A professional corporation in California is a type of corporation for specific professions that offer a service regulated by a state regulatory board or a similar agency. The professional corporation can only provide services from a single profession. Most California professionals start a professional corporation when forming a new company.
Do I need to form a professional corporation in California?
Unlike many other states, California does not allow professionals to form a limited liability company or professional limited liability company. In California, professionals must form either a professional corporation or a registered limited liability partnership.
What is the difference between a professional corporation and a corporation?
While traditional corporations their professional corporations are mostly similar, there is one key difference: with professional corporations (such as C Corps), owners are protected from legal claims made against their business, unless the claim was a result of the owner's own mistake.
Who can own a California professional corporation?
In a California professional medical corporation, at least 51% of the shares must be owned by a licensed physician or surgeon, and only up to 49% of the outstanding and issued shares may be held by a (1) doctor of podiatric medicine; (2) psychologist; (3) registered nurse; (4) optometrist; (5) marriage, family, and ...
What is an example of a professional corporation?
Common professional corporation examples include those incorporated by engineers or architects, attorneys, doctors, accountants, etc.
What is the purpose of a professional corporation?
Professional corporations provide a limit on the owners' personal liability for business debts and claims. Incorporating can't protect a professional against liability for his or her negligence or malpractice, but it can protect against liability for the negligence or malpractice of an associate.
What is the benefit of a professional corporation?
Professional corporations offer most of the same advantages as a regular corporation: personal asset protection, the ability to issue stock, and tax advantages. The downsides to a professional corporation are also the same as those of a regular corporation, such as the time and money spent on corporate formalities.
How are professional corporations taxed in California?
Professional corporations are taxed as C-corporations by default. A C corporation is considered a separate entity for business entity filings. This means the corporation files and pays their corporate income taxes and federal taxes. The professional corporation owner has to pay and file their individual taxes as well.
Can a professional corporation own real estate?
Any corporation incorporated under the OBCA has the authority to borrow for any purpose, including an acquisition of real property.
How do you create a professional corporation?
Professional Incorporation Checklist: How to Set up Your Professional CorporationSet up a corporation in your jurisdiction. ... Get approval from your professional body. ... Switch over your bank and credit cards. ... Get a GST/HST number for your company. ... Change over your business paraphernalia. ... Get the right accounting software.More items...•
What is the structure of a professional corporation?
Professional corporations (PCs), or professional service corporations, are a unique corporate structure which is comprised of a specific group of professionals. An S corporation or a C corporation may be formed by certain professionals including physicians, attorneys, engineers, or accountants.
Who is more likely to set up a professional corporation?
Namely, professional corporations are exclusively for business owners in “professional” occupations. The definition of “professional” varies state-by-state, but generally includes persons of licensed occupations, such as doctors, lawyers, and financial professionals.
Can a professional corporation be an S Corp in California?
A California Professional Corporation may be a C-Corporation or an S-Corporation, and is organized to provide services in professions that require a state license in order to practice.
What are the 4 types of corporations?
There are four general types of corporations in the United States: a sole proprietorship, a Limited Liability Company (LLC), an S-Corporation (S-Corp), and a C-Corporation (C-Corp).
What is the difference between a professional corporation and a corporation Canada?
If you work in certain professions in Canada, you may be able to save taxes by forming a professional corporation. These are similar to regular corporations but do not limit the liability of the professional if they are sued for malpractice or “errors and omissions.”
What is a professional corporation structure?
Professional corporations (PCs), or professional service corporations, are a unique corporate structure which is comprised of a specific group of professionals. An S corporation or a C corporation may be formed by certain professionals including physicians, attorneys, engineers, or accountants.
What is a NJ professional corporation?
A Professional Corporation or Association is one organized for the specific purpose of providing the same professional services as its shareholders, each of whom is licensed or legally authorized to provide that service. See N.J.S.A.
What is a professional corporation?
A professional corporation is a corporation formed under the California state laws in order to practice a particular profession. The following professions may be professional corporations:
Who is personally liable for any obligations that they have personally guaranteed?
Shareholders are personally liable for any obligations that they have personally guaranteed.
Can a professional corporation be held liable for payroll taxes?
Generally, shareholders of the professional corporation are not personally liable for corporation’s debts, EXCEPT certain payroll taxes and obligations arising from the corporation’s own negligence; NOTE: Professional Limited Liability Companies (LLCs) are NOT allowed in California.
