what does “inc.” mean?

When you see the acronym "inc.", you may be wondering what it stands for. Inc. stands for "Incorporation", which is a business entity that is separate from its owners.

Essentially, incorporating a business creates a separate legal entity for it and its owners. This entity is distinct from the individuals that maintain it and can provide various protections for owners and investors.

By incorporating a business, founders can take advantage of many benefits. The most obvious one is limited liability: if the business produces liabilities and debt, the owners may have some portion of the burden decreased or removed due to the separation of the entity from the individual owner. Incorporating also provides tax advantages, extends the duration of the business, and encourages investors, allowing a business to get additional funding.

When it comes to incorporating a business, there are a few steps that most companies need to take. This includes registering the business name, getting certain documents filed with the state, and obtaining the appropriate licenses and permits. Doing this can be time-consuming, but there are many resources to help assess what is needed.

what are the benefits of incorporating a business?

When you incorporate your business, you create a separate legal entity that offers a range of important advantages. While there are many benefits to incorporation, they key advantages are protection of your personal assets, legal and tax advantages, and obtaining capital and credit.

Protection of Personal Assets

One of the most important advantages to incorporating your business is the protection it provides for your personal assets. Once you incorporate your business, you create a distinct legal entity that is separate from you and your assets. If the business is ever sued, the corporation's assets—not your personal ones—are at risk. This limitation of liability is especially important when it comes to protecting your personal assets from debt and legal issues arising from the business.

Legal and Tax Advantages

Incorporating your business gives you access to other, more subtle legal and tax advantages. Your business can more easily salary members, hire employees, open a business bank account and build business credit.

It may also be more tax-efficient to incorporate your business. When you are a sole proprietorship, you and the business are one and the same—all business profits and losses impact your individual income tax return. Conversely, incorporating your business allows you to take advantage of lower corporation taxes, or even benefits as a pass-through entity, where business income flows directly to the personal returns of the owners.

Capital and Credit

Incorporating your business may also give you certain advantages when it comes to obtaining capital and credit. Incorporating can give you access to capital and credit options you might not have as a sole proprietor. Banks and financial institutions are often more willing to grant credit and loans to legally recognized corporations, as this reduces the risk for them.