What is a Professional Corporation?
A Professional Corporation (or PC) is a legal entity formed by one or more individuals who are required to obtain a license to provide services. PCs are available in all 50 states as both C-Corporations and S-Corporations. Professional corporations offer benefits such as limited liability for shareholders, tax advantages, and a formal structure for business operations. However, unlike general corporations, all shareholders, directors, and typically officers in a PC must be licensed in the same profession, though there are exceptions. The PC permits the entity itself to be licensed, and therefore provide licensed services to third-parties.
Most licensed professionals are required to operate either by themselves as a sole proprietorship or partnership, or underneath a PC. Any licensed professionals operating under a regular Corporation or Limited Liability Company (or LLC) do so at substantial risk, unless their governing body or board has specifically permitted doing so.
Who is a Professional?
A professional is any individual who requires special licensure in order to provide services to others. This generally includes—but is not limited to—accountants, architects, chiropractors, contractors, dentists, doctors, engineers, lawyers, oral surgeons, private investigators and security, and therapists. These professionals answer to a governing body which handles their licensure (such as a state bar for lawyers).
General Requirements
Generally, the requirements mirror those of forming a standard corporate entity. While specifics may vary, states typically require the following to form a PC:
- Licensure: All incorporators, shareholders, directors, and officers must hold a valid license in the profession.
- Name Requirements: The corporate name must usually include “Professional Corporation,” “P.C.,” or an equivalent.
- Regulatory Approval: Formation may require approval from the relevant state licensing board.
- Articles of Incorporation: Like a standard corporation. Must be filed with the Secretary of State, often with additional documentation showing professional licensure.
- Single-Profession Limitation: Most states limit PCs to one profession unless express permission is granted.
Some States with Notable Exceptions and Restrictions
Several states—including but not limited to the following—impose restrictions or have unique requirements:
- California: Only certain licensed professions may form a PC, as listed in the Moscone-Knox Professional Corporation Act (See the list).
- Texas: Physicians cannot form PCs.
- Louisiana: Requires board approval for each profession. Not all licensed occupations are eligible to form PCs.
- Pennsylvania: Allows multi-profession PCs, but only with express approval from each profession’s licensing board.
- West Virginia: Only certain licensed professions may form a PC, and requires licensure confirmation.
Professions Commonly Eligible to Form PCs
The following professions are commonly authorized across the vast majority of states:
- Physicians (except in Texas) and Surgeons
- Dentists
- Attorneys
- Certified Public Accountants
- Architects
- Engineers
- Psychologists
- Chiropractors
- Optometrists
- Veterinarians
Conclusion
Understanding the requirements for forming a Professional Corporation is crucial for any professional. While many states follow similar frameworks, regulations vary and several impose profession-specific restrictions. Professionals considering incorporation should consult with an attorney licensed in the jurisdiction (or jurisdictions) in which they intend to perform their services to ensure compliance with local and state laws. Want to form your professional corporation today? Need more information? We’d be happy to help!
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