Difference between Corporation and Incorporation

By Online Legal India Published On 05 Feb 2025 Category Company Registration

Incorporation is the process of legally forming a company, and the results of that process are called a corporation (Crop.). They both sound similar but incorporation (Inc.) is a process and corporation is the product. Understanding the difference between them can help you start a new business with ease. This article provides an in-depth explanation of the clear difference between corporation and incorporation.

What is a corporation?

The corporation is a legal business setup in which the assets, and income are separate from the owners. Every shareholders vote to elect the board of directors. Basically, the board of directors runs a corporation. A corporation has its own rights, responsibilities, and liabilities. In easy words, it can own assets, borrow money, pay taxes even sue independently. There are several types of corporations such as Privet Limited Company (Pvt Ltd), Public Limited Company (Ltd), One Person Company (OPC), Limited Liability Partnership (LLP), C Corporation, etc.

Key aspects of a corporation include,

Limited liabilities: Shareholders are only responsible for the amount they invested. They are not liable for the excess debts.
Ability to raise funds: Any corporation can raise capital by issuing shares.
Governance: A board of directors is responsible for the governance of the corporation.
Separate entity: This is a legal entity separate from the owners.

What is Incorporation?

The legal process of forming a company where the company’s income and assets are separated from the owners is called incorporation. The difference between corporation and incorporation is that incorporation is a process that creates a legal framework and helps the businesses to gain certain benefits like limited liability, ensure protection of personal assets of the owners or tax deductions on corporate income. Incorporating the entity will provide a separate identity. It can borrow money, own properties, and pay taxes.

As an example, if you are in India you have to register the company with MCA (Ministry of Corporate Affairs) under the Companies Act 2013 to be incorporated.

Key Difference between Corporation and Incorporation

Corporation	Incorporation
A corporation refers to a business structure.	This is a legal process.
The corporation is a fully functioning legal entity.	This is not a business or entity. This is the process of creating a business.
The purpose of a Corporation is to run the business with liability protection and advantages.	The purpose of incorporation is to create a new corporation.
The lifecycle of the corporation is not counted by numbers it depends on financial availability	The lifecycle of incorporation is limited. Starts with the issue of a certificate until the corporation is established

Advantages and Disadvantages of Corporation.

Advantages

Disadvantages

Separate entity: A Corporation can own properties, enter new contracts, etc. It can work separately from the owners.

Complex process: The path to becoming corporate is a bit complicated. It involves legal paperwork, registration fees, and other complications

Limited Liability: Shareholders of LLC’s are not responsible for the company’s debt or any legal issue.

Costly: Corporations have to pay more than any other entity.

Governance: It is governed by the board of directors.

Double taxation: In some cases, investors and the corporation have to pay taxes separately.

Tax benefit: There are certain expenses such as salary and, benefits are tax deductible.

Complex ownership: Corporations are run by the board of directors.

Growth opportunities: Corporations are more trustworthy to invest in.

Regulation: Every corporation must follow strict government rules and regulations.

Advantages and Disadvantages of Incorporation

Advantages	Disadvantages
Liability protection: Incorporating the business protects Shareholders' personal assets.	Complex process: The process of incorporation is a complicated process. You need to do lots of paperwork with the state where the business is registered.
Easy to access: Incorporating your business will attract more shareholders.	Regulations: Regulations, like annual tax filing, and audits are compulsory under government rules after incorporating your company.
Eternal existence: The company will continue its business even after the ownership changes.	Costly: This process is an expensive one.
Increase trust: Investors, suppliers, and customers trust incorporated entities more than others.	Legal risk: The corporation will be legally liable against any debts or lawsuits after incorporating.
Tax Benefit: There are certain expenses deductible after incorporating.	Complex ownership: Incorporating your company can influence leadership.

Conclusion

In conclusion, this might sounds similar but there is a big difference between corporation and incorporation. Incorporation is a legal process of forming a business entity on the other hand corporation is the outcome of that particular legal process, where the company’s assets and income are separated from the owners or shareholders. We have discussed everything you need to know about ‘corporation’ and ‘Incorporation’. As you can see there are advantages and disadvantages of incorporating the business. Now it is on you to decide whether you want to incorporate your business or not. To morph your business into a renowned corporation it is important to understand the process and outcome. For more information contact Online Legal India. Our expert will guide you to achieve your dream.

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