What is the Difference Between Incorporation and Registration?

The difference between incorporation and registration is that the former creates a separate legal entity. Forming a corporation entitles the business owner to protections against the public from suing the business owner for personal assets. Limited liability companies as well as C and S corporations are common forms of business corporations. Business registration is not a form of incorporation, and it doesn’t often provide any protection of personal assets. The purpose of registering a business is to obtain a business license, 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 department of corporations. The region has the authority to legally recognize a business as a corporation and require annual filings to determine whether the corporation is in good standing. One major difference between incorporation and registration is that courts often honor a corporate veil when a business is incorporated. For example, if the corporation is sued for selling a defective product, the plaintiff is limited to the assets of the corporation to pay for damages. Courts only pierce the corporate veil and allow the personal assets of corporate owners to be included in a damage award when there is proof of fraud.

Business registration is the process by which business owners can obtain licenses to operate a business in the region. Incorporated businesses must often obtain a business license, but a registered business does not have to be incorporated. Most businesses need to register in order to operate, but there are exceptions. There are also certain types of businesses that require special licenses to operate, such as companies offering financial services. The public is often able to research the names of the owners of businesses and their contact information because of the required business registrations.

The cost for incorporation and registration varies, depending on the jurisdictions. In most cases, the cost of forming a corporation is higher than registering a business. Corporations also have to file annual reports, which require additional fees, and have to pay for a license. Business registrations often expire after one year and must be renewed annually. 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 paperwork required for both. A business owner can hire an incorporating lawyer or a business incorporation service to form a corporation, or he or she can incorporate a business without any help. A business registration is often a straightforward process that requires no outside help. A business owner can often contact the office that handles business registration and obtain help or ask questions if necessary.