Difference Between Incorporated and Corporation

The main difference between Incorporated and Corporation is that “Incorporated” is a term used to describe the process of legally forming a Corporation, while “Corporation” refers to the actual business entity that is created through this process.

What is Incorporated and What is Corporation?

“Incorporated” refers to the status a business gains once it completes the process of incorporation. This process involves filing the necessary documents with the state, such as articles of incorporation, and adhering to legal requirements to set up a business as a separate legal entity. Once a business is incorporated, it benefits from limited liability protection, which means its owners and shareholders are generally not personally liable for the company’s debts and obligations.

A “Corporation,” on the other hand, is the result of this incorporation process. It is a distinct legal entity that is separate from its owners or shareholders. The corporation can own property, enter into contracts, sue or be sued, and conduct business in its own name. Corporations have their own legal rights and responsibilities, making them a popular choice for businesses seeking to protect their owners from personal liability.

Key Differences Between Incorporation and Corporation

1. Status vs. Entity: “Incorporated” refers to the process or status, whereas “Corporation” is the entity that results from incorporation.
2. Legal Formation: Incorporation is the method used to create a Corporation, involving legal documents and state filings.
3. Responsibility: Corporations are responsible for their own debts and obligations, separate from their owners.
4. Ownership Structure: A Corporation can have multiple shareholders, who own parts of the company through shares.
5. Business Operations: Corporations operate under their legal names and can engage in various business activities independently.
6. Taxation: Incorporation can affect how a business is taxed, while a corporation has specific tax responsibilities separate from its owners.
7. Regulatory Requirements: Corporations must adhere to ongoing regulatory requirements, such as annual reports and board meetings.
8. Liability Protection: Incorporation provides liability protection to the owners, but the Corporation is the entity that holds this protection.
9. Perpetual Existence: Corporations can continue to exist beyond the involvement of their original owners or shareholders.

Key Similarities Between Incorporation and Corporation

1. Legal Separation: Both concepts involve creating a legal separation between the business and its owners.
2. Limited Liability: Both terms emphasize the protection of personal assets from business liabilities.
3. Regulatory Compliance: Both require adherence to state laws and regulations to maintain status and operations.
4. Formal Documentation: Both require formal documentation, such as articles of incorporation and bylaws.
5. Structured Management: Both necessitate a structured management setup, including a board of directors.
6. Business Continuity: Both contribute to business continuity and perpetual existence.
7. Investor Attraction: Both make it easier to attract investors due to the structured framework and limited liability.
8. Annual Reporting: Both must file annual reports with the state to remain in good standing.
9. Defined Governance: Both require a clear definition of governance structures and operational procedures.

Key Features of Incorporated vs Corporation

1. Legal Recognition: “Incorporated” signifies the legal process, while a “Corporation” is recognized as a separate legal entity.
2. Document Filing: Incorporation involves submitting specific documents, such as articles of incorporation, to state authorities.
3. Ownership Structure: Corporations have shareholders who own portions of the business, reflected in shares of stock.
4. Taxation: Incorporation impacts how a business is taxed, but a Corporation has distinct tax obligations as a separate entity.
5. Liability Protection: Incorporation protects personal assets of the owners. The Corporation holds liability separate from its shareholders.
6. Governance Requirements: Corporations must adhere to governance rules like forming a board of directors and holding annual meetings.
7. Perpetual Life: Corporations can continue to operate independent of the lifespan of their original founders or owners.
8. Ability to Raise Capital: Corporations can issue shares to raise funds, making them attractive for investment.