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Professional Corporation

Some states require that business owners in certain professions form their companies as a Professional Corporation (also known as a “Professional Service Corporation”).

What is a Professional Corporation?

Note that a Professional Corporation does not shield the professional who commits malpractice from personal liability. Therefore, a one-person PC offers no personal liability protection to its sole shareholder.

In a multi-member PC, however, the personal assets of the other shareholders may be protected while the professional who committed the act which caused the liability to the PC may be held personally liable. By obtaining professional liability insurance, individual shareholders can help protect themselves.

In states where this structure exists, the Secretary of State office (or similar agency) will maintain a list of the occupations it applies to—typically doctors, veterinarians, lawyers, accountants, and other professions that run higher liability risks. A professional corporation must usually identify a single purpose—to practice a specific profession—as explained in its Articles of Incorporation.

A separate entity from its owners, a professional corporation is considered a C Corp for tax purposes unless it elects for treatment as an S Corporation.

When might operating as a Professional Corporation be preferable?

Existing Clients

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Manager Managed

  1. Popular where 1 or more of the owners will act as “Passive” investors
  2. Some owners may be “Passive” while others may be designated as “Managers”
  3. Some owners may be designated as Managers, some “non-owners” may be designated as managers, or any combination thereof may be designated.

Member Managed

  1. The most popular structure for LLCs with 1 or more owners.
  2. ALL Owners have control over the daily operations of the business.
  3. The owners have authority to bind the LLC by signing for a loan, negotiating and executing contracts, and managing other daily operations of the business.