Frequently, an international prospect or client will tell me that he wants to create an Inc. to run his business in the in the United States. This post explains what an “Inc.” is and where the term comes from.
History and Other Countries
For centuries, in the interest of fostering economic activity, governments have recognized certain types of businesses as separate legal entities. Investors’ liability is limited to the amount invested (“limited personal liability”). Investors’ other assets, beyond the amount invested, may not be taken to satisfy the business’s debts or other obligations.
To put others on notice, many jurisdictions require the entity to have a name that designates this limitation of investors’ liability. For example, “S.A.” is appended to the names of such entities in many civil law countries, including France (“Société anonyme“) and Spain (“Sociedad Anónima“).
“Inc.” and the United States
In the U.S., most states – notably including Delaware, but excluding California – require such a designation in the name but provide some flexibility. The commonly-available choices include Corporation, Limited and Incorporated. In abbreviated form, these are Corp., Ltd. and Inc.
So when someone talks about creating an Inc., that individual really is talking about forming a corporation.
(Not coincidentally, “Inc.” is the name of a magazine for entrepreneurs and business owners.)
Related post: Which is Best – “Inc.”, “Corp.” or Something Else?
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.