Professional Corporations


As a rule, the “professional” in Professional Corporations refers to a business where all of the owners hold the same professional license and offer a licensed service. Doctors, lawyers, accountants, and engineers are all examples of professions who operate in this fashion. Depending on your state, you may be able to use any of the three incorporated structures (C or S Corporation, LLC, or LP) as professional businesses.

Professional structures are specifically designed for this purpose. Ownership in these structures is usually restricted only to those professionals who are properly licensed. For example, if you use a professional corporation to form a law firm, then each shareholder of the corporation would need to be a licensed attorney. However, there are a number of states that permit non-licensed parties or spouses to also hold stock or interests in a professional entity.

The liability rules for these structures are also different. Generally speaking, professionals remain liable for their acts and deeds, no matter what type of business structure they operate through. If your attorney or CPA does something wrong and causes you to be sued or to lose money, you have a right of action against that attorney or CPA, as well as the firm he or she belongs to. Professional structures allow these individuals to work together as a group while having some personal liability protection from each other. In other words, if one doctor is sued for malpractice, it remains a personal suit against that doctor and against the medical practice. The other doctors cannot be personally named to the lawsuit.

In many states, forming a professional corporation means you’ll need the pre-approval of your state licensing board before your corporation’s paperwork will be filed. In other states, you are required to first incorporate your business structure with the secretary of state’s office, and then register it again with your local state licensing board. The best way to find out if you need to operate through a professional corporation is to contact your licensing board and ask them what their local requirements are.

States are inconsistent on the list of professionals required to incorporate as a professional corporation. Generally speaking, if your profession requires you to be licensed and you need to belong to a state or federal regulatory body, you may need to operate through a professional corporation.

Here are some of the most common occupations that must be operated through professional corporations. Again, contact your local licensing board if you have any questions about your own profession.

  • Accountants
  • Engineers
  • Health care professionals, such as audiologists, dentists, nurses, opticians, optometrists, pharmacists, physical therapists, physicians, and speech pathologists
  • Lawyers
  • Psychologists
  • Social workers
  • Veterinarians

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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