What is a Professional Corporation (PC)?

In many states, people in certain occupations who want to incorporate their practice can create professional corporations (PC) or professional service corporations. A professional corporation consists of different types of professionals, such as doctors, lawyers, architects, accountants, engineers, psychologists, etc. Learn how to set up a professional corporation with our legal guide below.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Professional Corporations (PCs), also known as professional service corporations, were created to allow certain kinds of professionals such as physicians, lawyers, accountants, or engineers to do business together. PCs might show up as S-corporations, C-corporations, or LLCs on their tax forms. The legal regulations they adhere to are different than other similarly named organizations, though.

Keep reading to find out what does a professional corporation mean and what is the difference between a professional corporation and a regular corporation. If you need further legal assistance, just enter your ZIP code below.

What are the advantages of a professional corporation?

The exact requirements to use a PC vary from state to state. Generally speaking, they include accountants, engineers, healthcare professionals, lawyers, psychologists, social workers, and veterinarians. Typically, each individual organization limits their membership to one profession or grouping of professions. For example, a group of doctors who have their individual medical practice can form a professional corporation if their business is to practice medicine.

This type of organization designation provides personal liability protection greater than that of a traditional limited liability partnership. While there is some limitation on liability surrounding the actions of each partner, the licensed professionals in the firm may not be relieved of liability for their own professional negligence or malpractice. This is the main reason professionals form this type of corporation. They can enjoy sharing management responsibilities and profits without exposing themselves to malpractice actions against the other business owners. A regular corporation may leave the whole organization exposed to liability for the actions of any one individual.

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How do I set up a professional corporation?

Any business entity interested in this designation can start their applications. To get through, you may want to start by doing some research. Be sure you understand the professional corporation requirements of your state. Some states require that each owner hold the same type of business license and will verify this before allowing the corporation to be formed.

You may have to carry a certain designation in the company name, such as “PC” for professional corporation. You will also need to draft corporate by-laws. These are the rules of how businesses will operate and be governed. You will need to designate officers and their responsibilities, assign decision-making procedures, and set any terms regarding management and finances.

The final step is to register your corporation in your state. It varies, but in most cases, you will pay a filing fee and submit a professional corporation form. How you file will also determine your corporate tax rate and other financial factors that determine what the business is required to do in the future. If you feel you need help, your local small business association or a corporate attorney can offer assistance. Some states also have guides posted on their websites to help explain the process and the requirements of corporations.

What Are Professional Corporation Examples?

The list of professionals required to incorporate as a professional corporation, or personal services corporation, is given below:

  • accountants
  • engineers
  • health care professionals (audiologists, dentists, nurses, opticians, optometrists, pharmacists, physical therapists, physicians, and speech pathologists)
  • lawyers
  • psychologists
  • social workers
  • veterinarians

Of course, this is a general list. For a more precise list of professional corporation owners and more, it’s best to look at your state. A business attorney can also answer many of the questions you may have about setup and liability for business in your area. They can also make any requirements from a board of directors to stock shares and more.

What Kind of Business Shouldn’t Become a Professional Corporation?

A professional corporation status can be essential in some business models. If state laws allow you to register your business corporation accordingly, it could eliminate many hassles. Each situation has to be evaluated individually, though. For example, the key benefits wouldn’t apply to sole proprietorships or a professional association that wasn’t listed by your state.

If you think a professional corporation may be the right fit for you, always work with an attorney to complete online filing and more for your future success.

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