Starting a Professional Corporation in Delaware 2024: Ultimate Guide

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How to Start a Professional Corporation in Delaware

Licensed professional? Level up your business with Delaware professional corporation! Enjoy unique benefits like Delaware LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Delaware with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Delaware, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Delaware is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Delaware.

The primary purpose of Delaware Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Delaware professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Delaware.

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Who Can File Under Professional Corporation Laws

Under Delaware Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Delaware, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: Delaware Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in Delaware are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of Delaware Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Delaware: A Guide

Here is a detailed guide to starting a professional corporation in Delaware that you should follow.

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in Delaware. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Delaware and be available during regular business hours.

We compiled the list of the best registered agent services in Delaware to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your Delaware Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Delaware Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Delaware Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

Delaware professional corporations must file an annual report with the Delaware Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Delaware Division of Revenue, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Delaware Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Delaware

Here are some of the most common fees when starting a professional corporation in Delaware.

  • State Laws and Regulations: To form a professional corporation in Delaware, it is crucial to comply with the state laws and regulations governing professional corporations. The Delaware General Corporation Law and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Delaware is to draft and file the Certificate of Incorporation with the Delaware Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Certificate of Incorporation requires a filing fee currently $89 for most professions. However, it is essential to check with the Delaware Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Delaware. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Delaware Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Certificate of Incorporation requires a reservation fee of Not available online and $75 mail.
  • Certificate of Incorporation: The Certificate of Incorporation is a critical document for forming a professional corporation in Delaware. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Certificate of Incorporation must be filed with the Delaware Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Delaware may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Delaware Secretary of State every In Delaware, the annual report filing time is not applicable, as it is not a mandatory requirement. of filing the Certificate of Incorporation. The filing fee for this form is $0 because it is not mandatory.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $300, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Delaware:

Federal income tax

A professional corporation in Delaware is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Delaware Professional Corporation is also subject to state taxes, such as the Delaware franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Delaware.

Tax deductions and exemptions

A professional corporation in Delaware can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Delaware

