Examples:

• • Dr. Patel, a surgeon, formed a PC to protect his personal assets from potential malpractice claims against his practice.
  • Attorney Lopez chose a PC structure so she could eventually sell shares to her associates and expand her firm.
  • The engineering firm Graham & Associates, PC has outlived its original founders thanks to its perpetual existence.
  • BW Accounting, PC elected S-corp taxation to avoid the double taxation of corporate income.

How to Proceed:

• • Confirm your profession is eligible to form a PC in California per the Moscone-Knox Professional Corporations Act.
  • Consult an attorney and tax advisor to determine if a PC is the most advantageous entity type for your practice.
  • Decide if your PC will be taxed as a C-corp or S-corp and plan accordingly.
  • Choose an available name that meets California’s PC naming requirements (see Section 3 below).

FAQs:

• • What professions are eligible to form a PC in California? In CA, a diverse array of state-licensed professionals can structure their practices as professional corporations. This includes medical providers like physicians, surgeons, dentists, podiatrists, and psychologists; legal professionals such as attorneys and shorthand reporters; accounting and financial services providers including CPAs and professional fiduciaries; and various other state-regulated practitioners like optometrists, veterinarians, acupuncturists, audiologists, chiropractors, naturopathic doctors, nurses, occupational therapists, physical therapists, physician assistants, and speech-language pathologists. However, some licensed occupations – notably architects, engineers, and land surveyors – are permitted but not mandated to form PCs. The full roster of professions eligible for PC status is spelled out in the California Corporations Code. If your occupation isn’t explicitly listed there, consult an attorney well-versed in California PC laws to determine if that corporate structure is a viable option for your practice.
  • Can I be the sole shareholder of my PC? Yes, California allows single-shareholder PCs, though multi-owner PCs are also permitted.
  • Do professional corporations operate identically to regular corporations? No, a PC is a special type of corporation only for licensed professionals and has some differing requirements.
  • Does a PC protect me from malpractice claims? While a PC can shield your personal assets from the PC’s business debts and some liability, it typically won’t protect you from your own professional malpractice. Maintain robust malpractice insurance.

Examples:

• • Dr. Lee and Dr. Garcia, licensed physicians, could name their PC something like “Lee Garcia Medical Group, A Professional Corporation”.
  • Smith & Associates, CPA, PC received approval from the CA Board of Accountancy for their firm’s name.
  • Werner Psychological Services, PC had to pick a new name after finding there was already a PLLC with their original desired name on record.

How to Proceed:

• • Ensure all shareholders, directors and officers are properly licensed in California for the PC’s profession.
  • Research the CA Secretary of State’s business entity database to confirm your desired PC name isn’t already taken.
  • Draft your proposed Articles of Incorporation, including the PC name and professional services to be rendered.
  • Get any name pre-approvals required by your specific profession’s licensing board prior to filing.

FAQs:

• • What initials can I use in my PC name? You can typically use “PC”, “P.C.”, “Professional Corporation”, “Prof. Corp.” or “Prof. Corporation” at the end of your name.
  • Does California allow “single purpose” professional corporations? Yes, your Articles of Incorporation must state the sole professional service the PC will provide.
  • Can I use the same name as my out-of-state PC? Not if it’s already used by another CA business. Your foreign PC would need a distinct name to register in CA.
  • Are there restrictions on who can own PC shares? Yes, typically only licensed members of the profession can be shareholders, with minor exceptions for other types of professionals.

Examples:

• • Drs. Patel & Lee’s Articles stated their PC would “engage in the profession of medicine” and authorized 1,000 shares of common stock.
  • The incorporators of LMN Engineering, PC declared under penalty of perjury that they were licensed engineers in California.
  • Attorney Cohen paid an extra $350 for 24-hour rush filing to get her PC Articles processed ASAP so she could start her practice.

How to Proceed:

• • Draft Articles including all provisions required by the CA Professional Corporations Act and Corporations Code.
  • Have all initial directors sign the Articles, consenting to serve, and all licensed incorporators sign the declaration.
  • Submit an original and at least one copy of your Articles to the SOS with the requisite filing fees.
  • Calendar your estimated processing time, but wait to receive confirmation of filing before transacting business.

FAQs:

• • Who can be an incorporator? One or moreindividuals, at least 18 years old. Directors and officers need not be incorporators.
  • Do I need to name all initial directors in the Articles? No, the Statement of Information, which is due 90 days after incorporation, must include names and addresses for all directors, who must typically be licensed in the PC’s profession.

Examples:

• • All the directors and shareholders of ABC Law Firm, PC met at a local conference room to hold their first official meeting as a professional corporation.
  • Smith & Jones, DDS, PC issued 10,000 shares to Dr. Smith and 5,000 to Dr. Jones, retaining 5,000 in the corporate treasury for future shareholders.
  • The Board of Eng Architects, PC elected Ms. Johnson as CEO and President, Mr. Eng as Secretary and Mr. Patel as CFO and Treasurer.

How to Proceed:

• • Consult an attorney to ensure the corporation’s bylaws are properly drafted.
  • Convene all founding directors, either face-to-face or virtually, to handle essential corporate startup matters.
  • Document all stock issuances and have shareholders pay par value at minimum for their shares.
  • Nominate and elect officers, delegating titles and authority as outlined in your bylaws.
  • Have your corporate secretary prepare minutes of the meeting and written consents for all directors to sign, then store with your other corporate records.

FAQs:

• • How many directors must a PC have? Most have 3-5 directors but CA allows a single director if the PC has just 1 shareholder, or 2 directors if there are only 2 shareholders.
  • What are typical officer roles? CA requires a President, Secretary and Treasurer at minimum but other offices may be established in your bylaws. The same person can hold multiple offices.
  • Can minutes and consents be signed electronically? Yes, California allows e-signatures on corporate records as long as proper protocols are followed.
  • How should PC records be stored? You must keep minutes, consents, stock ledgers and financial records at your principal office. Backup records securely off-site as well.

