Key Takeaways

  • “Inc.” means the business is a corporation (a separate legal entity) and, unlike an LLC, it issues stock and follows corporate formalities. 
  • Incorporation offers limited liability, perpetual existence, simpler ownership transfer via shares, and added credibility; trade-offs include more paperwork and possible double taxation for C corps. 
  • LLCs also protect owners but don’t issue stock and usually require fewer formalities; they can choose pass-through taxation or elect corporate taxation. 
  • C corps are preferred for venture financing and Delaware formations are common, but small, single-state businesses often keep things simpler by forming in their home state. 
  • To maintain “Inc.” status, corporations must keep bylaws, minutes, hold meetings, file annual reports, and maintain a registered agent.

Inc business structure might be the best option for your business but it is wise to take a closer look into what incorporation involves before you make a decision. It's understandable if you feel confused about what type of business structure is right for you. Even the smartest business owners may feel confused and wonder where to start or what will be involved.

What is Inc Business?

Inc business, also known as business incorporation, is a broad term given to a number of legal business structure options. The most common Inc business structure options include:

  • A Limited Liability Company (LLC)
  • Corporation (C Corp or S Corp)
  • Nonprofit
  • Cooperative

When a business is incorporated, it changes from a sole proprietorship to a company that is now legally recognized by its state of incorporation. This means that it is formally separate from the individuals that founded the company. An incorporated business is often viewed as a responsible company with a strong corporate identity.

The most popular options for a new business to incorporate as are either Limited Liability Company (LLC) or Corporation. If you form a Corporation, you can choose to be a C Corporation or S Corporation. You will find that each of the incorporation options has their own pros and cons.

What “Inc.” Means vs. LLC (Plain-English)

“Inc.” on a name signals a corporation—a separate legal “person” that exists apart from its owners and shareholders. Corporations can be formed as C corporations or elect S-corporation status; the big differences relate to stock, shareholder rules, and how profits are taxed. LLCs are also separate legal entities but aren’t “Inc.” and don’t issue stock.

Pros and Cons of Incorporation at a Glance

  • Pros: Limited liability (“corporate veil”), perpetual existence, easier ownership transfer and liquidity via shares, and credibility with customers and lenders. 
  • Cons/Trade-offs: More formalities and filings than an LLC; potential “double taxation” for C-corps (corporation taxed on income and shareholders taxed on dividends/capital gains).

Limited Liability Company (LLC)

  • A relatively new structure, but recommended for most small companies because of the flexibility in management.
  • Limited Liability protects the owners from being held personally responsible for company actions.
  • Some states will require two or more owners also known as "members".
  • Only a few states will limit the number of owners.
  • Members own a percentage of the company and income can be distributed unequally.
  • Transferring membership can sometimes be difficult.
  • LLC's cannot go public.
  • Taxation varies depending on the state.
  • Company loss and earnings are recorded on the members' personal income tax return.
  • Profits are subject to social security and Medicare taxes as well as income tax.
  • LLC's are not subject to double taxation.
  • It is usually easy to dissolve the company.

LLC vs. Inc: Governance, Stock, and Taxes

Corporations must hold annual meetings, keep minutes and bylaws, file annual reports, and designate a registered agent; LLCs typically file an annual report with fewer formalities. LLCs cannot issue stock; corporations can issue shares and raise capital by selling equity. For taxes, LLCs generally receive pass-through treatment by default and can elect corporate taxation if members agree.

When an LLC Makes Sense

If you’re operating in one state and want simpler ongoing compliance, forming in your home state can be the most straightforward path. You’ll still need to qualify to do business (and pay fees) in any additional states where you operate.

C Corporation

  • This is the basic type of corporation in America which has been in use for a long time.
  • It has a more rigid management structure and can involve more paperwork.
  • Corporations have a board of directors that oversee the business.
  • Owners receive a share of stock and become "shareholders".
  • C Corporations are subject to high taxation.
  • Income tax is paid on corporate profits plus shareholders pay tax on what they personally receive, this is known as "double taxation".
  • Shares of stock are issued equally to owners.
  • Shares can be traded freely between owners.
  • Owners are protected from business debts by personal liability.
  • C Corporations can pay employment taxes of only active shareholders.

