Individuals who provide a professional service can also benefit from forming a Professional corporation. Where a business provides a professional service, most states have special filing requirements when incorporating.
Professional services typically include:
A Professional Corporation can shield a professional service provider (doctors, attorneys, accountants, etc...) from liability for the operations of the business. However, in most cases, the individual who provided the service may NOT be shielded by the professional corporation.Example: Docs 'R Us, A Professional Corporation (P.C.)
Dr. Gold, an employee and shareholder of “Docs R' Us, A Professional Corporation”, is negligent in performing a surgery on his patient, “Susan Yoo.” Susan will most likely name “Dr. Gold,” “Docs 'R Us, A Professional Corporation,” and anyone else she can reach. The senior physician and founder of the medical corporation, Dr. Oldman, was not involved with Susan Yoo or her surgery, but he is named in the lawsuit as well since he is a shareholder...just like Dr. Gold.
Dr. Gold, the shareholder who was the doctor performing the surgery, may be held PERSONALLY LIABLE to Susan Yoo. The existence of the corporation DOES NOT help him here.
Docs 'R' Us, A Professional Corporation, will pay Susan yoo for her damages. Hopefully, the corporation's insurance policy covers this type of incident.
Dr. Oldman, a shareholder, has limited liabilty protection via the professional corporation. Susan Yoo cannot reach Dr. gold's personal assets, home, savings, etc...
The tax advantages for a Professional Corporation are the same as the advantages afforded to a C Corporation or S Corporation. In fact, a Professional Corporation may elect S Corporation status where appropriate.
Caveat: Corporate filing requirements can vary and may be more or less expansive depending on your state. Laws governing professional services and Corporations are often quite complex. We strongly urge you to consult with an attorney before making the decision to form a Professional corporation. Forming a corporation is a Major decision that will have an impact on your business.
Once you are properly equipped with the legal advice and information specific to your individual circumstances, Taxrole can assist you and / or your attorney in preparing and filing the necessary documents with the state office.