What Is the Definition of Incorporation?

Incorporation is the act of forming and legally establishing a new corporation in the United States of America or United Kingdom, usually for the purpose of either for-profit business or non-profit activities. Incorporation is generally one of the first steps in creating a new business or nonprofit organization.

What Does Incorporation Actually Do?

Incorporation creates a corporation, which is considered an individual legal entity in the eyes of the law. This corporation is separate from the person or people who establish it, and may own property, conduct business and be transferred to new owners easily.

What are the Benefits of Incorporation?

The chief benefit of incorporation is a limitation of liability on the part of the corporation's owner; corporation owners may not be held legally liable for the activities of a corporation. There are other benefits of incorporation, including lower taxation rates than individuals, separate credit ratings and the possibilities of stock offerings.

How Do You Incorporate?

In the United States, the incorporation process is handled through state government, by filing articles of incorporation and company bylaws with the appropriate Secretary of State office. There is usually a small fee required to incorporate. After the state government reviews and certifies the paperwork and checks that the corporate name requested is available, the incorporation process is complete.

Does Incorporation Need to be Updated or Renewed?

Incorporation is a one-time process that does not need to be renewed. However, changes to a corporation's ownership, name or bylaws may require a refiling with the state government.

What Else Can Be Incorporated?

Although incorporation is technically defined as the process of forming a corporation, the term is also commonly used to indicate the formation of other business and organization types, most often Limited Liability Companies (LLCs) and Limited Liability Partnerships (LLPs). For example, in order to create either LLC or LLP, articles of incorporation must be filed with the appropriate government agency.