When you see “Co.” in a business name, you might wonder what it really means. Does it stand for “company” or “corporation”? Well, it could either mean, depending on how the company is set up. But “Co.” by itself doesn’t tell you much about the legal structure of a business. Let’s break it down together in simple terms.
What Does “Co.” Mean?
At its core, “Co.” is short for “company.” But in some states, it can also mean “corporation.” If you are planning to start a business, it is important to remember that “Co.” does not always indicate how a business is legally set up. For example, a business can be a corporation, partnership, or even a sole proprietorship and still have “Co.” in its name.
Common Business Structures
Businesses can be set up in many different forms. Each structure comes with its own rules and benefits. Some of the most common business structures are as follows,
01. Companies
A corporation is a business that is considered separate from the person who owns or operates it. In other words, it has its own legal entity. If you own a corporation, your personal assets (such as your car and home) will remain separate from your business, and the liabilities of your business’s debts will not affect your personal assets. A corporation is managed by a board of directors by the shareholders.
Company name is usually marked with “Inc.” or “Corp.” because they are incorporated. Many states may also allow “Co.” or “Ltd.” However, the best practice is to review your state’s rules and policies before choosing your business name.
There are two main types of corporations:
- C Corporations: Legally an independent entity separates from the owners and pays taxes separately.
- S Corporations: Its profit passes through to the owners’ personal returns, thus avoiding double taxation.
02. Limited Liability Companies (LLCs)
LLCs are incredibly popular, especially for small businesses. Why? They give you the protection of a corporation, so your personal assets are safe from your business debts, and they’re also easier to operate. LLCs also allow profits to pass through to your personal tax return, similar to a partnership.
If you’re starting a family business, an LLC can be a great option. In an LLC, you will have flexibility without the strict rules of a corporation.
Most states require you to include “LLC” or “Limited Liability Company” in the name when naming an LLC.
03. Partnerships
In a partnership, two or more people work together to run a business. There are several forms of partnerships, including:
- General Partnerships: All partners share the work and the responsibility. But their personal assets aren’t protected from business debts.
- Limited Partnerships (LPs): These have two types of partners – a general partner who runs the business but has personal liability and a limited partner who invests money in the business and has limited liability.
- Limited Liability Partnerships (LLPs): All partners in an LLP have limited liability. This is usually incorporated by professionals such as doctors, lawyers, and accountants.
- Limited Liability Limited Partnerships (LLLPs): This new type of business entity includes both a general (managing) partner and a limited partner. All the shareholders receive limited liability in this business structure. This business structure is mostly popular with real estate investors because it allows them to manage their properties without personal liability. However, LLLPs are not available in all states. Thus, check with your local corporation office before setting up this type of business structure.
04. Sole Proprietorships
If you’re thinking of running a business solo, this is the easiest business structure to choose. You don’t have to deal with a lot of startup paperwork, and it’s very easy to manage. However, one of the major disadvantages is that there is no liability protection. In other words, if something bad happens to your business, your personal assets may be at risk.
Why Limited Liability Matters
Limited liability means that your personal belongings, such as your house or savings, cannot be touched if your business has debts or gets sued. Of course, that is one of the major reasons people incorporate their businesses or form LPs, LLPs, or LLLPs rather than operate as solo proprietors or general partnerships.
Tips for Naming Your Business
Choosing a name for your business is exciting, but it’s not as easy as picking something catchy. Here are a few things you need to consider,
- Make It Unique: A unique name helps you stand out and makes it easier to secure a website domain.
- Be Clear: Your name should hint at what your business does. This helps potential customers understand your services.
- Follow the Rules: Look at your state’s naming requirements. Some states require you to include words or abbreviations that reflect your business structure, such as “LLC” or “Inc.”
- Avoid Restricted Words: Words that could confuse your business with a federal or state government agency, like “federal” or “state,” are often not allowed.
Before finalizing a business name, it’s a good idea to conduct a search to make sure it’s not already taken. This will save you a lot of hassle later on.
Difference Between LLCs and Limited Companies
People sometimes confuse limited liability companies (LLCs) with limited companies, but they’re not the same. LLCs are a U.S. business structure. Limited companies, often seen in Canada and Europe, use “Ltd.” in their name. If you’re doing business internationally, it’s worth learning about these differences.
You might interested in learning about LLC vs. Corporation
When to Get Professional Help
Starting a business requires a series of decisions, from naming to setting up the legal structure. If you’re unsure or don’t know what your next step should be, set up a meeting with an attorney who specializes in business formation. They can guide you through the process and help you avoid mistakes.
Final Thoughts
Understanding business names and structures can seem overwhelming at first, but it’s not that complicated. Think of what you need, like the protection of personal assets, ease of management, or tax benefits, then choose a structure that fits.
Take your time when naming. It’s the first impression people will have of your business. A good name can set you apart and make it easier to grow your brand.
Starting a business is a big step, but with a little research and planning, you can get it right. Good luck!
