Profit prior to incorporation refers to the income generated by a business entity before it has been formally incorporated as a legal entity. In many cases, entrepreneurs may start operating a business and generating revenue before they go through the process of formally incorporating the business, which involves registering it with the appropriate government authorities.

During this period, any income earned by the business belongs to the individuals or partners who are running the business, rather than to the corporation itself. Once the business is formally incorporated, any profits generated thereafter typically belong to the corporation, which is a separate legal entity from its owners.

It’s important for entrepreneurs to keep track of their profits prior to incorporation for accounting and tax purposes, as these profits may need to be reported on personal income tax returns or other relevant documents. Additionally, when incorporating a business, any assets or liabilities accumulated prior to incorporation may need to be transferred to the corporation in accordance with legal requirements.