Difference Between Corporation & Incorporation

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People comprise a corporation.
People comprise a corporation. (Image: "Business meeting" is Copyrighted by Flickr user: llawliet (Lee Chisholm) under the Creative Commons Attribution license.)

A corporation is an independent legal entity. The word "corp" is Latin for "body"--a legal, rather than a natural body, generally consisting of a group of people. Through the process of incorporation, the body unites into a formal corporation.

Process

The process of incorporation begins with filing the articles of incorporation.

Articles of incorporation describe the business.
Articles of incorporation describe the business. (Image: "Nestlé's Flawed Business Model" is Copyrighted by Flickr user: Alex Osterwalder (Alexander Osterwalder) under the Creative Commons Attribution license.)

Function

A corporation's articles of incorporation are a charter, or authorization, that establishes the existence of a corporation in a specific state. Requirements and fees vary from state to state.

(Image: "SKY click competitors (ups)" is Copyrighted by Flickr user: Alex Osterwalder (Alexander Osterwalder) under the Creative Commons Attribution license.)

Legal Process

The articles outline basic information about the new business. Filed with the Secretary of State's office, the articles of incorporation describe the essential identifying and operating characteristics of the proposed business.

The articles must be filed with the state.
The articles must be filed with the state. (Image: "Dear Sally, Stop. Please Get Me Out of Here, Stop." is Copyrighted by Flickr user: foundphotoslj under the Creative Commons Attribution license.)

Benefits

Once approved by the state, the articles legally create the corporation as a registered business entity. It then becomes an "artificial body" with rights, responsibilities, taxes and consequences separate from its incorporators--the group of people who filed the paperwork and who request to merge into a corporation.

A corporation has rights and owes taxes.
A corporation has rights and owes taxes. (Image: "Pop!Tech 2008 - Juan Enriquez" is Copyrighted by Flickr user: Pop!Tech under the Creative Commons Attribution license.)

Misconceptions

The terms often are used interchangeably, when in fact "incorporation" is the process of forming a "corporation."

"Corporation" and "incorporation" often used interchangeably.
"Corporation" and "incorporation" often used interchangeably. (Image: "Pop!Tech 2008 - Erin McKean" is Copyrighted by Flickr user: Pop!Tech under the Creative Commons Attribution license.)

Net Result

Once approved, the incorporators become shareholders and the corporation takes on a life of its own.

The corporation is a stand-alone entity.
The corporation is a stand-alone entity. (Image: "suits4.jpg" is Copyrighted by Flickr user: CFAGELNYC under the Creative Commons Attribution license.)

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