"Inc." is an abbreviation of "incorporated," and both the abbreviation and the full word mean that a company's business structure is a legal corporation.
A corporation or "Inc." is an entirely separate entity from its owners and shareholders. This is an important legal distinction since an incorporated business essentially becomes a separate "person" under the law. A corporation affords the owners limited liability, and if an owner dies, the corporation—as its own entity—lives on.
Types of Corporations
"Incorporation" is the process through which a business becomes a corporation, thereby earning it the right to put an "Inc." or "Incorporated" after its name. The rules concerning incorporation vary by state and the specific type of corporation you wish your business to be.
Generally, to earn the "Inc.," you must first choose whether you want to incorporate your business as an S corporation (S corp.) or a C corporation (C corp.). A C corp. is the most common type, with taxes paid on the corporate level and at the individual level on dividends. C corporations have no ownership restrictions.
In an S corp., on the other hand, profits and losses "pass-through" the business to the owners' personal income tax returns. For this reason, an S corp. is considered a "pass-through tax entity." An S corp., also called a close corporation, is limited to no more than 100 shareholders, who must be United States citizens.
The Road to Incorporation
After selecting the type of corporation, you must choose which state to incorporate in. Your home state is always an option, of course, but some corporation owners choose states with laws favorable to corporations.
Every corporation must have directors and a registered agent who agrees to receive important legal and tax documents on behalf of the business. A registered agent must be available to receive these documents during normal business hours.
The next step on the road to incorporation is to compile and file articles of incorporation with your chosen state's Secretary of State. Each state also has a filing fee that you must pay when filing the articles.
Once you have received notification that your business entity is registered with the state as a corporation, you are literally in business. At this point, you can formally add the denomination "Incorporated" or "Inc."
Your newly formed corporation should absolutely indicate that it is an incorporated entity. To accomplish this, you may also choose to use the full words "Corporation" or "Company," or the abbreviations "Corp." or "Co."
Overall, remember that "Incorporated" and the similar words listed exist so that the public knows that the business in question is, indeed, incorporated as such with a Secretary of State.