How To File as a Professional Corporation

In most states, the formation of professional corporations involves additional requirements and in some cases more stringent regulation.  Professionals who require a state license or governmental oversight most often need to use this form or organization when they wish to incorporate.  For example, lawyers, accountants and medical practitioners are subject to these additional requirements when incorporating.

Before choosing this business entity, it is wise to check with the state agency in your state which oversees corporate filings to be certain if your state requires practitioners in your profession to incorporate in this form.  If your profession is not covered by these additional requirements, you may incorporate in standard form.

Special articles of incorporation must be written when filing as a professional corporation.  Many states offer examples of these special articles for download on their agency websites.  Checking these sites will provide blank forms and advice that will greatly aid in a smooth and proper incorporation process.

In addition to standard rules of incorporation, a business must also signify their status as a professional corporation within their name by using a special designator.  In Massachusetts, for example, professional corporations must have the “P.C.” designator after their firm names.

All shareholders of these entities also have to hold professional certifications in the profession for which the corporation was formed to do business.  Proof of valid certification for every shareholder must be filed with the articles of incorporation.  Usually, the business must carry out only transactions related to the profession for which it was formed.  However, allied professions are allowed to incorporate together.  An example would be two medical practitioners whose specialties often require consultation or collaboration.

Only certified professionals within the corporation can render service to customers.  In a law firm for example, the practice of law must be done by the attorney, not the receptionist or law clerks.  Each licensed professional must carry adequate professional liability insurance.  The protective corporate veil will only extend to business debts and business transactions and not cover professional negligence which remains on the shoulders of the practitioner.  However, protection will extend to other professionals in the professional corporation not involved in the professional neglect or misconduct.

A final consideration is on of tax treatment.  Some states impose a flat income tax for some professions regardless of their choice of business entity.  Therefore, some of the tax advantages of incorporation may not be present in the professional corporation.