1. About Incorporated Businesses
2. Steps for Incorporation
3. Limited Company
4. Limited Liability Companies
5. Choosing the Right Business Name

What does co mean in a business name? "Co" is just an abbreviation for the word "company." A company is an association of people working in a commercial business. This can be a limited liability company, sole proprietorship, or another structure. Abbreviating "company" as "co" does not have a specific meaning regarding a business's legal structure.

About Incorporated Businesses

An incorporated company, also known as a corporation, is a legal entity that stands on its own and is separate from the person or the people who formed it. Once a company incorporates, it is formally designated as a corporation under the laws of the state where the paperwork for formation is filed.

Operating as a corporation according to the rules and regulations of the government and the IRS, the business must follow all laws pertaining to operating a corporation. As a legal entity, a corporation is responsible for:

  • Paying its own debts.
  • Paying taxes on earnings.
  • Selling stock to raise funding.

In a corporate structure, shares in the business are purchased by officers and directors who are responsible for the corporation's operation. A unique benefit of this structure is that the corporation can continue to operate as a legal entity in the event of the death of a director or a stock sale. Due to the expense involved to administer/operate a corporation, the U.S. Small Business Administration recommends that small businesses wait until they have become established as a large company before incorporating.

The inclusion of a corporate designation, such as "Inc.," is required in most states.

Steps for Incorporation

Once a business has chosen the state where it will form and file as a corporation, the following steps are necessary:

  1. The corporation selects a business name and follows up with a search to make sure the name is not already in use.
  2. The company will select the type of corporation to form. This may be a limited liability company, C corporation (which pays corporate taxes), or an S corporation (which has pass-through tax liability).
  3. A board of directors is chosen.
  4. A decision is made about whether the company will issue ordinary, preferred, or shares with no voting rights to stockholders.
  5. A registered agent who resides within the state where the corporation is located is appointed.
  6. A set of articles of incorporation is filed with the state along with a fee.
  7. A set of bylaws is set up detailing the rules for how the company will conduct business.
  8. Stocks are issued to stockholders once the corporation is formed.

Limited Company

In a limited company environment, the shareholders and director have limited liability regarding the debt of the company as long as the business follows the rules and operates lawfully. Things to know about limited companies include:

  • They are found mostly in Canada and European countries.
  • Directors pay income tax. The company is responsible for corporation tax due on profits.
  • Company debt is usually limited by the initial amount invested in the company.
  • Predetermined amounts for a shareholder's liability can be included in a memorandum.

Limited Liability Companies

"LLC" is the designation for a limited liability company. An LLC combines features of corporations and partnerships. Owners/members are protected from liability. The profits and losses pass through to its owners, who report them on their personal income taxes. This process makes working within an LLC less complex than other businesses.

If a member leaves the LLC, the current business is dissolved. The remaining members then decide if another new business will be formed. LLCs are created according to the state laws for the state where the LLC is being formed. Formation papers are filed with the Secretary of State along with articles of incorporation.

Choosing the Right Business Name

No matter the type of business, its name will make it stand out from competitors. Tips for selecting a business name include:

  • Take the naming process seriously.
  • Avoid wordplay.
  • Stay focused.
  • Do not borrow, use, or modify an existing brand name.
  • Think beyond local relevance.
  • Avoid naming the company after yourself.
  • Ask friends to spell your business name to see if the name is clear.
  • Choose an internet-friendly name.
  • Confirm that the name is available before registering.

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