Professional Corporations – What, Why, and How?

Professional corporations are just another type of corporation. But what is different about it? Why have one? How do you form one?

What is a professional corporation?

A professional corporation ("PC") is a corporation that is available to practitioners of certain professions.

In California, professional corporations are available to accountants, attorneys, dentists, physicians, and veterinarians. See Cal. Corp. Code section 13401, Cal. Bus. & Prof. Code section 5150 (accountants), section 6160 (attorneys), section 1800 (dentists), section 2406 (physicians), section 4910 (veterinarians).

In Texas, professional corporations are available to accountants, attorneys, architects, dentists, and veterinarians. See Tex. Bus. Orgs. section 301.003, especially subsections (2), (3), and (8).

Why should I form a professional corporation?

If you are a licensed practitioner of one of the professions listed above, a professional corporation might be your only option for incorporation. For example, in California, attorneys who want the benefits of limited liability can only form PCs or LLPs.

How do I form a professional corporation?

Similar to a general corporation, you file your articles or certificate, and you hold your initial meeting of the board.

Is there anything else I need to know?

Yes. You will need to check with your licensing authority for any further requirements, such as for registration. For example, in California, you need to request approval for your professional corporation from your profession's licensing authority. That means if you're an attorney, you need to fill out a handful of forms (available here) and send them to the State Bar of California (Texas and some other states have no such requirement).

How is a professional corporation different from a regular corporation?

Professional corporations, unlike general corporations, are limited to engaging in their licensed business. So a legal professional corporation can only engage in the practice of law. Its directors, officers, and shareholders usually must be licensed members of that profession.