Corporations organized for the purposes of
providing professional services.
Typically professional services are
regulated by a specific board or organization within each state (such as a
State Board of Professional Engineers or the State Bar for
attorneys). Some of the most common businesses which must be organized
as Professional Corporations include; medical, legal, accounting,
architectural and accounting services. Laws differ from state to state regarding what
businesses must form professional corporations.
Corporations must be organized for the sole purpose of rendering one
for ownership Interest:
(Preferred or Common)
that creates the entity:
Articles of Incorporation
Certificate of Incorporation
Charter of Incorporation
Articles of Association
Treatment: A Professional Corporation can usually elect
the tax treatment of either a S
Corporation or C
Corporation. In some cases, if a Professional Corporation is
formed as a C Corporation and is deemed a "qualified personal
service corporation," it will not receive the benefit of graduated
corporate income tax rates. Qualified personal service
corporations typically provide services in medicine, law, health,
accounting, engineering, architecture, consulting and actuarial science.
To determine how your corporation will be classified, we recommend that
you seek the advice of an accountant.
Formation of a Professional Corporation normally requires compliance
with specific rules set forth by the regulatory body of the profession
in questions. In most cases, there are separate applications which
must be filed to obtain the necessary licensing.
The requirements for additional signatures and information specific to
each regulatory body tend to extend the registration process for
Many states restrict who can be a
shareholder or a director in a Professional Corporation. For example, in
some states, only licensed practitioners of the service provided by the
corporation may own stock or serve on the board. Some states require at
least 50% of the shareholders and/or directors to be licensed professionals.
The board of directors are representatives of the shareholders. They
make the important policy decisions of the company and elect the officers.
Most states require corporations to have the lesser of 1) three directors, or 2)
directors equaling the number of shareholders in the corporation.
The officers manage the day to day operations of the corporation.
Generally, the first three officers of a corporation are the President,
Treasurer and Secretary. In many states, a for-profit S Corporation with
one director may have one officer fill all three roles.
of professional corporations
Most states require one of the following words, or
to be included in the name of a Professional Corporation:
P.A., or PA
only allowed in a few states
Additionally, in some states the name of the
profession must be listed in the name (such as Smith Engineering, P.C.).
In most cases, Professional
Corporations cannot do business under
additional fictitious names.
As mentioned, in some
states shares may not be issued to parties who are not licensed
professionals in the service being rendered by the corporation.
Professional Corporations are
subject to the same formalities as S Corporations or C Corporations, depending
on the status they elect.