What is a Professional Corporation (PC)?
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Professional Corporations (PCs), also known as professional service corporations, were created to allow certain kinds of professionals such as doctors, lawyers, accountants, or engineers to do business as a professional corporation.
Benefits of a Professional Corporation
Professional corporations are different from corporations because all shareholders in a professional corporation must be members of the same profession involved in the same business. For example, a group of doctors can form a professional corporation if their business is to practice medicine. While there is some limitation on liability surrounding the actions of each partner, the 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 owners. Depending on state law, limited liability partnerships (LLPs) may offer the same benefit and may even be more desirable.
How Do I Set Up a Professional Corporation?
If you are interested in setting up a professional corporation, be sure you understand the 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 your business 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 registration form. 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.