Under the law, the term “incorporated” refers to entities that have gone through the legal process of incorporation, meaning they are recognized as a distinct legal entity separate from their owners. The main types of incorporated entities include:
1. Corporations (Inc., Corp., Ltd.)
- C Corporation (C-Corp): A separate legal entity that is taxed independently of its owners (shareholders). Profits are taxed at the corporate level and again at the shareholder level if distributed as dividends.
- S Corporation (S-Corp): Similar to a C-Corp but allows profits and losses to pass through directly to shareholders (avoiding double taxation). There are restrictions on ownership.
- Nonprofit Corporation: Formed for charitable, educational, religious, or scientific purposes. They can qualify for tax-exempt status under IRS rules.
- Professional Corporation (PC): Designed for licensed professionals (doctors, lawyers, accountants) to provide personal liability protection.
2. Limited Liability Company (LLC)
- A hybrid structure combining corporate liability protection with partnership-style taxation.
- Owners (members) are not personally liable for business debts.
- Can choose to be taxed as a sole proprietorship, partnership, or corporation.
3. Limited Liability Partnership (LLP)
- Common for professional service businesses (law firms, accounting firms).
- Offers liability protection to partners, meaning one partner is not liable for another’s misconduct or negligence.
4. Benefit Corporation (B-Corp)
- A for-profit corporation with a stated mission to create social and environmental benefits in addition to making a profit.
- Must meet certain standards of accountability and transparency.
5. Cooperative (Co-op)
- Owned and operated by a group of individuals for mutual benefit.
- Common in agriculture, retail, and utility services.
Each type of incorporated entity has different legal, tax, and liability implications. If you’re considering incorporating your company, an LLC or Corporation might be a good option, depending on your liability protection and tax preferences.