Incorporation creates a separate legal entity, protecting personal assets from lawsuits. Registration obtains a business license and is required to operate, but does not offer personal asset protection. Incorporation is more complex and expensive, but courts honor the corporate veil, limiting damages to company assets. Registration is simpler and often requires no outside help.
The difference between incorporation and registration is that the former creates a separate legal entity. Setting up a company entitles the entrepreneur to protect the public from suing the entrepreneur for personal property. Limited liability companies and C and S corporations are common forms of corporations. Business registration is not a form of incorporation and often provides no protection of personal assets. The purpose of registering a business is to obtain a business licence, which may be required by regional laws, in order to conduct business.
Incorporating a business often requires business owners to file articles of incorporation and pay filing fees to the regional corporations department. The county has the authority to legally recognize a business as a corporation and requires an annual filing to determine if the corporation is in good standing. A major difference between incorporation and registration is that courts often honor a corporate veil when a business is incorporated. For example, if the company is sued over the sale of a defective product, the plaintiff is limited to the company’s assets to pay damages. The courts only pierce the corporate veil and allow the personal assets of business owners to be included in a damages award if there is evidence of fraud.
Business registration is the process by which entrepreneurs can obtain licenses to operate a business in the region. Incorporated businesses are often required to obtain a business license, but it is not necessary to incorporate a registered business. Most businesses need to register in order to operate, but there are exceptions. There are also some types of businesses that require special licenses to operate, such as companies that offer financial services. The public is often able to research the names of business owners and their contact information due to the required business registrations.
The cost for incorporation and registration varies across jurisdictions. In most cases, the cost of setting up a company is higher than registering a business. Companies also have to submit annual reports, which require additional fees, and have to pay for a license. Business registrations often expire after one year and must be renewed every year. Some companies may require additional permits, which add to the overall costs of complying with regional registration laws.
Incorporation and registration differ in the complexity of the documents required for both. An entrepreneur can hire an incorporated attorney or a business formation service to set up a company, or they can incorporate a company without any help. A business registration is often a simple process that does not require any outside help. A business owner can often contact the office that handles business registration and get help or ask questions if needed.
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