Professional Corporation
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.
What is a Professional Corporation?
Professional services typically include:
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Physicians or Doctors
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Attorneys or Law Firms
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Accounting Professionals or CPAs
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Architects
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And other Licensed Professionals
Professional Corporation Benefits
Limited Liability
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.)
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Dr. Gold, an employee and shareholder of “Docs R’ Us, A Professional Corporation”, is negligent in performing a surgery on his patient, “Susan Yoo.”
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Susan will most likely name “Dr. Gold,” “Docs ‘R Us, A Professional Corporation,” and anyone else she can reach.
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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.
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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.
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Docs ‘R’ Us, A Professional Corporation, will pay Susan yoo for her damages. Hopefully, the corporation’s insurance policy covers this type of incident.
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Dr. Oldman, a shareholder, has limited liabilty protection via the professional corporation. Susan Yoo cannot reach Dr. gold’s personal assets, home, savings, and so on.
Tax Advantages
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.