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in Delaware avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a Professional Corporation?
A Professional Corporation (PC) is a legal entity created for the purpose of providing professional services such as accounting, legal, medical, or engineering services.
Why start a Professional Corporation in Delaware?
Delaware is a popular choice for forming a Professional Corporation because of its supportive business environment, favorable tax laws, and flexible corporate laws.
What are the requirements to form a Professional Corporation in Delaware?
The requirements to form a Professional Corporation in Delaware include filing Articles of Incorporation with the Delaware Secretary of State, obtaining a Certificate of Incorporation, and electing directors and officers.
Can I form a Professional Corporation without being a licensed professional?
No, in order to form a Professional Corporation in Delaware, you must have at least one licensed professional as a shareholder.
What types of professionals can form a Professional Corporation in Delaware?
Delaware allows professionals in many fields to form a Professional Corporation, including lawyers, accountants, engineers, doctors, and architects.
How many shareholders are required to form a Professional Corporation in Delaware?
Delaware requires at least one shareholder for a Professional Corporation.
Can a Professional Corporation have more than one type of professional service?
Yes, a Professional Corporation in Delaware can provide more than one type of professional service.
What is the liability protection for owners of a Professional Corporation in Delaware?
PC owners typically receive limited liability protection, meaning they are not held personally liable for business debts and obligations.
Do I need a registered agent to form a Professional Corporation in Delaware?
Yes, Delaware requires all corporations, including Professional Corporations, to have a registered agent located in Delaware.
What are the taxes for a Professional Corporation in Delaware?
Delaware’s corporate income tax rate is 8.7%. However, many companies choose to incorporate in Delaware because of the state’s tax-friendly corporate laws.
What other state fees must be paid to form a Professional Corporation in Delaware?
In addition to filing fees, Delaware requires an annual franchise tax that is calculated based on the value of the authorized stock of the corporation.
Can non-US residents form a Professional Corporation in Delaware?
Yes, non-US residents can form a Professional Corporation in Delaware.
Does Delaware require Professional Corporations to file an annual report?
Yes, Delaware requires Professional Corporations to file an annual report and to pay an annual franchise tax.
What happens if I don’t file my annual report on time?
Failure to file an annual report can result in a late fee, penalty, or revocation of the corporation’s status.
Can I be the only director of my Professional Corporation in Delaware?
Yes, you can be the only director of your Professional Corporation in Delaware.
What are the qualifications to be a director of a Professional Corporation in Delaware?
Delaware does not require any specific qualifications to be a director.
Can a Professional Corporation own property in Delaware?
Yes, a Professional Corporation can own property in Delaware.
Can a Professional Corporation have a partnership structure?
No, Professional Corporations cannot have a partnership structure in Delaware.
Can a Professional Corporation issue stock?
Yes, a Professional Corporation can issue stock.
How much does it cost to form a Professional Corporation in Delaware?
The filing fee for Articles of Incorporation is $200, and the annual franchise tax can range from $175 to $180,000 depending on the value of the corporation’s authorized stock.
What is the timeline for forming a Professional Corporation in Delaware?
The timeline for forming a Professional Corporation in Delaware is typically 5-7 days from the date of filing.
Is it necessary to have a physical address in Delaware to form a Professional Corporation?
No, you do not need to have a physical address in Delaware to form a Professional Corporation, but you will need a registered agent located in Delaware.
Can I change the name of my Professional Corporation in Delaware?
Yes, you can change the name of your Professional Corporation by filing Articles of Amendment with the Delaware Secretary of State.
Can I dissolve my Professional Corporation after forming it in Delaware?
Yes, you can dissolve your Professional Corporation by filing a Certificate of Dissolution with the Delaware Secretary of State.
Who is responsible for maintaining the compliance of a Professional Corporation in Delaware?
The officers and directors are responsible for the compliance of a Professional Corporation in Delaware.
Do I need to have articles of association to form a Professional Corporation in Delaware?
You need to have Articles of Incorporation, which fulfill the same purpose as articles of association.
Can a Professional Corporation operate in states other than Delaware?
Yes, a Professional Corporation can operate in other states, but may need to file for permission to do so.
Will I need to renew my Certificate of Incorporation periodically with the state of Delaware?
No, your Certificate of Incorporation does not require regular renewal, though annual reports must be made.
How long can a Professional Corporation exist in Delaware?
A Professional Corporation can exist in Delaware indefinitely without restructuring or absorbing by handling well followed state procedures and requirements.
What is a professional corporation in Delaware?
A professional corporation in Delaware is a business structure that allows professionals such as lawyers, accountants, and doctors to set up a corporation for their practice.
What are the benefits of starting a professional corporation in Delaware?
Some of the benefits of starting a professional corporation in Delaware include personal asset protection, tax savings, and increased credibility.
How do I start a professional corporation in Delaware?
To start a professional corporation in Delaware, you must file the necessary paperwork with the state and obtain a certificate of incorporation.
Do I need to be licensed to start a professional corporation in Delaware?
Yes, you need to be licensed in Delaware to start a professional corporation for your practice.
Can a non-resident start a professional corporation in Delaware?
Yes, a non-resident can start a professional corporation in Delaware as long as they meet the state’s requirements.
Is there a minimum capital requirement to start a professional corporation in Delaware?
No, there is no minimum capital requirement to start a professional corporation in Delaware.
How long does it take to set up a professional corporation in Delaware?
It typically takes two weeks to set up a professional corporation in Delaware.
Is Delaware a good state to start a professional corporation?
Yes, Delaware is known for its friendly business laws and tax benefits, making it an excellent state to start a professional corporation.
What types of professionals can start a professional corporation in Delaware?
Any licensed professional such as lawyers, accountants, and doctors can start a professional corporation in Delaware.
What taxes do I need to pay if I start a professional corporation in Delaware?
You will need to pay state and federal taxes on your income as a professional corporation in Delaware.
Can a professional corporation practice in any state it wants?
No, a professional corporation must be licensed to practice in any state other than its state of incorporation.
Can I sell shares of my professional corporation in Delaware?
No, you cannot sell shares of your professional corporation in Delaware as it is a closed corporation.
Can I operate multiple professional corporations in Delaware?
Yes, you can operate multiple professional corporations in Delaware if you meet the state’s requirements and have the necessary licenses.
Are non-professional employees allowed to work for a professional corporation in Delaware?
Yes, non-professional employees are allowed to work for a professional corporation in Delaware.
Can I operate my professional corporation from my home in Delaware?
Yes, you can operate your professional corporation from your home in Delaware as long as you meet any local zoning requirements.
What are the filing fees for setting up a professional corporation in Delaware?
The filing fees for setting up a professional corporation in Delaware depend on the type of corporation and the amount of capital.
How often do I need to file a report for my Delaware professional corporation?
You need to file an annual report for your Delaware professional corporation.
Do I need to appoint a registered agent for my Delaware professional corporation?
Yes, you need to appoint a registered agent for your Delaware professional corporation.
What is a registered agent, and why do I need to appoint one in Delaware?
A registered agent in Delaware is a person or company that receives legal notices and other important correspondence on behalf of your corporation.
How do I find a registered agent in Delaware?
You can search for a registered agent in Delaware through the state’s website or use a third-party service.
Do I need to have a physical office in Delaware to start a professional corporation?
No, you do not need to have a physical office in Delaware to start a professional corporation, but you are required to have a registered agent with a physical address in the state.
How do I obtain a Delaware business license for my professional corporation?
You can obtain a Delaware business license through the state’s online portal or by filing paperwork with the state.
How do I dissolve my Delaware professional corporation?
You can dissolve your Delaware professional corporation by filing paperwork with the state.
What happens to my assets if I dissolve my Delaware professional corporation?
If you dissolve your Delaware professional corporation, your assets are distributed to your shareholders.
Can I change the name of my Delaware professional corporation?
Yes, you can change the name of your Delaware professional corporation by filing paperwork with the state.
What type of insurance do I need for my Delaware professional corporation?
You need to have professional liability insurance for your Delaware professional corporation.
Can I have a professional and personal bank account for my Delaware professional corporation?
No, you need to have a separate bank account for your Delaware professional corporation.
Is there a requirement for having a board of directors for my Delaware professional corporation?
No, there is no requirement for having a board of directors for a Delaware professional corporation.
Where can I find more information about starting a professional corporation in Delaware?
You can find more information about starting a professional corporation in Delaware on the state’s website or by consulting with a business attorney.

