A Professional Corporation, often abbreviated as P.C. or PC, is a corporation formed by licensed professionals to provide professional services. Professional corporations are commonly used by professionals such as attorneys, accountants, physicians, dentists, architects, engineers, and other individuals whose services require a professional license.
A professional corporation is generally structured and operated similarly to a standard corporation and may, depending on applicable tax elections and eligibility, be taxed as either a C corporation or an S corporation. However, a professional corporation is subject to additional rules because it is formed for the purpose of providing licensed professional services.
One important distinction is liability. A professional corporation generally provides limited liability protection for ordinary business debts and obligations of the entity, similar to a standard corporation. However, it generally does not protect a licensed professional from personal liability for their own malpractice, negligence, or professional misconduct. In many states, a professional corporation may help protect one licensed professional from personal liability for the malpractice or negligence of another licensed professional within the same company, although the specific scope of protection varies by state.
Most states allow licensed professionals to form professional corporations, but the requirements vary. Depending on the state and profession, the shareholders, directors, and officers may need to be licensed in the same profession or otherwise approved under the applicable professional licensing rules. Some states also restrict who may own shares in a professional corporation and may limit ownership to licensed individuals or other authorized professional entities.
Professional corporations are typically required to identify themselves as professional entities by using a professional corporate designator in the company name, such as “P.C.”, “PC”, “P.A.”, “PA”, “Professional Corporation,” or “Professional Association.” The permitted designators vary by state. Some states may also prohibit a professional corporation from using standard corporate indicators such as “Inc.”, “Corp.”, or “Ltd.”, while other states may allow them.
In addition to filing formation documents with the appropriate state filing office, some states require approval, consent, or certification from the professional licensing board or regulatory agency before the professional corporation may be formed. In other cases, the entity may need to file with the state first and then separately register with, or obtain approval from, the applicable licensing authority before providing professional services.
Professional corporation requirements may depend on several factors, including:
- The state of formation;
- The profession being practiced;
- The licensing status of the owners, officers, and directors;
- The proposed company name;
- Whether prior approval or consent is required from a licensing board;
- Whether the entity will be taxed as a C corporation or elect S corporation status; and
- Ongoing professional licensing, registration, and reporting obligations.
Because professional corporation laws and licensing-board requirements vary by jurisdiction and profession, professionals should confirm the applicable requirements before forming the entity or conducting business in another state.
