Professional Corporation FAQ
What is a Professional Corporation?
A professional corporation, PC for short, is a corporate form that is used by licensed professionals when they want to incorporate. Many states require that licensed professionals only use the PC form. If you have questions, please contact our office toll free at (888)-DoMyLLC (366-9552).
What is the difference between a regular corporation and a Professional Corporation?
There is no difference in the benefits or the drawbacks to forming a PC. They are the same as a corporation. The only difference is that the formation documents may possibly be subject to review by the professional licensing agency for your PC to be approved.
What professions usually use PCs?
PCs are used primarily for professions where a license must be obtained in order to perform the job, such as architects, accountants, attorneys, health care professionals, social workers and psychologists. It is important to note that a PC’s shareholders all must be licensed in that state for that profession. For example, if a group of dentists wanted to incorporate and become a PC, all shareholders in that PC must be licensed dentists.
How are PCs formed?
PCs are formed the same way corporations are. Please refer to the Corporations section and the Corporations FAQ for more information.
Are PCs still the best option for professionals?
The trend in recent years is for states to allow professionals to form limited liability companies as professionals, known as PLLCs. These pretty much the same as limited liability companies (“LLCs”) and since forming a PLLC is somewhat easier, they are becoming more popular. Not all states allow professionals to use PLLCs, so this is not an option for everyone.
Are PCs taxed different than regular corporations?
PCs are taxed the same way corporations are taxed and be formed as either an S or C type corporation. PCs are most commonly formed under the C type. PC’s net income is taxed at a flat rate of 35% because the IRS has classified PCs as personal service corporation. Please review the C Corp and S Corp sections for more information on how these two types of Corps are taxed.
Why would I want to form a professional corporation?
Professional corporations has the benefit of protecting or limiting the members from the negligence or malpractice of other members. Having a PC will not protect individual members from malpractice or negligence.
Each member is still responsible for their own actions and for obtaining their own malpractice insurance.
