What’s the difference between all these terms:
Corporation
Incorporated
Limited
Company
And whatever other words follow business names. I assume “limited” would have something to do with a limited liability, but I’m fuzzy about the details of all these. Then there are “limited partnerships” and the such. Could somebody with a better grasp of businessese explain these subtleties to me?
One of the bedrock principals of corporate law is that individual shareholders, as a general rule, are not liable for the obligations of the corporation.
With respect to big corporations, it makes intuitive sense that you can’t chase down the shareholders for obligations of the company.
But what if Joe’s Plumbing, Inc. botches your toilet? If Joe’s Plumbing is insolvent, it may not be so easy to pursue your claim against Joe.
Realizing that the corporate form has this potential to frustrate parties who transact business with corporations, legislatures require that corporations (and other limited-liability entities) make it clear to the public that they are in fact limited liability entities.
Thus, you see “corp.” “inc.” and “ltd.” a lot. I think these are in most cases synonymous, but I’m speculating a little. (Feel free to correct me)
If Joe’s Plumbing doesn’t tell the public that it’s a corporation, it runs the risk of having a court make shareholders, officers, etc. liable for the corporation’s obligations. This is known as “piercing the corporate veil.”
I think that “Co.” doesn’t have much significance anymore, at least in the US.
Other limited liability entities include LLP’s (limited liability partnerships) and LLC’s (limited liability companies)
Well, a “Corporation” is just something that’s “incorporated,” so you have the noun and the adjective there. “Limited” is another adjective that describes a corporation. All three can be applied to a corporation’s name. They mean the same thing (or they do here, at least. Your local law may vary.) When I incorporated a company, I had my choice of words - did I want it to say Inc. or Incorporated or Corp. or what at the end? I ended up picking “Incorporated.”
You’re right in that the basic purpose of a corporation is to limit the liability of the owners. Incorporating means that the corporation becomes, in a sense, a person all its own. So if Pulykamell Incorporated goes belly up, they cannot come after your personal assets to settle PKI’s debts; your money and the company’s money are strictly separate things. That’s why one of the fundamental “Generally Accepted Accounting Principles” is keeping personal finances and business finances apart.
This does NOT mean, however, that the people who run the company are immune from the results of their decisions. Directors of corporations have been sent to prison for actions undertaken by the corporations they run.
“Company” just means “a business.” A company might be incorporated, or it might not.
Like everything else in this strange country, the rules depend on what state you’re in, but states abide by each other’s decisions.
That’s why so many corporations form in Delaware, which has the lowest tax and only requires a “dropbox” local office (like Mailboxes, Etc.).
Actually, you may or may not need any special indicator. The main reason is that some names “look like” businesses. E.g., if the name includes “…Clothing Store”. What won’t pass for a legal name varies by state, but in most your own name is not enough. You cannot name your company “Bob Smitherine”, but must make it “Bob Smitherine ___something”. This is so when you sign a contract the other party is advised that you are immune to certain liabilities that an individual must honor.