Incorporation
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Incorporation
Incorporation
Incorporation.
When a business incorporates, it receives a state or federal charter to operate as a corporation. A corporation has a separate and distinct legal and tax identity from its owners.
In fact, in legal terms, a corporation is considered an individual -- it can own property, earn income, pay taxes, incur liabilities, and be sued.
Incorporating can offer many advantages to a business, among them limiting the liability of the company's owners. This means that shareholders are not personally responsible for the company's debts. Another advantage is the ability to issue shares of stock and sell bonds, both ways to raise additional capital.
You know that a business is a corporation if it includes the word "Incorporated" -- or the short form, "Inc." -- in its official name.