Definition, How It Works, and Advantages [Video]

Incorporation is the legal process used to form a corporate entity or company. A corporation is the resulting legal entity that separates the firm’s assets and income from its owners and investors.

Corporations can be created in nearly all countries in the world and are usually identified as such by the use of terms such as “Inc.” or “Corp.” in their names. It is the process of legally declaring a corporate entity as separate from its owners.

Incorporation is the broad term to describe a business registered with a state to become a separate legal entity. That business entity often is owned by shareholders (even if it is a single-member owned corporation) that may also be overseen by a board of directors.

A company does not need to be incorporated to operate a business. Business owners may elect to operate as a sole proprietorship or a partnership instead. These two legal …