Corp vs. Inc

Attribute	Corp	Inc
Legal Structure	Corporation	Incorporated
Ownership	Owned by shareholders	Owned by shareholders
Liability	Limited liability	Limited liability
Taxation	Double taxation	Double taxation
Formation	Requires filing Articles of Incorporation	Requires filing Articles of Incorporation
Stock	Issues shares of stock	Issues shares of stock
Board of Directors	Managed by a board of directors	Managed by a board of directors
Shareholder Meetings	Annual shareholder meetings required	Annual shareholder meetings required
Legal Name	May include "Corp" in the name	May include "Inc" in the name

Introduction

When it comes to establishing a business entity, two popular options are Corporation (Corp) and Incorporation (Inc). Both Corp and Inc provide limited liability protection to their owners, but they differ in various aspects. In this article, we will explore the attributes of Corp and Inc, highlighting their similarities and differences to help you make an informed decision for your business.

Formation and Structure

Both Corp and Inc are legal entities formed under state laws. To establish a Corp or Inc, you need to file the necessary documents, such as Articles of Incorporation, with the appropriate state authority. Once approved, the business becomes a separate legal entity from its owners.

One key difference between Corp and Inc lies in their structure. A Corp is typically structured with shareholders, directors, and officers. Shareholders own the company's stock, elect directors, and have the right to vote on major decisions. Directors oversee the company's operations and appoint officers who manage day-to-day activities. In contrast, an Inc is structured with shareholders, who have the power to elect directors, and officers who handle the company's operations.

Ownership and Shareholders

Both Corp and Inc allow for multiple shareholders, enabling the distribution of ownership among individuals or entities. Shareholders in both entities have limited liability, meaning their personal assets are generally protected from the company's debts and liabilities.

However, there are some differences in ownership and shareholder rights. In a Corp, ownership is divided into shares of stock, which can be classified into different classes (e.g., common stock, preferred stock) with varying rights and privileges. Shareholders in a Corp have the right to vote on important matters, such as electing directors or approving major corporate actions.

In an Inc, ownership is also divided into shares, but there is typically only one class of stock. Shareholders in an Inc may have different voting rights, depending on the company's bylaws. Some Inc structures may grant certain shareholders more voting power than others, allowing for a more concentrated decision-making process.

Taxation

Another important aspect to consider when comparing Corp and Inc is taxation. Both entities offer different tax advantages and considerations.

A Corp is subject to double taxation, where the corporation itself is taxed on its profits, and then shareholders are taxed on any dividends received. This can result in a higher overall tax burden for both the corporation and its shareholders.

On the other hand, an Inc can elect to be taxed as an S Corporation (S Corp) under the Internal Revenue Code. By doing so, the company can avoid double taxation. Instead, the profits and losses of the S Corp are passed through to the shareholders, who report them on their individual tax returns. This pass-through taxation can provide potential tax savings for the shareholders.

Legal Formalities and Compliance

Both Corp and Inc are subject to certain legal formalities and compliance requirements to maintain their legal status.

A Corp typically has more formalities, such as holding regular shareholder and director meetings, keeping minutes of those meetings, and maintaining corporate bylaws. These formalities help ensure proper governance and compliance with state laws.

An Inc, while still subject to compliance requirements, may have fewer formalities compared to a Corp. However, it is important to note that the specific requirements can vary depending on the state of incorporation.

Perception and Credibility

Perception and credibility can play a significant role in the success of a business. Both Corp and Inc can provide a level of professionalism and credibility to potential customers, partners, and investors.

A Corp, with its more formal structure and governance, may be perceived as more established and credible. It can be particularly advantageous when seeking investment or entering into contracts with larger organizations.

An Inc, while still providing credibility, may be seen as a more flexible and agile entity. This perception can be beneficial for startups or businesses that prioritize adaptability and innovation.

Conclusion

Choosing between Corp and Inc depends on various factors, including your business goals, ownership structure, taxation preferences, and compliance capabilities. Corp offers a more traditional and structured approach, while Inc provides flexibility and potential tax advantages. Understanding the attributes of both entities is crucial in making an informed decision that aligns with your business needs. Consulting with legal and tax professionals is highly recommended to ensure compliance with state laws and to make the best choice for your specific circumstances.