What is a Professional Corporation (PC)?

Certain professions — such as doctors, lawyers, accountants, and architects — must follow special rules when forming a business. In many states, licensed professionals cannot form a standard LLC for the services they provide and instead must form a professional entity, such as a Professional Limited Liability Company (PLLC) or a Professional Corporation (PC). However, some states, including California and Maryland, restrict the use of PLLCs for many licensed professions, making a PC the more common or required structure.

How a Professional Corporation (PC) Works

A PC works much like a standard corporation, but it must follow additional rules related to ownership, licensing, and management. Like other corporations, a PC is a separate legal entity from its owners, who are called shareholders. This means the business can:

• Sign contracts
• Own property
• Open bank accounts
• Operate under its own name

In most states, all shareholders (and often directors and officers) must hold active licenses in the profession the PC provides.

A PC does not protect a professional from liability for their own malpractice. However, it generally protects shareholders from personal responsibility for the malpractice or negligence of other professionals in the company.

When Is a PC Required?

A PC may be required when state law requires licensed professionals to form a professional entity to offer services. In some states, professionals can choose between a Professional Corporation (PC) and a Professional Limited Liability Company (PLLC). In others, a PC may be the primary or required option.

This commonly happens when:

• The business provides services that require a state-issued license.
• State law restricts licensed professionals from forming standard LLCs for professional services.
• The profession is subject to Corporate Practice of Medicine (CPOM) rules, which limit ownership and control to licensed professionals.

For example, California prohibits licensed professionals from forming LLCs for professional services (PLLCs), making the PC the standard structure for medical and legal practices in that state.

In states where professionals have options, a PC may still be chosen because of its corporate structure, tax treatment, or governance preferences.

PC Tax Treatment

A Professional Corporation is taxed as a C Corporation (C-Corp) by default. This means the corporation pays taxes on its profits, and shareholders may also pay taxes on dividends. This is often called “double taxation.”

Many small professional practices choose to elect S Corporation (S-Corp) status, if eligible, to avoid double taxation. S-Corp status allows profits to pass through to the owners’ personal tax returns.

PC vs. Professional Limited Liability Company (PLLC)

Both PCs and Professional Limited Liability Companies (PLLCs) are business structures created for licensed professionals, but the right choice depends largely on state law and professional licensing rules. Some states allow professionals to choose between a PLLC and a PC, while others require one specific structure. Other factors, such as management flexibility, tax treatment, and compliance requirements, may also affect which option is best.

For a detailed comparison of how these two structures differ, refer to PC vs. PLLC: What’s the difference?

Which Professions Can Form a PC?

A Professional Corporation (PC) is available to certain licensed professionals. These are professions that require a state-issued license to legally provide services.

Common professions that may be required or allowed to form a PC include:

• Doctors and other healthcare providers.
• Attorneys (lawyers).
• Accountants and Certified Public Accountants (CPAs).
• Architects and engineers.
• Dentists.
• Veterinarians.
• Mental health professionals, such as therapists and counselors.

In many states, a PC can be formed by one owner or multiple owners. A single-shareholder PC allows a solo professional to operate under a corporate structure while receiving the same legal protections as larger firms.

Whether a professional must form a PC, may form one, or can instead use another structure (such as a PLLC) depends on state law and licensing board rules. These requirements vary by profession and location, so it’s important to review your state’s rules before choosing a business structure.

How to Form a Professional Corporation (PC)?

Forming a Professional Corporation involves similar steps to forming a standard corporation, along with additional licensing requirements.

While the exact process varies by state, it typically includes the following steps:

Step 1: Confirm Professional Eligibility

Before forming a PC, confirm that:

• Your profession qualifies for a Professional Corporation.
• All required owners hold active licenses.
• Your state requires or allows a PC for your profession.

Step 2: Choose a Compliant Business Name

Most states require the name to include:

• “PC”
• “Professional Corporation”
• Or, in some states like Florida, “P.A.” (Professional Association)

Some states also require approval from the licensing board before filing.

Step 3: File Formation Documents

To form a PC, you must file Articles of Incorporation with the Secretary of State.

Many states require:

• Professional license numbers.
• Certification from a licensing board.
• Confirmation that all owners are properly licensed.

Step 4: Maintain Ongoing Compliance

After formation, a PC must meet both corporate and professional requirements.

These often include:

• Keeping licenses active and in good standing.
• Filing annual state reports.
• Filing required documents with a professional licensing board.
• Holding annual shareholder meetings.
• Keeping corporate bylaws and meeting minutes.

PCs usually have stricter administrative requirements than LLCs.

Determining whether a PC is the right fit for your practice—or the only legal option in your state—can be a complex task. If you are unsure about your eligibility, a Legal Pro can guide you through each step, ensuring your professional practice starts on a solid and compliant foundation.

  

Key Takeaways A Professional Corporation (PC) is a corporate structure for licensed professionals. Some states, such as California, require PCs because they do not allow PLLCs for many professions. PCs protect owners from liability for the malpractice of other shareholders, but not their own. PCs are taxed as C-Corporations by default, though many elect S-Corp status. Ongoing compliance requirements are generally stricter than those for LLCs. Rules vary by state and profession, so reviewing local requirements is essential.