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What is a professional corporation or professional limited liability company?

The purpose of a professional corporation and a professional limited liability company is to provide professional services. State law determines what services may be deemed professional; therefore, professional services vary from state to state. Usually, any profession requiring a license, such as doctors, lawyers and accountants, also requires the formation of a professional corporation or professional limited liability company for the purpose of providing these services to the public.

How is a professional corporation or professional limited liability company (LLC) formed?

Articles of Incorporation for a professional corporation and Articles of Organization for a professional limited liability company are similar to standard Articles of Incorporation/Organization. The difference is that before these documents can be filed with the proper state agencies (usually the Secretary of State), the proper state licensing body must approve the formation documents. Also, it is usually required that a licensed professional's signature and license number appear on the formation documents. Because of these requirements, the filing time for forming a professional corporation or professional LLC is longer than that of the standard corporation or LLC.

How is a professional corporation or professional limited liability company (LLC) taxed?

Typically, a professional corporation or professional limited liability company is taxed in the same manner as a standard corporation or LLC. The tax status of a professional corporation is usually that of a C-corporation, unless the corporation specially elects itself to have an S-corporation tax status. Please be advised that not all professional corporations may take advantage of graduated corporate federal income tax rates. Generally, corporations that provide services in the fields including, but not limited to, of health, law, engineering, architecture and accounting may be eligible to be classified as "qualified personal service corporations." Being identified as such provides the benefit of paying a flat federal income tax rate of 35 percent. Please use the services of an attorney or accountant to determine whether your corporation may be classified as such a corporation.

Professional corporations are allowed to file for S-corporation status, which means the corporation qualifies for pass-through taxation. A C-corporation is subject to double taxation, where a tax is levied on the corporate profits before it is distributed to its shareholders, who then pay a second income tax on the distributed dividends. With an S-corporation status, a professional corporation or professional LLC completes a tax return, but passes through its profit or loss dividends to the shareholders, who then pay individual income taxes on these dividends.

Who can be a shareholder or director in a professional corporation?

Many states require a corporation to create and to maintain a board of directors and shareholders. For a professional corporation, however, the state may restrict who may be a director of or shareholder in a professional corporation. For instance, a state may require a certain percentage of such groups in a corporation to be licensed practitioners of the specific professional service the corporation is formed to provide.

Why choose IncFilings.com?

The benefit of choosing IncFilings.com for your business incorporation needs is simple: we want you and your business to succeed. To emphasize your business success as our top priority, we offer 24-hour online access to your account and order status, a trained and knowledgeable designated customer service staff and a time-tested company reliability and commitment to providing quality products and services in a timely manner.

To find out more about this service or to place an order

Please contact our customer support team from 9:30 AM - 6:00 PM Eastern Standard Time at 877-345-3267 or 718-359-4019. You may also email your inquiry or order request to service@incfilings.com.