Wondering what INC means in business? You see you at the end of company names such as Apple, Inc and want to know exactly what does this abbreviation mean about the business.
What INC Means
The abbreviation INC means incorporated. In the UK they use LTD instead of INC. The abbreviation Inc. is used for both traditional C corporations and S corporations.
INC Legal Entity – Business Incorporation
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. This corporation could be a commercial business, a nonprofit charity, a government, city or town or club organization.
Because the Corporation is an entirely separate legal entity from the people who founded the company it will 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 to 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 issuing stock shares.
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How to Incorporate Your Business as INC
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. You will need properly licensed and experienced legal assistance to incorporate your business – Legalzoom offers surprising affordable incorporation packages.
Additionally, you will need to file the Articles of Incorporation which meets your state’s laws and guidelines. These often include the corporation’s purpose, principal business address, number of stock shares, and corporate bylaws.
Fees for registration must also be paid along with your application. Also, there are annual requirements for filing for corporations, which differ from state to state. Usually, it’s an Annual Report, Board of Directors meeting minutes and sometimes also details about Shareholders Meetings and votes.
The rules governing corporation formation and maintenance can be complex and difficult for many business owners to complete without professional legal help – get low cost incorporation at Legalzoom.
The United States Small Business Administration recommends that companies should incorporate if they plan on growing substantially. I incorporated my cosmetic manufacturing firm at the onset to protect my personal assets from any possible product liability lawsuits.
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Incorporation Pros and Cons
Advantages of Incorporation
The primary advantage of corporations is that they can issue stock shares. This gives corporations the ability to attract investors and venture capitalists.
Tax liability can also be limited with incorporation and income sharing.
Disadvantages of Incorporation
Traditional C corporations have two significant disadvantages. The first, worst, is double taxation on earnings.
Firstly, profits from the Corporation are taxed, and then the shareholders, the business owners, and shareholders must again pay taxes when they receive dividend payments. Because of this negative ramification, S-type corporations were developed to avoid double taxation. These type of corporations have restrictions which include a limit of 100 shareholders.
The other drawback of incorporation is more administrative work to file state reports annually, and shareholder and board of director meetings. Depending upon your business operations incorporation could be a good decision. Ask your attorney for their recommendations.
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The terms Corp. is an abbreviation for Corporation and Inc. is also is an abbreviation for Corporation.
They can be used interchangeably, however, INC is more prevalent and widely known. Both short words can be used for entities that are incorporated whether a business, government or nonprofit organization.
The abbreviation Inc means incorporated.
This corporation is a separate entity legally from the business owner, person or people, that created its formation. Board of Directors and company officers own or purchase shares in the incorporated business and have responsibilities for business operations.
When you decide to incorporate your business you are protecting your individual assets against business liabilities, debts, and lawsuits.
While LLC and INC are both forms of business entities they are different and distinct.
Inc. is used for incorporated companies either C-Corporation or S-type corporations, while LLC indicates that the company ownership and legal entity is a limited liability company.
Every US state has their own laws about LLC formation which include specific requirements about the words you can legally include in your LLC name. No state allows an LLC to include the designation Inc in their registered name.
It is common for growing startups to launch as an LLC and then want or need to incorporate, for financing, tax or liability purposes.
You can indeed incorporate your LLC and convert that LLC to a corporation Inc.
There are a few ways you can incorporate your LLC by first forming a new corporation and then:
1 – Merging your existing LLC into the new corporation. Once you make the merge your LLC will be terminated legally and the corporation will now have all the rights and obligations of the LLC.
2- LLC to contribute its assets to the new corporation in exchange for all the stock in the new corporation. Then you can liquidate the LLC.
3- LLC owner’s to assign their LLC interests to the new corporation. Your LLC will become a wholly-owned subsidiary of the new corporation.
>>Learn more about important business terms such as EIN and FEIN in our comprehensive guide.
The primary difference is that INC corporations are owned by many shareholders while an LLC is typically owned by one or a few individuals. This ownership difference affects the liability, taxation and finance options of the business entity.
You can only use INC in your business name if your company formation is as a corporation, and is legally incorporated. You cannot just add INC to your business name if your firm is not incorporated.
It is better for companies who are seeking investor funding to be incorporated so they can issue stock shares for business financing.
Most other forms of small businesses are best formed as LLC. Both INC and LLC protect the business owners from personal liability, business debts and lawsuits.
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