Why Choose a C Corp (and When)

C corps are often preferred—or required—by venture investors and commonly formed in Delaware due to its business-friendly legal framework and predictable Court of Chancery. While C-corp profits may be taxed at the corporate level and again to shareholders (dividends/capital gains), some C-corp stock can qualify for favorable treatment (e.g., QSBS) depending on facts and eligibility.

Core C-Corp Formalities to Maintain “Inc.” Status

Adopt bylaws, hold your first board meeting, and keep minutes. File articles/certificate of incorporation and appoint a registered agent to receive legal notices. Most states require annual reports and fees.

S Corporation

  • A more modern corporation structure which is popular because it is not subject to double taxation.
  • As a Corporation, it also has a board of directors and shareholders.
  • Profits go through the shareholder's personal tax return.
  • Losses can be recorded on the personal tax return as deductions.
  • S Corporations cannot offer stock plan options as an incentive.
  • S Corporations are restricted to a maximum number of shareholders and shareholders cannot be non-residents.

S Corp: Eligibility and Tax Treatment

An S corp is a corporation that elects pass-through taxation; it avoids corporate-level income tax and reports profits/losses on owners’ returns. S-corp rules also differ from C corps in the number and types of shareholders they can have (and stock they can issue). LLCs can sometimes replicate similar pass-through results without corporate formalities by default.

S Corp vs. LLC for Taxes—Quick Note

Both S corps and LLCs can provide pass-through treatment; however, an LLC’s flexibility stands out because members can elect corporate taxation if needed. Choosing between an S corp and LLC often comes down to payroll planning, investor expectations, and administrative complexity.

Tips for Adopting Inc Business Structure

  • Compare the options with a lawyer and accountant.
  • Discuss how you want your company to be managed and how you want to pay taxes.
  • Remember to consider the company's future, not just the current tax burden.
  • Consider the paperwork and record keeping required for each structure.
  • Consider the costs involved in adopting the structure.
  • Consider whether you may want to sell the company at some point.
  • The business structure you choose for your company does not need to be set forever.
  • However, be aware of the restrictions or limitations for switching between the different Inc business structures.
  • Be careful not to cause concern for the IRS.
  • Be aware that liability protection may not be absolute.

You will most likely need to seek professional legal advice when deciding which Inc business structure works best for you. When you are making such a big decision for your business, it is wise to think things through thoroughly.

Step-by-Step: From Name to Bylaws

1. Choose a business name and registered agent. 2) Draft and file articles/certificate of incorporation (state requirements and fees vary, often a few hundred dollars). 3) Hold an organizational meeting to adopt bylaws. 4) Issue shares and set up your cap table and bank account.

Ongoing Compliance and Recordkeeping

Document annual fees, tax obligations and calendar, and keep clean corporate records (minutes, bylaws, stock ledgers). Strong recordkeeping supports limited liability and helps you stay current on filings. 

Where to Incorporate: Home State vs. Delaware

Smaller, single-state businesses often incorporate in-state to limit complexity. If you plan to raise venture capital or scale nationally, Delaware is commonly favored; you can headquarter elsewhere but will need to qualify in every state where you do business. 

Frequently Asked Questions

  1. What is an “Inc.” company?
    A company with “Inc.” is a corporation—a separate legal entity that issues stock and follows corporate formalities.
  2. How is an Inc different from an LLC?
    Both protect owners, but corporations issue stock and have more required formalities; LLCs typically have fewer formalities and don’t issue stock.
  3. What are the main benefits of incorporating?
    Limited liability, perpetual existence, easier equity transfers via shares, and enhanced credibility.
  4. Why do startups often choose Delaware C corps?
    Investor preference, a business-friendly legal framework, and a specialized court system; you can still operate elsewhere with proper qualification.
  5. What ongoing tasks keep an Inc in good standing?
    Maintain bylaws and minutes, hold meetings, file annual reports, and keep a registered agent on file.

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