What Are the Principle Differences Between Corporation and Incorporation?

What's the Difference Between Corporation and Incorporation?

Simply put, "corporation" is a noun that describes a type of business entity, while "incorporation" is a verb that describes the act of forming a — you guessed it — corporation.

A corporation is considered legally separate from its owners, employees and others, and exists as an entity in its own right. Corporations in the U.S. are known as either S Corporations or C Corporations, and each provides different benefits to stakeholders .

The main difference: incorporation is the process you go through to create a corporation , which is a separate legal entity.

Corporations Are Not Your Only Option

S Corporations and C Corporations do provide some advantages to specific types of entrepreneurs, but they also require a lot of overhead to maintain, including:

• Payroll for employees

• Creation of a company charter

• Bylaws and meeting minutes, regularly updated

• Issuance of stock ownership certificates

• The requirement to hold an Annual General Meeting

• The requirement to appoint officers

• The requirement for a board of directors

• Complex tax filings

In most cases, there’s a type of business that provides similar benefits to corporations without the administrative headaches — the limited liability company, or LLC . These types of businesses are quicker, easier and cheaper to create and maintain. It’s important to note that an LLC is not a type of corporation, but in many cases, it will meet your needs and it also offers liability protection.

We have a complete set of state-by-state guides to forming a corporation and other guides for forming an LLC . They’re a great starting point for learning what’s best for your circumstances. We also have a Business Entity Quiz that helps you decide the type of business that’s best for you.