Examples:

• • Dr. Sanchez, the sole shareholder of Sanchez Dental Corporation, made sure her DDS license was current before seeing patients.
  • ABC Physical Therapy, PC applied for an EIN to open a bank account and put their facility lease in the company’s name.

How to Proceed:

• • Have each practitioner verify the status of their individual professional license. The PC itself may also need a separate permit or registration.
  • Conduct a fictitious business name search at the county recorder’s office and file the statement in each county where you’ll be doing business under that name.
  • Visit your city’s business license department and check with county planning/zoning to determine which local permits your PC needs.
  • Apply for an EIN. Open your PC bank account using your filed Articles, EIN, and director/officer info.
  • If your PC will routinely sell taxable goods or services, you must register electronically with the California Department of Tax and Fee Administration. If just providing professional services, you likely won’t need a seller’s permit.

FAQs:

• • What happens if a PC owner’s individual license expires or is revoked? The PC has a short grace period to fix the issue or remove that person before the corporation itself is suspended and prohibited from rendering services.
  • Can a PC have multiple fictitious business names? Yes, you can register as many FBNs as you need for the different brands or trade names your PC operates under.
  • Does my PC need a seller’s permit if I’m just providing services? Typically no, seller’s permits are for companies selling tangible goods. But certain services may be taxable, so check with CDTFA.
  • Will I need separate state tax IDs too? Usually your EIN is sufficient, but in some cases you may need a separate CA employer ID for state payroll taxes.

Examples:

• • Lee & Park Accountancy, PC made sure to hold their annual shareholders’ meeting each February to elect directors.
  • Martinez Veterinary Corp PC filed their first SI-550 Statement of Information 60 days after incorporating, beating the 90-day deadline.

How to Proceed:

• • Create an annual compliance calendar with key filing deadlines, meeting dates and renewal reminders.
  • Use your filed Articles, Bylaws and state PC laws to determine annual meeting requirements. Hire counsel to prepare shareholder agreements.
  • Build regular license verification into your operational protocols and assist practitioners with renewals if needed.
  • Monitor your Articles, Bylaws and key contracts and prepare amendments for a shareholder or director vote as your PC evolves.
  • Work with an attorney and tax advisor to ensure ongoing legal and tax compliance, including payroll, sales and income tax filings.

FAQs:

• • What happens if I miss an SI-550 deadline? The state assesses a $250 late penalty. Failing to submit your Statement of Information on time can also lead to the suspension of your professional corporation by the state.
  • How do I dissolve my PC? Ensure compliance with any buy-sell agreements. File a Certificate of Dissolution, prepare corporate records, and notify all shareholders, creditors and relevant agencies. Settle final taxes and legal obligations.
  • Are there ongoing tax filing requirements for PCs? Yes, your PC will need to file federal and CA income tax returns, and if you have employees, payroll tax returns too. Sales tax filings may also be required.

Examples:

• • By electing S-Corp status, the CPA firm Johnson & Co, PC saved thousands on self-employment taxes for its working shareholders.
  • The prestigious “PC” after the law firm’s name made it appear larger and more established to prospective clients.

How to Proceed:

• • Maintain corporate formalities to preserve the liability shield – hold meetings, keep minutes, properly capitalize the PC, etc.
  • Consult a CPA on the tax pros and cons of C-Corp vs. S-Corp status for your PC and owners’ individual situations.
  • Put a succession plan in your Bylaws or shareholder agreements so your practice can continue if tragedy strikes.
  • Gauge interest among colleagues and qualified investors if you need to raise funds to grow your PC practice.
  • Update marketing materials to properly reflect your PC designation and reap the reputational benefits of incorporation.

FAQs:

• • Are there disadvantages to forming a PC? More formalities, paperwork and start-up costs compared to some other entities. But often outweighed by tax & liability benefits.
  • How much will I save on taxes as a PC? It depends on your profession, income, payroll and S-Corp vs C-Corp status. Ask a CPA for estimates.
  • Will forming a PC protect me from personal malpractice liability? No, you’re still personally liable for your own professional negligence. Maintain robust malpractice insurance.

Questions:

• • 1. Who is eligible to form a professional corporation in California?
    • A) Any person providing professional services
    • B) Only certain licensed professionals like doctors, lawyers, accountants, etc.
    • C) Anyone with a graduate degree
    • D) Non-profit organizations providing charitable services
  • 2. How many directors must a PC have at minimum?
    • A) 1
    • B) 2
    • C) 3
    • D) 5
  • 3. What suffix must be included in a California PC’s name?
    • A) Chartered
    • B) Limited
    • C) Professional Association
    • D) Professional Corporation or similar
  • 4. How often must a California professional corporation file Statements of Information with the CA Secretary of State?
    • A) Within 90 days of formation, then every 1 year
    • B) Every 6 months
    • C) Every 3 years
    • D) Only once after filing the initial Articles of Incorporation
  • 5. Which of the following is NOT a common benefit of forming a PC?
    • A) Limited personal liability protection
    • B) Tax savings opportunities
    • C) Perpetual existence of the company
    • D) Complete avoidance of malpractice liability

Answers:

• • 1. B) Only certain licensed professionals like doctors, lawyers, accountants, etc. are eligible to form a PC.
  • 2. A) 1 – California allows single shareholder/single director PCs.
  • 3. D) “Professional Corporation” or “Prof. Corp.” or similar must be included in the PC’s name.
  • 4. A) PCs must file an SI-550 within 90 days of forming, then every year thereafter.
  • 5. D) While PCs provide some liability protection, they do not shield owners from personal malpractice liability.