Is a professional corporation a shareholder?
Shareholders and Directors in a Professional Corporation. Generally, only a licensed professional practicing the profession the professional corporation is. engaged in may be a shareholder. Nonetheless, in certain situations, some other licensed. professionals may also hold shares.
How to form a professional services corporation in California?
In order to form a California professional services corporation, the Articles of Incorporation must be filed with the SOS. After completing the registration with the state, the business must adopt bylaws, hold a meeting with the shareholders and directors, and issue shares to owners. Within 90 days of incorporation, a Statement of Information must be filed. Remember, most professional corporations have requirements that must be met in terms of who can be a member of the board of directors, an officer, or a stockholder. Usually, they must be a licensed professional.
What is a professional service in California?
Services that constitute professional services are defined in the California Corporations Code Section 13401, which includes most healthcare professionals, including physical therapists and doctors. The bylaws may be for either a C corporation or an S corporation.
What Is a C Corporation?
The most common type of corporation is the C corporation, mainly because it's the default corporation type. Shareholders in a C corporation suffer from double taxation. Double taxation occurs when the business generates a profit and that profit is taxed at both the corporate and individual level.
How many stockholders can a C corporation have?
C corporations may have an unlimited number of stockholders. However, there's a maximum number of 35 stockholders for businesses that would like to be exempt from SEC filing requirements. Some other advantages to forming a C corporation include:
What is an operating agreement in an LLC?
A limited liability company (LLC) will refer to the bylaws as an Operating Agreement. Sample bylaws are usually included in the corporate kit of an LLC or corporation. There is no need to file the Operating Agreement or bylaws with the Secretary of State (SOS). Rather, the Operating Agreement and bylaws are only filed in the internal business records.
How to start an LLC in another state?
Pay all required fees and taxes. Comply with all state and federal regulations and obligations. Obtain the required local business license and respect local laws. If you need help with forming an LLC in another state, you can post your legal need on UpCounsel's marketplace.
Which is more likely to invest in a corporation or sole proprietorship?
Investors are much more likely to invest in a corporation rather than a sole proprietorship or partnership
What Is Different About Professional Corporations?
Professional corporations have more restrictions than traditional corporations.
What professions are required to be a professional corporation?
Professions that are required to be professional corporations include many of those that must have a state license, such as dentists, certified public accountants, doctors, veterinarians, lawyers, optometrists, marriage and family therapists, psychiatrists and psychologists.
Can you deduct disability insurance from a professional corporation?
In addition, by forming a professional corporation you may be able to deduct payments for benefit plans, such as disability or health plans or group term insurance.
Can a licensed person be a shareholder in a professional corporation?
Professional corporations are also subject to specific rules in the California Business and Professions Code. For example, only licensed persons can be shareholders of a professional corporation.
Do professional corporations have liability for malpractice?
While professional corporations do not provide liability protection for malpractice, you could have limited liability protection for claims not based on malpractice, such as a slip and fall accidents.
What is a professional corporation in California?
Code Sections 13400-13410). Unless an exception applies, California professional corporations can be formed only to provide professional services (including secondary services) within a single profession. A professional service is defined as any service that requires a license issued by a California state regulatory licensing board, state court, or similar agency. To provide services, all California professional corporations must have a currently effective certificate of registration issued by the governmental agency regulating their profession.
How many shareholders can a professional corporation have?
A professional corporation which has only two shareholders can have those two shareholders also appointed as the only two directors. Those two shareholders between them can fill the offices of president, vice president, secretary, and treasurer of the corporation.
How to file articles of incorporation in California?
There is a specific form for professional corporations on the California Secretary of State's website (go to the Business Entities page and click on the Forms, Samples & Fees link to find the form). Follow the instructions provided with the form for completing and filing your articles of incorporation. Your articles must include the corporate name, corporate purpose, corporate agent for service of process, corporate street address and mailing address, and number of stock shares. If an individual person is listed as the agent for service of process, the agent's California street address must be included, along with a California street address (not a post office box address) where documents may be served. The articles must contain a statement that the corporation is a professional corporation under California law.
How many directors are required to be a director in California?
Unless the corporation has less than three shareholders, California professional corporations must have at least three directors on their board.
What percentage of a corporation's shares are owned by other licensed professionals?
