Inc. is an abbreviation for incorporated. It’s a business entity type that is a separate legal entity from its owners and can sell shares. Read below to learn more.
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Wondering what “Inc.” means in business? We see this abbreviation at the end of company names (such as Apple, Inc.). But what exactly does it signify? Keep reading to discover everything you need to know about “Inc.”
“Inc.” is short for incorporated. When you see “Inc.” at the end of a company’s name, it simply means the business is a corporation. This abbreviation is used for traditional C corporation structures.
Note: In the U.K., the abbreviation “LTD” is often used instead of Inc.
Recommended: Incorporation Definition
An incorporated business is a legal entity. This entity is recognized, just as a person would be as an individual, for business purposes under the law.
Corporations can be for-profit businesses or nonprofit organizations, such as charities, educational institutions, or social clubs. Government entities may also form municipal corporations for specific public functions, but they are not corporations in the traditional commercial sense.
A corporation is an entirely separate entity from the people who founded the company. That means it can survive beyond the life of the stockholders or any owners who leave the company.
When a business incorporates, it creates shares, which are sometimes called stock. These stock shares represent ownership of the company.
Incorporation and the issuing of stock shares allow companies to sell some of those shares to raise capital for business operations and expansion. They can also use them as collateral for loans or equity for venture capital investments.
Companies that plan to expand and go public with an IPO are required to be corporations with issued stock shares.
To form a corporation, you must complete the proper paperwork and file it with the Secretary of State in the state headquarters of the corporation’s primary address.
While the process and requirements may differ depending on state law, the basic steps for incorporating are as follows:
Your Certificate of Incorporation/Articles of Incorporation will need to meet your state’s laws and guidelines.
These typically include the corporation’s:
Fees for registration must be paid along with your application.
There are also annual requirements for filing for corporations. While these annual requirements differ from state to state, they usually include:
The U.S. Small Business Administration (SBA) recommends that companies incorporate if they plan on growing substantially.
For example, many new small business owners choose this business structure for liability protection purposes (in other words, to protect their personal assets from possible product liability and other lawsuits).
The rules governing corporation formation and maintenance can be complex and difficult for many business owners to understand or complete on their own.
Luckily, we’ve got your back! Our worry-free services and expert support can help you form your corporation and remain compliant with state laws.
Still trying to decide whether incorporating is right for your business? Here are the pros and cons.
One advantage of corporations is that they can issue stock shares. This gives corporations the ability to attract investors and venture capitalists. Another advantage is personal liability protection for the owners (shareholders). In most cases, the shareholders can’t be sued for the liabilities of the corporation.
Traditional C corporations have two significant disadvantages.
The first is double taxation on earnings. First, profits from the corporation are taxed. Then, the shareholders pay income tax when they receive dividend payments.
Because of this negative ramification, S corporations were developed to avoid double taxation. This type of corporation has restrictions, however, which include a limit of 100 shareholders.
The other drawback of incorporation is that it requires more administrative work. Corporations must file state reports annually and track shareholder and Board of Directors meetings.
Like “Inc.,” the term “Corp.” is just another abbreviation for corporation. These terms can be used interchangeably. However, “Inc.” is more prevalent and widely known. Both shortened words can be used to refer to entities that are incorporated, whether that entity is a business, government, or nonprofit organization.
As we already covered, the abbreviation “Inc.” means incorporated. A corporation is a separate legal entity from the business owners.
The Board of Directors and company officers own or purchase shares in the incorporated business and have responsibilities for business operations.
When you incorporate your business, you’re helping protect your individual assets against business liabilities, debts, and lawsuits.
Related: Business Structures Explained
While LLC and Inc. are both forms of business entities, they’re different and distinct. The abbreviation “Inc.” is used for incorporated companies, such as a C corporation (C corp).
“LLC” stands for limited liability company. This abbreviation indicates that the business entity is a limited liability company. Like a corporation, an LLC is a separate legal entity from its owners; however, unlike a corporation, it can’t sell shares to raise money. Every U.S. state has its own laws about LLC formation, as well as specific requirements about the words you can legally include in your LLC name. No state allows an LLC to include the designation “Inc.” in its registered name.
It’s not unusual for growing startups to launch as an LLC and then want or need to incorporate for financing or tax reasons.
You can indeed convert your LLC to a corporation, or “Inc.” There are several ways you can incorporate your LLC, but these will vary by your state’s regulations. See our guide to converting an LLC to a corporation.
Related: LLCs, DBAs, and Corporations, Oh My! Understanding Your Business Type
The main difference between an LLC and a corporation comes down to how they’re structured and taxed. LLCs are generally more flexible — they’re easier to manage, have fewer formal requirements, and profits can pass directly to the owners (called members) without being taxed at the business level. Corporations, on the other hand, have a more rigid structure with a board of directors, officers, and shareholders, and may face double taxation (once at the corporate level and again on shareholder dividends). However, corporations can be a better fit for raising investment or going public.
You can only use “Inc.” in your business name if your company is formed as a corporation and is legally incorporated. You can’t just add “Inc.” to your business name if your firm is not incorporated.
Which formation type is best for your business depends on a number of factors.
For example, companies that seek investor funding might opt to incorporate so they can issue stock shares for business financing.
Many other forms of small businesses are best formed as LLCs for the sake of avoiding double taxation, fewer administrative/filing requirements, and a more flexible management structure.
Both Inc. and LLC formation types usually protect the business owners’ personal assets from personal liability, business debts, and lawsuits.
In summary, “Inc.” is simply the abbreviation for incorporated. When you see this designation at the end of a company name, it means that the company is a corporation.
Depending on your financing needs, operational plans, and other factors, incorporating may or may not be the best choice for forming your new business. It’s best to ask your attorney or legal advisor for their recommendations.
Ready to turn your business idea into a reality? Whether you choose to form an LLC or a corporation, our worry-free services can help you get your new company up and running quickly and compliantly.
Want to learn more about starting, running, and growing a business? Explore important business terms such as EIN and FEIN in our guide. Plus, check out this article on how to save a failing business, or discover these top business startup blogs to read every week.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 800,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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