Key Takeaways

  • "Inc." means a business is incorporated, but it doesn’t determine whether it is an S corp or C corp—that’s decided by IRS election.
  • C corporations are the default when forming a corporation and are taxed at the corporate level.
  • S corporations must file Form 2553 to elect pass-through taxation and meet certain ownership requirements.
  • While both S corps and C corps provide liability protection and share similar structures, they differ in taxation, ownership restrictions, and flexibility for raising capital.
  • Adding “Inc.” to a name simply indicates a corporation, not a specific tax status.
  • Choosing between S corp and C corp depends on business goals, such as growth potential, tax strategy, and administrative complexity.

Identifying as an S corp vs. Inc. can mean the difference between S corporation and C corporation status. Putting "Inc." after your company name indicates the business is incorporated in its home state. The company's status as a C or an S corporation depends on what it files with the IRS. Requirements for forming a corporation vary by state, so check with your respective state's Secretary of State office. Companies that do business in multiple states must register with the Secretary of State in each state.

What Is a C Corporation?

A corporation is what most people likely think of when they think about business organizations. A C corporation (Inc.) is a standard corporation and the default business type when you incorporate. In the United States, C corporations are the most common types of corporation. Owners are called shareholders, and they elect directors to handle day-to-day business operations.

The board of directors has the majority control of business operations but shareholders can have some control over larger policy issues. Officers on the board of directors are typically CEOs, CFOs, CTOs, and COOs. The company makes distributions to shareholders according to how many shares each person owns. Corporations are typically not responsible for business debts or liability, except in very limited cases.

To form a corporation, file registration documents and Articles of Incorporation with your respective state. Then follow standard corporation requirements, such as:

  • Adopting bylaws.
  • Holding director and shareholder meetings.
  • Filing annual reports.
  • Issuing stock, and more.

If a corporation fails to meet these requirements, the company can dissolve or lose personal liability protections.

Because a C corporation is a separate legal entity, corporate debts are only attached to company assets. Typically, a shareholder is not personally liable for corporate debts, but in certain cases, a shareholder might be liable through "piercing the corporate veil."

What Does "Inc." Mean in a Business Name?

Using "Inc." after your business name signifies that your company is incorporated, but it does not indicate whether the company is a C corporation or an S corporation. The abbreviation "Inc." stands for "Incorporated" and is a legal designation showing that the business is registered as a corporation with the state.

All corporations—whether taxed as C corps or S corps—can use "Inc." in their names. However, the default tax status of any newly formed corporation is C corporation. To become an S corporation, a business must elect that status by filing IRS Form 2553. Therefore, “Inc.” does not automatically mean a business is a C corp, but unless the S corp election is made, it is treated as a C corp for federal tax purposes.

What Is an S Corporation?

S corporations follow Subchapter S of the Internal Revenue Code. File IRS Form 2553 to elect S corporation status provided you meet all the eligibility guidelines. You have up to 75 days after formation of a corporation to decide whether to become an S corporation.

Electing S Corporation Status

To be taxed as an S corporation, a business must first be formed as a corporation under state law. Once incorporated, the company must file IRS Form 2553 within two months and 15 days of the beginning of the tax year the election is to take effect. This election allows the corporation to be taxed as a pass-through entity.

To qualify for S corporation status, the business must:

  • Be a domestic corporation
  • Have only allowable shareholders (individuals, certain trusts, and estates—not other corporations or partnerships)
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (e.g., certain financial institutions or insurance companies)

Failing to file Form 2553 or not meeting eligibility requirements means the business will default to C corporation status.

Similarities Between S and C Corporations

  • Both offer shareholders some protection from liability.
  • They are both separate entities.
  • They both have to file corporation formation documents with the state.
  • Their structures are similar, with shareholders owning the company. Shareholders elect a board of directors that handles corporate affairs.
  • Both S corporations and C corporations must maintain the same formalities.
  • They have perpetual existence, which means the business exists even if the original owner dies.

Misconceptions About "Inc." and Corporate Tax Status

Many business owners mistakenly assume that adding "Inc." to their company name automatically means they are a C corporation. In reality, "Inc." only reflects incorporation status, not how the business is taxed.

The actual tax classification—C corporation vs. S corporation—is determined by what is filed with the IRS. A business incorporated at the state level but not making the S corp election with the IRS will be treated as a C corp by default.

This distinction is important for legal liability, tax planning, and compliance purposes. For example:

  • An incorporated business (Inc.) could be either a C corp or an S corp.
  • Only businesses that meet IRS qualifications and actively elect S corp status will receive pass-through taxation benefits.

Differences Between C and S Corporations

C corporations are taxed at the corporate level by filing IRS Form 1120. If any corporate income is distributed as dividends, it's subject to double taxation. S corporations are pass-through business types, meaning they file IRS Form 1120S but pay no corporate taxes.

S corporation owners report business profits and losses on their personal tax returns as they are "passed through." They must pay personal income tax for any salary taken and dividends received. Other differences between the corporation types include:

  • S corporations are restricted to 100 shareholders, all of whom must be U.S. citizens or residents.
  • S corporations can only have one class of stock while C corporations can have multiple types.
  • Shareholders in S corporations all have the same voting rights.
  • Because C corporations can have different types of stock, they have different types of shareholders.
  • C corporations offer more flexibility if you ever plan to expand or sell your business.
  • Because you can issue multiple types of stock with C corporations, it is easier to raise additional capital.
  • C corporations can be owned by other companies whereas S corporations cannot.
  • Companies that want to offer more fringe benefits, such as health insurance, life insurance, and disability insurance, will find C corporations to be better structures.
  • These costs can be deducted and aren't taxable to the shareholders as long as the benefit is offered to at least 70 percent of employees.
  • S corporations cannot deduct these expenses, and they are taxable to shareholders who own more than 2 percent of the stock.

When to Choose C Corp vs. S Corp

Choosing between C corp and S corp status depends on your business’s size, goals, and funding strategy. Consider the following factors:

Choose a C Corporation if you:

  • Plan to seek venture capital or issue multiple classes of stock
  • Want to reinvest earnings into the business rather than distribute profits
  • Need more flexibility in ownership structure (e.g., foreign or corporate shareholders)
  • Intend to go public or be acquired

Choose an S Corporation if you:

  • Want to avoid double taxation by passing income through to shareholders
  • Have a small number of U.S.-based individual shareholders
  • Do not plan to offer multiple stock classes
  • Prefer simplified taxation and accounting for a small or mid-sized business

Keep in mind that while C corporations can offer more fringe benefits and investment opportunities, S corporations can offer tax savings for closely held companies.

Frequently Asked Questions

  1. Does “Inc.” automatically mean a company is a C corporation?
    No. “Inc.” indicates that a business is incorporated, but tax status as a C corp or S corp is determined by IRS filings.
  2. How can I tell if a company is an S corp or C corp?
    You cannot determine this from the name alone. Check IRS filings or ask the company directly to learn its tax classification.
  3. Is “Inc.” required in my company name if I incorporate?
    Most states require or allow corporate identifiers such as “Inc.,” “Corp.,” or “Incorporated” in the legal name of a corporation.
  4. Can an LLC use “Inc.” in its name?
    No. Only incorporated businesses (corporations) can use “Inc.” in their names. LLCs use “LLC” or “Limited Liability Company.”
  5. What happens if I don’t file Form 2553?
    Your corporation will default to C corporation tax status and be subject to corporate income tax at the entity level.

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