Professional Corporation

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How to Form a Professional Corporation
BUSINESS FORMATION

Launch Your Professional Corporation With Confidence

If you are a certified professional in fields like law, accounting, engineering, social work, or healthcare, establishing a professional corporation (PC) can be extremely beneficial. The niche business structure is meant to shield your personal assets and see to it that your corporation is compliant with state and federal laws.

What Is a Professional Corporation?

A professional corporation (PC) is a special kind of corporation formed by licensed professionals. PCs are different from other corporations in that they are subject to rules on who can be a director or shareholder. Typically, only the licensed professionals in that field can be shareholders or directors of the corporation.

While a professional corporation protects personal assets from business liabilities, it does not protect a sole owner from personal malpractice or negligence. But it does protect the corporation and other shareholders from some business risks, such as lawsuits or bankruptcy.

A professional corporation can be either a C-Corp or an S-Corp but is taxed as a Professional Corporation (PC) or Professional Services Corporation (PSC). A PSC is a federal tax classification for a professional corporation, but it will first have to qualify under the state's requirements for incorporation as a PC.

Shareholders and Directors of a Professional Corporation

When creating a professional corporation, the state in which the business is being formed will have certain requirements as to who can serve as a shareholder or director. Generally, a PC will require shareholders and directors to be licensed in the same profession that the business is in. For example, in a law firm, shareholders would typically need to be attorneys.

Before you begin, verify with your state's regulations to make sure you are meeting these requirements.

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Advantages of a Professional Corporation

Limited Liability Protection

The main advantage of establishing a professional corporation is that there will be a demarcation of your personal and the business's assets. Even though your own assets are most times protected, you will not have protection for yourself from individual liability arising due to professional negligence or malpractice.

Tax Benefits

There are numerous tax benefits associated with professional corporations, such as the provision of certain benefits such as health and life insurance in a Voluntary Employees' Beneficiary Association (VEBA). Another benefit of retirement plans like 401(k)s is that they have more generous contribution limits than those for individual business owners.

Perpetual Existence

One of the major characteristics of a professional corporation is that it can survive even when a shareholder or director dies. This is particularly useful for companies that wish to guarantee longevity past the lives of the initial owners.

SIMPLE PROCESS

Form Your Professional Corporation in 4 Simple Steps

DIY (Do it Yourself)

If you know how the filing process works, you can file the documents yourself using your state's official website. This approach gives you complete control over the process but requires you to understand all the legal requirements and paperwork involved.

Use an Online Service

The majority of entrepreneurs prefer to utilize an online incorporation service for a quicker and more efficient process. The services guide you through the intricate paperwork and ensure that everything is filed properly. This option saves time and reduces the risk of errors in your filing.

Best Online Professional Corporation Filing Services

1. Northwest Registered Agent

Best Overall Corporation Filing Service

Northwest Registered Agent is one of the best for professional corporation filing. They provide robust privacy protection, simple and dependable services without upselling or hidden fees, and direct access to experienced U.S.-based support. Their personalized service ensures a smooth and hassle-free process.

Advantages:

  • One year of registered agent service included with every formation

  • Privacy by Default keeps your personal info off public records

  • Knowledgeable, U.S.-based customer support available for lifetime assistance

Visit Northwest Registered Agent

2. MyCorporation

Award-Winning Corporation Formation Service

MyCorporation focuses on assisting you in forming professional corporations and nonprofits. They feature a quick online procedure to incorporate your company and offer expert guidance throughout the entire process.

Advantages:

  • Fast and simple online incorporation

  • Expertise in professional corporation filings

  • Provides many compliance services, such as annual reports and registered agent services

Visit MyCorporation

Before You Incorporate

Before you incorporate as a professional corporation, it's advisable to consult with your attorney or tax advisor. Be sure to consider the following factors:

  • Professional Requirements

    In certain states, specific licensed professionals are mandated to establish a professional corporation, while other states allow greater flexibility when deciding whether to incorporate as a PC, LLC, or LLP.

  • Ownership Structure

    How many owners will your corporation have, and what will the ownership structure be? This is an important consideration, particularly if you have multiple partners or shareholders.

  • Tax and Liability Implications

    Professional corporations have different tax benefits and liabilities than LLCs and LLPs. Talk to an expert to determine which structure best meets your long-term objectives.

Conclusion

Creating a professional corporation is a strategic move that can offer tax benefits, limited liability, and an organized structure for licensed professionals. Whether you incorporate yourself or hire a professional service, knowing the process and what your state requires is essential to success. Employing online services such as SwyftFilings or MyCorporation can make the process easier, allowing you to concentrate on your business while remaining compliant and secure.

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