Professional Corporation
The Professional Corporations (PCs) are these entities of corporation for which many act of company make the special provision, regulating the use of the corporate form by licensed professionals such as attorneys, architects, engineers, accountants and doctors. A professional corporation is a corporation that is formed for the purpose of providing a professional service that by law a for-profit or nonprofit corporation is prohibited from rendering. A "professional service" means any type of service that requires, as a condition precedent to the rendering of the service, the obtaining of a license in the state.
The legal payments applying to the professional-companies differ typically from the important manners of those which apply to other companies. The professional orders, which can have a simple director or multiple directors, do not have the means usually this person or people the same degree of limitation of responsibility as for the ordinary companies of businesses. The Professional-companies often exist as an element of larger, more complicated, legal entity
Why Professional Corporation form?
A professional corporation (PC) formed with the intention of engages in one of the learned professions, as the law, as medicine, or as the architecture. Traditionally, the professional corporations (PC) were forbidden of engages in such professions because they lacked the human, the necessary personal qualifications to follow them. In the recent years nevertheless most of the states promulgated a professional corporation (PC) or an association act that allows the professional persons to practice in the form of business provided that all shareholders are members of the profession.
Professional Corporation - Point to Consider
- There is a significant limitation on the personal responsibility in a corporation.
- While the corporation cannot protect a professional against their own negligence, it protects them against the negligence of an associate.
- Professional Corporation is a useful securing of data to occupation wrongdoing insurance.
- More expensive to create than a partnership or only proprietary right.
- Paper work can become costly to owners.
- All incorporators must belong to the same occupation.
How is a Professional Corporation or PLLC formed?
To register Professional Corporation the formation documents, the articles of incorporation for a PC, 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.
To form professional corporation may be by filing a Certificate of Incorporation pursuant of the Business Corporation Law, includes any practice as an attorney and counselor-at-law, or as a licensed physician, and those occupations designated in Title Education Law (For a listing of professional services).
To start professional corporation a Certificate of Good Standing from the appropriate Division or a Certificate of Authority under seal from the State Department of Education, Division of Professional Licensing Services, must be submitted with the Certificate of Incorporation.
What are the advantages of a Professional Corporation?
A major advantage of a Professional Corporation is the limited liability the corporate entity affords its shareholders. Typically, shareholders are not legally responsible for the debts and obligation of the corporation, unless the shareholder has specifically agreed to assume personal responsibility for the corporate debts. This 'limited liability' benefit is generally limited by State statute, as to Professional Corporations (PC), in order to prevent a 'licensed professional' from avoiding liability for 'malpractice'.
Additional advantages:
- Life of a company is not dependent on its members. A company possesses the mark of the unlimited life. If an owner dies, or wishes to sell its interest, becomes the company further and exist to construct business.
- Retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation.
- The possession of a corporation is more easily transferred.
- A Professional Corporation may benefit from more 'tax deductions' than a 'sole proprietorship', partnership, or LLC.
- A Professional Corporation can increase 'asset protection' benefits for the 'licensed professional'.
What are the disadvantages of a Professional Corporation?
The primary disadvantage to a professional corporation is the potential for "double taxation". This occurs when the 'Earnings and Profits' of a professional corporation are distributed to shareholders as 'Dividends'. These 'Earnings and Profits' were taxed first as 'Income' earned by the corporation, and again taxed as 'Income' to the shareholder when received as 'Dividends'. The potential for "double taxation" can be minimized, however, since the corporation is permitted to deduct a very broad range of business expenses.
Additional disadvantages:
- Complexity and expense of forming a corporation.
- Extensive record keeping requirements.
- Operating a corporation across state lines requires the corporation to qualify to do business in the other state.
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