Although “Inc.” and “Corp.” are both acronyms for “corporation,” they have slightly different meanings. A corporation that is incorporated under state law is referred to as a “Inc.” while a corporation that is incorporated under federal law is referred to as a “Corp.” However, in actual usage, the two names are frequently used interchangeably. Why would a business switch from being an Inc to an LLC?
A business may decide to change from being a corporation to an LLC for a variety of reasons. The fact that LLCs provide more flexibility in terms of management and ownership structure is one of the reasons. One or more people may hold an LLC, and the owners may opt to run the company individually or employ a management team. Additionally, because the company’s debts and legal obligations are distinct from the owners’ personal assets, LLCs provide greater protection for the owners against personal liability. Why pick an LLC instead of a corporation?
Although corporations can raise money through public offerings or by issuing stock, these are only a few of the advantages they have over LLCs. Many small business owners, however, prefer the flexibility and simplicity of an LLC. Compared to corporations, LLCs offer a more streamlined management structure with less formalities and regulations. Additionally, because owners of LLCs are not held personally liable for the company’s debts and legal obligations, LLCs provide better protection from personal liability.
By submitting Form 2553 to the IRS, a corporation can choose to be taxed as a S corporation (S corp). S corporations fall under the category of pass-through entities, which implies that the company’s revenues and losses are distributed to the owners and reported on their individual tax returns. Due to this, S companies can avoid double taxation, a drawback of conventional corporations. The business must fulfill specific criteria, such as having no more than 100 shareholders and just one class of shares, in order to be eligible to become a S corp.
The legal structure of your company will determine whether you need to write “Inc.” on your business cards. If your business is officially recognized as a corporation, your business cards should read “Inc.” On the other hand, if your company is set up as an LLC, you shouldn’t put “Inc.” on your business cards. Despite the fact that corporations have some benefits over LLCs, many small business owners prefer the flexibility and ease of an LLC. In order to avoid double taxation, firms can also choose to be taxed as S corporations.
A shareholder or stockholder is the common term used to describe the owner of an Inc.