Professional Corporation Faqs
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.
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.
PCs are formed the same way corporations are. Please refer to the Corporations section and the Corporations FAQ for more information.
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.
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.
Professional corporations has the benefit of protecting 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.