ownership interests in the business. These shares can also be inherited or sold. Corporations survive their owners, which means that in principle, they can exist without end.

The liability for business debt and other obligations is limited to the investment of each individual shareholder. Personal assets are not at risk unless a seller or lender requires them to guarantee repayment. The shareholders of a corporation are responsible to elect a board of directors, which will manage the operations of the business.

Corporations come with a few advantages:

  • Can issue stock shares to appeal to investors
  • Can split corporate income for lower tax liability

Some of the disadvantages of a corporation include:

  • Restrictions on how many owners are allowed in S-corporations
  • Required to hold meetings every year and keep the minutes
  • The tax structure of a C-corporation requires payment of double taxes on any profits from the business

The word corporation refers to business groups, organizations, or institutions. Both business and nonprofit corporations will have charters, which include the business name and office address, along with the information about the board of directors. Nonprofit corporations typically state that all proceeds and earnings won't be paid to participants, officers, or directors, except in return for any business services rendered to the organization.

In order to gain tax-exempt status as a 501(c)(3) organization, a corporation must include a charitable purpose in its articles of organization. One example of a charitable purpose is the relief for those in poverty. The articles must outline that the purposes of the corporation are limited to charitable endeavors. Nonprofit corporations do not have shareholders. Instead, they could have members who issue votes for those on the board of directors. When nonprofit corporations do not have members, the business will choose its own board members.

Types of Corporations and Their Legal Characteristics

Corporations can take several forms depending on their goals, ownership, and taxation structure. The most common types include:

  • C Corporation (C Corp): The standard corporation structure that pays corporate income tax and may face double taxation when profits are distributed to shareholders.
  • S Corporation (S Corp): Allows profits and losses to pass through to shareholders’ personal tax returns, avoiding double taxation while retaining limited liability.
  • Nonprofit Corporation: Organized for charitable, educational, or religious purposes. Nonprofits may apply for federal tax-exempt status under Section 501(c)(3).
  • Benefit Corporation (B Corp): Operates as a for-profit entity but includes a public benefit mission in its charter and must meet certain transparency and accountability standards.
  • Professional Corporation (PC): Designed for licensed professionals such as doctors, attorneys, and accountants who wish to incorporate while maintaining professional accountability.

Each corporate type provides liability protection and perpetual existence, but differs in governance, taxation, and shareholder requirements.

What Is Incorporation?

The process of incorporation forms or creates a corporation. All organizers of a corporation are required to file the charter, also called the articles of organization, with the office in the state in which it will operate. This document, similar to a birth certificate of a corporation, will include the name of the corporation. The name has to be unique and distinctive from any other corporations within the state. It also cannot mislead potential investors or customers.

Additional provisions in the charter may include:

  • The corporation's lifespan, which can be indefinite
  • The corporation's business address
  • Attestation that the purpose of the corporation is in line with all laws
  • A description of the activities of the corporation

As soon as the owners of the corporation file the articles of organization, the business will be born. The exception to this rule is if a different effective date is specified in the articles.

Steps in the Incorporation Process

Incorporation formalizes your business as a separate legal entity. Although the exact requirements vary by state, most corporations complete the following steps:

  1. Choose a Business Name: It must be unique in the state and include a corporate designator like “Inc.” or “Corp.”
  2. Appoint a Registered Agent: The agent receives legal and government documents on behalf of the business.
  3. File Articles of Incorporation: Also known as the corporate charter, this document includes the company name, address, business purpose, share structure, and registered agent information.
  4. Draft Corporate Bylaws: These outline internal rules for management, meetings, and shareholder rights.
  5. Appoint Directors and Hold the First Board Meeting: Directors approve bylaws, authorize stock issuance, and record decisions in meeting minutes.
  6. Obtain an EIN (Employer Identification Number): Required for tax filings and opening business bank accounts.
  7. Comply with State Reporting and Tax Requirements: Some states require annual reports and franchise taxes to maintain good standing.

Completing incorporation provides legal recognition, ownership structure, and protection for shareholders’ personal assets.

Corporation vs. Incorporation

Corp. is an abbreviation for corporation while inc. is an abbreviation for incorporated. Both of these abbreviations are commonly used in the names of incorporated business entities. When registering a business as a corporation, the owners must use one of these abbreviations or words in the name. Corporations and incorporations have the same tax structure, limited liability, compliance rules, and legal structures. However, the two terms shouldn't be used interchangeably. After registering a business with either inc. or corp. in the name, the owners must continue to use the same abbreviation in all legal documents.

Both terms and abbreviations represent business entities that have been granted their own charters. The charter recognizes a corporation as its own legal entity with its own liabilities and privileges that are separate from its members' rights, liabilities, and privileges. One of the most critical features of both incorporations and corporations is limited liability. This means employees, directors, and shareholders will not be held personally responsible for any business debts.

Key Legal Differences Between Incorporation and Corporation

The difference between incorporation and corporation lies in timing and context:

  • Incorporation is the act or process of filing legal documents with the state to create a corporate entity.
  • Corporation is the legal entity that results from this process, capable of conducting business, owning assets, and being taxed.

In other words, incorporation creates, while a corporation exists. Once incorporation is complete, the business can use “Inc.” or “Corp.” in its name. The chosen suffix must be used consistently on contracts, checks, and state filings.

Additionally, corporations must maintain compliance through annual reports, meeting minutes, and taxes to preserve their corporate status and limited liability protection.

What’s Included in Articles of Incorporation

Articles of incorporation are the foundation of every corporation. According to Thomson Reuters, these documents typically include:

  • Corporation name and principal address
  • Registered agent name and address
  • Business purpose statement
  • Authorized number and class of shares
  • Names and addresses of incorporators
  • Duration of the corporation (perpetual by default unless otherwise stated)

Some states also require optional provisions, such as indemnification clauses or limitations on director liability. Filing the articles with the Secretary of State officially brings the corporation into existence.

Incorporation vs Corporation: Which Term Should You Use?

Use “incorporation” when referring to the process of forming the company—such as “the incorporation of XYZ, Inc.” Use “corporation” when discussing the entity itself—for example, “XYZ, Inc. is a registered corporation in Florida.”

For legal filings, it’s essential to use your business’s full registered name, including its chosen suffix. Changing between “Inc.” and “Corp.” after formation typically requires filing an amendment to the articles of incorporation with the state.

Choosing the right terminology ensures clarity in contracts, tax forms, and government filings.

Frequently Asked Questions

  1. Is incorporation the same as forming a corporation?
    Not exactly. Incorporation is the legal process of forming a corporation. Once the process is complete, the business becomes a corporation recognized by the state.
  2. Can I use “Inc.” and “Corp.” interchangeably in my business name?
    No. You must use the abbreviation you originally registered with in all official documents and filings.
  3. What are the main benefits of incorporating a business?
    Key benefits include limited liability protection, easier access to capital, perpetual existence, and enhanced credibility with customers and investors.
  4. How long does the incorporation process take?
    It varies by state but typically takes from a few days to several weeks, depending on the filing method and state processing times.
  5. Do all corporations have to file articles of incorporation?
    Yes. The articles of incorporation are required in every state to legally establish a corporation and define its structure and purpose.

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