California Professional Corporation
A Corporation that provides “Professional Services” must incorporate as a Professional Corporation.
A Professional corporation is a special type of corporation for business owners who work in specialized fields. In California, professional corporations are established under the Moscone-Knox Professional Corporation Act, California Corporations Code section 13400-13410. In California, professionals must form either a California professional corporation or a registered limited liability partnership. Unlike many other states, California does not allow professionals to form a limited liability company or professional limited liability company.
Types of Professional Services Industries
Professional Services usually consist of the following activities:
- Doctor of Medicine or Surgery
- Engineer of Medicine or Surgery
- General Professionals
- Massage Therapist
A California Professional corporation can only lawfully render professional services through employees who are licensed to perform such services by the State.
- The owner of the corporation usually requires a license for their profession.
- They are usually regulated by state in some way.
Selecting Name for your California Professional Corporation
Some states require an entity-specific designation in the corporate name, such as “PC” for a Professional Corporation.. (See Cal. Corp. Code § 13409 for name requirements.) It is important to check the name availability with the California Secretary of State. The name chosen for the professional corporation in California must also comply with any rules which regulate the service profession as well as any name requirements issued by the licensing agency for that profession.
Liability Protections of a Professional Corporation
Professionals who set their practice up as a California professional corporation are able to protect their personal assets against lawsuits brought against them through their business practice. Although setting up a California professional corporation does offer corporate owners protection against lawsuits, owners are not free from personal liability for malpractice from their own acts. The professional is protected from the malpractice of other owners within the company.
Professional Corporation Taxation Issues
A California professional corporation is generally taxed like a C-corporation, unless an S-Corp election has been made. In California, a personal service corporation that offer services in the fields of health, law, engineering, architecture, accounting, actuarial science, or consulting can make an S-Corp election. There are rules and restrictions, advantages and disadvantages when a California professional corporation elects to be treated as an S-Corp. Because of the tax implications, it is important to consult with a tax advisor before forming a professional corporation.
We STRONGLY recommend that you seek the advice of an attorney if you fall within the “Professional Services” statute. However, once you decide that you would like to form a Professional Corporation, we will gladly help you with your corporate filing.
A People’s Choice can save you hundreds of dollars by preparing your California professional corporation and other business organizational documents instead of an expensive attorney!