Sacramento Professional Corporations
Professional corporations are corporations reserved for professionals. They are variations of standard corporate forms. Professional corporations are created through state laws to permit individuals to practice under a professional form.
Some states require professional corporations for particular individuals. California, for example, does not allow lawyers to form a limited liability company. Hence, a lawyer must form a professional corporation. The most common businesses that must form a professional corporation are dental, law, and medical. Here is a nonexclusive list of businesses that may incorporate as professional corporations:
Some states require professional corporations for particular individuals. California, for example, does not allow lawyers to form a limited liability company. Hence, a lawyer must form a professional corporation. The most common businesses that must form a professional corporation are dental, law, and medical. Here is a nonexclusive list of businesses that may incorporate as professional corporations:
- Accounting (Bus & P C §§5150-5158);
- Acupuncture (Bus & P C §§4975-4979);
- Chiropractic (Bus & P C §§1050-1058);
- Dentistry (Bus & P C §§1701-1701.5, 1800-1808);
- Law (Bus & P C §§6127.5, 6160-6172);
- Medicine (Bus & P C §2402);
- Pharmacy (Bus & P C §§4150-4156);
- Physical therapy (Bus & P C §§2690-2696); and,
- Physician assistants (Bus & P C §§3540-3546).
Advantages for Professional Corporations
Professional corporations, like other corporations, offer several advantages.
- Limited liability. This is typical with most corporations and business structures. Forming a professional corporation will limit the liability of the shareholders.
- Current income tax deductions through retirement plans and 401(k) plans.
- Health and Life Insurance - Tax Deductions
- Disability Insurance - Tax Deductions
- Dependent Care - Tax Deductions
Disadvantages for Professional Corporations
- Generally, only licensed professionals may be shareholders. For example, a professional dentist corporation can only have licensed dentists as shareholders.
- The estate of a deceased shareholder may not be shareholders. Therefore, the professional corporation must buy back the shares at the time of a shareholder's death.
- Limited Liability is limited. The personal assets of an employee may be subject to malpractice. Moreover, the assets of the corporation are still subject to corporate obligations. (Bus & P C §6160; CC §2343(3)).
- The internal revenue service may classify the professional corporation as a "personal service corporation" and affix a flat 35% tax rate to the corporation's taxable income.
- The professional corporation must pay unemployment taxes on the wages of a shareholder-employee.
Contact Sacramento's Business Lawyers
Forming a Sacramento professional corporation requires several internal governing documents. There are also licensing requirements for professionals. After forming the professional corporation, it is still necessary to maintain the legal protections and keep up with corporate formalities. There are lots of potentially relevant internal documents like bylaws, meeting minutes, stock purchase agreements, and employment agreements. Feel free to contact our Sacramento business lawyers to set up an initial consultation to discuss forming professional corporation.
Call Us: (916) 669-8400
*Professional corporations are governed by the Moscone-Knox Professional Corporation Act (Corp C §§13400-13410). The information provided in this post does not constitute legal advice or opinion. The information is for guidance purposes only. Individual situations vary and you should contact us for a consultation.