Is Incorporated Same as Corporation: Everything You Need to Know
To answer whether or not "incorporated" is the same as "corporation," there are several factors that need to considered, including the steps necessary to form a business entity. 3 min read updated on February 01, 2023
To answer whether or not "incorporated" is the same as "corporation," there are several factors that need to considered, including the steps necessary to form a business entity.
Differences Between Incorporation, Corporation, and Nonprofit
Corporations are legal entities that are given certain rights, meaning they are treated as persons under the law. "Incorporation" refers to the steps that you must take to form your corporation. A nonprofit is one of the several different types of corporations that you could form. Unlike traditional corporations, which are focused on making a profit, nonprofits work towards the public good.
When you use terms such as nonprofit, incorporation, and corporation, you are referring to the structure of a business and how it was formed.
What Is a Corporation?
A corporation is a type of business that is legally allowed to perform actions such as the following:
- Owning a business
- Suing an individual or another business
- Conducting business in its name
When a business becomes a corporation, the owners of the business are provided a variety of legal protections, which makes it easier to pool multiple sources of funding.
Shares represent ownership interests in a corporation, and these shares can be sold, transferred, and inherited.
Corporations, unlike other business entities, can last after the death of their owners and, in theory, can last in perpetuity.
What Is Incorporation?
The process of forming a corporation is known as incorporation. One of the most important steps of incorporation is filing a corporate charter or Articles of Incorporation with the state where the business is located. In the Articles of Incorporation, which acts as the corporation's birth certificate, the name of the company must be listed. This name should be unique from other corporations and should not mislead the public.
Other information that should be listed in the corporate charter includes the following:
- The company's address
- The company's intended lifespan
- A description of the business activities in which the company intends to engage
What Is a Nonprofit?
A nonprofit is a type of organization that uses its resources for programs and other organizational purposes instead of distributing these resources to company investors or owners. While possible, forming a corporation is not required in order to run a nonprofit. If a nonprofit engages in limited activities and possesses limited resources, it generally doesn't need to incorporate. When a nonprofit does choose to incorporate, it only needs to file organization documents if it applies for tax-exempt status.
Nonprofit Corporation Organization
As with a normal corporation, a nonprofit corporation's charter must include information such as the following:
- The name of the corporation
- The corporation's address
- A listing of the board of directors
Nonprofit organizations must state that any earnings will only be paid to participants for nonprofit services and will not be distributed otherwise. If a nonprofit wishes tax-exempt status as a 501(C)(3) charitable organization, its Articles of Incorporation must list a charitable purpose. For example, the nonprofit could be focused on relieving poverty. While a nonprofit will not have any shareholders, it can have members. These members will appoint a board of directors.
Difference Between "Corporation" and "Incorporation"
A corporation is an entity that is formed for the purpose of doing business, while incorporation is the legal process of establishing a corporation. While the term "incorporation" is generally used to describe the actions needed to set up a corporation, it can also refer to the corporate status of an organization.
The abbreviation "Inc.," for example, stands for incorporated, and when this abbreviation is used, it means that a business is a corporation. While the terms "corporation" and "incorporated" cannot be used interchangeably, there is little difference between the two in terms of business structure, legal requirements, tax status, and liability protections. After a corporation registers using either the "Inc." or "Corp." designation, all legal paperwork must include the chosen designator. "Corp." and "Inc." are used for institutions that are legally separate from their owners and have their own privileges.
One of the most beneficial features of incorporating is having limited liability protections. This means that directors, shareholders, and employees of the corporation cannot be held personally liable for business debts. A corporation will come into existence once the process of incorporation has been completed. Incorporation and corporation are inextricably tied, as the incorporation process results in the formation of a corporation.
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