What this is: A handy little sheet that highlights the process of forming, as well as the pros and cons, of an entity type called a Professional Corporation.
What this means: State-by-state legal requirements for Professional Corporations vary significantly. As such, licensed professionals looking to incorporate should consider available entity types in accordance with their line of work, as well as the specific requirements for forming a Professional Corporation.
A Professional Corporation (PC) differs from a general business corporation in that it is specifically designed to provide professional services. Typically, it is formed by a group of individuals licensed in the same profession. State regulations determine whether a particular profession must operate as a PC or can use other entity structures, such as a business corporation, Limited Liability Company (LLC), partnership or Limited Liability Partnership (LLP).
In Texas, professional engineering services can be offered through a standard business corporation. Conversely, in New York, a corporation cannot provide engineering services unless it is a “grandfathered” general business corporation under Section 7209. Additionally, while a foreign business corporation authorized to practice engineering in its home state cannot operate in New York, a foreign PC may be allowed to do so.
In New York, engineering professionals can establish various entity types, including Professional Corporations, Design Professional Corporations and LLCs, provided that all shareholders, officers and directors are licensed engineering professionals.
You can learn more about this topic in our detailed article, The Professional Corporation: Is it the Right Entity Type for Your Business? or register for our webinar, Professional Corporations and LLCs: What They Are and How to Navigate Them.
Unless the state indicates otherwise, a Professional Corporation may generally only provide one professional service type. For instance, an engineering Professional Corporation cannot provide services outside of this profession even if it has professionals with additional non-engineering licenses. To learn more, read our article, The Professional Corporation: Is it the Right Entity Type for Your Business?
Twenty-one states now allow for the establishment of series LLCs, a unique structure that allows an LLC to create separate series that have separate members and managers, maintain separate assets and pursue separate business purposes and objectives from the LLC that created them (the master LLC) and other series of the LLC. Learn more about this topic by visiting our article, Qualification of Series LLCs to Do Business in Another State.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.