A professional corporation (or PC) is a legal form of business organization that provides liability protection to its owners and professional employees. This means that the entity itself is liable for its business debts as opposed to the individual shareholders.

Owners or professional employees may choose to incorporate as a PC by filing Articles of Incorporation with the Secretary of State’s office, which is typically done with help from an attorney. A PC is an independent legal entity and not an extension of any owner, professional employee, or shareholder. The corporation is a separate taxable entity. A PC files taxes separately from its owners and employees. It is also a separate entity from the owners or members themselves.

What is a Professional Corporation?

A professional corporation (PC) is an independent, separately incorporated legal entity that provides liability protection to its owners and professional staff. A PC is a business and performs work on behalf of clients. It is not a division or department of any parent organization, and it operates as an independent corporation, meaning shareholders are not liable for the debts or actions of the corporation.

A PC combines the limited liability protection of a corporation with tax advantages similar to those enjoyed by professional associations. A PC is a corporation with a narrow focus, just like a professional association. Professional employees work in the legal, medical, and accounting professions, but it is not limited to those sectors of the economy. A professional corporation can be used to provide liability protection and tax benefits for any business that provides a service instead of selling products.

What Types of Professions Usually File Under Professional Corporation Laws?

Any business that may need professional liability protection is eligible. The PC laws are designed to provide liability protection for the owners and key employees in the field of law, accounting, medicine, engineering, or other professions. In virtually every state, these professionals may choose to incorporate as a professional corporation by filing articles of incorporation with the Secretary of State’s office, which is typically done with help from an attorney.

A PC is a separate taxable entity, meaning that the owners and staff are taxed separately from the other members or shareholders. It’s a separate legal entity from the owners or members themselves. A PC files taxes separately from its owners and employees. The tax provisions of the Internal Revenue Code (IRC) apply to the business itself, not to its individual owners or their personal income tax returns.

These provisions allow for limited liability for all corporate directors, officers, management, and key employees who provide services for clients in the course of doing business.

How are Professional Corporations Different From Other Types of Corporations?

A corporation is an independent entity or legal person. In other words, a corporation has the ability to have assets and debts, as individuals do. The employees of a corporation are not the owners or investors. The shareholder’s role is to provide funds for the corporation’s expenses and should receive a share of any profits. This is not true for professional corporations, in which the shareholders and owners are held accountable for any losses or debt incurred by the business.

Professional corporations are not taxable entities. A corporation can have limited liability. The shareholders may limit their liability by purchasing policies of insurance or electing to be covered by the corporation’s umbrella policy. Both of these policies provide liability protection, but they do not provide tax advantages, such as the ability to write off the expenses of carrying out one’s job in the manner and on the scale that is necessary to succeed in highly competitive industries like business and law.

What are the Benefits of Professional Corporations?

Professionals who provide services to clients may choose to incorporate them as professional corporations. Profitability and success in today’s competitive marketplace may depend upon how well you market, network, and position yourself. This requires professional staff that is able to work with the latest technologies and marketing strategies in order to win clients. Professional corporations allow owners and employees flexibility in the way they operate their businesses.

A professional corporation is a separate legal entity. Shareholders are not liable for the debts or actions of the corporation. They have limited liability protection, which means that they may not be held personally responsible for any debts or claims made against the corporation. This type of independent incorporation is often required by banks when applying for loans to expand a business.

Do I Need a Lawyer for Help With Professional Corporation Issues?

A professional corporation is a separate legal entity that provides liability protection to its owners and professional employees. This means that the entity itself is liable for its business debts, such as personal loans, trade debts, or business debts. A PC file taxes separately from its owners and employees. It is also a separate entity from the owners or members themselves. Discuss your concerns with a business lawyer to make sure the corporation is incorporated correctly.

Conclusion:

The members of a professional corporation may be liable for the debts and claims made against a business. Since the business operates as an independent entity, the employees are typically not liable for any business debts incurred. This stems from the limited liability provided to key employees under state laws governing professional corporations.