Form a Professional Entity
Professional corporations (PCs) and professional limited liability companies (PLLCs) are corporations and limited liability companies organized for the purpose of providing professional services.
What services constitute professional services are defined by state law, and differ from state to state; however, it is typically professions requiring a license, such as doctors, chiropractors, lawyers, accountants, architects and engineers that are required to form PCs or PLLCs .Additionally, a PC or PLLC must typically be organized to solely provide the services of the licensed practitioners.
The formation of a PC or PLLC involves additional steps, such as approval by the appropriate state licensing body and signature of a licensed professional as the incorporator or organizer, prior to sending the formation documents to the state. In addition to preparing and filing the necessary documents with the appropriate state agency in order to establish your PC or PLLC, BizFilings also addresses the additional requirements imposed by your intended state of formation.
Frequently Asked Questions
Q. What are professional corporations (PCs) and professional limited liability companies (PLLCs)?
A. PCs and PLLCs are corporations and limited liability companies (LLCs) organized for the purpose of providing professional services. What services constitute professional services are defined by state law, and differ from state to state. Typically, professions that require a license, such as doctors, chiropractors, lawyers, accountants, architects, or engineers are required to form PCs or PLLCs. Typically, PCs or PLLCs must be organized for the sole purpose of rendering professional services of the licensed practitioners.
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Q. How are professional corporations (PCs) and professional limited liability companies (PLLCs) formed?
A. The formation documents, the articles of incorporation for a PC and articles of organization for a PLLC, are similar to those of standard corporations and limited liability companies (LLCs). However, with professional entities, the proper state licensing body must often approve the formation documents before these documents can be filed with the Secretary of State. Further, the formation documents typically must contain the signature of a licensed professional as the incorporator, and that person's license number typically is required. Therefore, the filing time for professional entities is longer than the filing time for standard business entities.
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Q. How are professional corporations (PCs) and professional limited liability companies (PLLCs) taxed?
A. Generally, the taxation of PCs and PLLCs is the same as standard corporations and limited liability companies (LLCs).
PCs are taxed like C corporations (unless they make the S corporation election). However, some PCs do not have the advantage of graduated corporate federal income tax rates. Those PCs that are "qualified personal service corporations" may be eligible to pay a flat federal income tax rate of 35 percent. "Qualified personal service corporations" typically provide services in the fields of health, law, engineering, architecture, accounting, actuarial science, or consulting. You should seek the advice of an attorney or accountant regarding whether your company meets this classification in your state of formation.
PCs are allowed to file for S corporation status, which allows for the entity to have pass-through tax treatment. With pass-through taxation, the income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is "passed through" the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns.
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Q. What do I name my professional corporation (PC) or professional limited liability company (PLLC)?
A. Choose the name carefully. It is very important that you portray the image you want. The name you select must not be "deceptively similar" to any existing corporation or limited liability company (LLC) and must be "distinguishable on the record" of your state. For example, if a corporation named Smyth Architects P.C. exists in your state, you probably would not be allowed to name your business Smith Architectural Design Professional Corporation. It is possible that the name you select will not be available; therefore, BizFilings asks for a second choice on the formation order form.
Additionally, the name you choose usually must show your business is a PC or PLLC. Most states require that the corporate or LLC name be followed by the ending Professional Corporation or the abbreviations P.C., PC, or in some states P.A. (for Professional Association). For PLLCs, the appropriate ending is Professional Limited Liability Company or PLLC.
Depending on your state of formation, there may be restrictions that require the profession to be listed in the company name (for example, Johnson Chiropractic, PC). Additionally, there may be specific "restricted words" that are not available for use in names. Check the state specific page for your intended state of formation for more details.
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Q. Who can be a shareholder or director in a professional corporation (PC)?
A. Many states restrict who may be a shareholder or a director of a PC. For example, in some states only licensed practitioners of the specific service that the corporation provides may own stock in the corporation and serve on the board of directors. Other states require at least 50% of the shareholders and directors to be licensed professionals. Check the state specific page for your intended state of formation for more details.
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