However, other licensed professionals may be officers, shareholders, directors, or professional employees in specified professions, as long as the total number of shares owned by these other licensed professionals is not more than 49 percent of the corporation's total shares. To see a complete list of licensed individuals who may own shares in any ...
Can a dentist be a limited liability company in California?
Unlike many other states, California does not allow professionals to form a limited liability company ...
Can a corporation have only one shareholder?
If you have only one shareholder, that shareholder can also be the only director and can also serve as the president and treasurer of the corporation. The other officers of the corporation in that situation need not be licensed professionals. A professional corporation which has only two shareholders can have those two shareholders also appointed ...
What prevents me from forming a Professional Corporation?
The most obvious answer here is if you do not have a license or are not legally permitted to practice that profession. However, this question can also extend into ownership of a company. Only certain licensed individuals can own or be shareholders of a professional corporation, even if that individual is not performing any of the professional services. Check out this story about a client we had who was not aware of these specific requirements for professional corporations:
What does "licensed" mean in the Chiropractic Act?
It means a person who is licensed under the provisions of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act to render the same professional services as will be rendered by the corporation of which they are, or intend to become, an officer, director, shareholder, or employee.
What is a professional service?
“Professional services” refers to any type of professional services that requires a certification, license, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act in order to be carried out legally.
What is the purpose of a professional corporation in California?
When you form a Professional Corporation in California, you must state which specific profession your company/corporation will be practicing in the Articles of Incorporation. This will be stated as the purpose, in the following language:#N#The purpose of the corporation is to engage in the profession of [Description of Profession, e.g. Dentistry] and any other lawful activities (other than the banking or trust company business) not prohibited to a corporation engaging in such profession by applicable laws and regulations. This corporation is a professional corporation within the meaning of California Corporations Code.#N#Part of the reason for this rule is that because each profession has different requirements and restrictions. There is no ‘General’ Professional Corporation. Your company would be formed as a corporation specifically connected to one profession.
What does it mean to be disqualified from a professional corporation?
A “Disqualified Person” means a licensed person who for any reason becomes legally disqualified to render those professional services.
Which boards do not require a certificate of registration?
Professionals that are not required to obtain a certificate of registration to offer their professional services when operating a corporation are those licensed by the following boards: Medical Board of California or any examining committee under the jurisdiction of the board; Osteopathic Medical Board of California;
Do you need a license to work in a chiropractic office?
Even if you only want to employ an individual in your professional corporation, that individual needs to be licensed (as mentioned in Division 2 of the Business and Profession Code, the Chiropractic Act, or the Osteopathic Act) and you need to meet the requirements to form a Professional Corporation for them to render professional services.
What Exactly Is a Professional Corporation?
Corporations are business entities that allow their owners to separate themselves from the company in terms of liability. If your business takes out a loan it can’t pay back, when you’re operating as a sole proprietor or are in a partnership, you would be personally responsible for the debt. Creating a separate S corporation or C corporation limits your personal liability.
What is the purpose of a PC?
The PC's only purpose is limited to providing professional service. You can’t run a secondary business, like a coffee shop in your lobby, for instance, without risking disqualification.
How long do you have to file an Articles of Incorporation?
You have 90 days from when you filed your Articles of Incorporation to submit your Statement of Information to the state. This simply provides them with your most up-to-date contact information and has to be submitted every year, even if nothing has changed.
Can a medical corporation have employees?
See Cal. Corp. Code § 13401.5. As previously mentioned, this does not mean that the corporation cannot have employees who are not licensed practitioners , such as administrative staff, for example.
Is a professional corporation the same as a regular corporation?
While Professional Corporations are similar in many ways to regular corporations, there are some key distinctions worth mentioning:
Do corporations pay taxes?
Corporations are also significant in terms of taxes. If you had been employed by someone else or were working in a sole proprietorship, you only had to pay your own personal income taxes. Corporations, however, have to first pay the corporate tax rate on income and then individuals also pay taxes on their own personal income. This double taxation burden can be circumvented by changing to an S Corp, which we will get into later.
Can a mistake in filing a California business license lead to rejection?
As you can see, there are quite a lot of steps we’ve mentioned and far more forms and licenses we have not. A single mistake in filing could lead to rejection from the California Secretary of State. An error or oversight in your corporate bylaws could be a costly mistake down the road.
