Even though a limited liability company (LLC) can be taxed as a corporation, its legal structure remains an LLC, as regulated by state statutes and federal tax regulations. Using the “Inc.” designation for the legal name of a company that is not incorporated can violate state law and have unintended tax repercussions.
Federal Tax Law
One of the advantages of an LLC is its flexibility. The Internal Revenue Service will by default treat a single-member LLC as a sole proprietorship, and a multi-member LLC as a partnership. But LLCs can elect to be taxed as a corporation instead or change back to its default status. The IRS specifies, however, that if federal or state statutes refer to the business entity as incorporated or a corporation, it will be taxed as a corporation.
State Naming Requirements
While state statutes establishing the formation of LLCs can vary from state to state, generally the enabling legislation requires the official name of an LLC end with the term “Limited Liability Company,” or the initials LLC, with or without periods. Your state may also allow the term “Limited Company” or just “Limited.” The word “corporation” or the abbreviation “Inc.” is reserved for companies that legally file articles of incorporation with the state.
When filing your LLC's articles of organization with your state, the state will search its database to assure your company's name is unique. A state may reject a name even if it's just similar to another name. Your LLC also cannot duplicate a corporation's name where the only difference is the designation “Inc.”
Even though your state will require you to use an LLC designation in your company's legal name, regulations don't prevent you from using a less formal version of the name without the designation for marketing and other general purposes. A company is also free to operate under a fictitious name by filing a “Doing Business As” registration with the state. The DBA also does not need the LLC designation.
Tom Chmielewski is a longtime journalist with experience in newspapers, magazines, books, e-books and the Internet. With his company TEC Publishing, he has published magazines and an award-winning multimedia e-book, "Celebration at the Sarayi." Chmielewski's design skills include expertise in Adobe Creative Suite's InDesign and Photoshop. He holds a Bachelor of Arts in English from Western Michigan University.