Also Read

How to Save Money While Forming Delaware Professional Corporation

The first step in saving money while forming a Delaware professional corporation is to do your research. There are many resources available online that can guide you through the process and help you understand the requirements and regulations. By familiarizing yourself with the process beforehand, you can avoid unnecessary expenses and delays that can come from making mistakes or not understanding the steps involved.

Another way to save money is to consider using an online incorporation service. These services offer packages that include all the necessary documents and filings for forming a professional corporation in Delaware. While using an online service may not be suitable for all businesses, it can be a cost-effective option for those looking to save time and money on legal fees. These services often streamline the process, making it easier for individuals to handle the requirements of forming a corporation without the need for expensive legal counsel.

It is also essential to consider the type of professional corporation you are forming and whether you need additional services. Some professionals may require specialized practices tailored to their particular industry, such as medical professionals or financial advisors. If you fall into this category, it may be wise to consult with a provider early on to ensure that you understand the specifics and costs associated with setting up a professional corporation in Delaware.

When it comes to filing fees and initial costs, it is crucial to set a realistic budget. While there are standard fees associated with forming a professional corporation in Delaware, additional costs can quickly add up if you are not careful. By planning ahead and understanding the expenses involved, you can avoid any surprises down the road. It may also be possible to negotiate payment terms with service providers to spread out costs over time, making it easier to manage your cash flow and stay within budget.

One final cost-saving tip is to file your documents online through the Delaware Division of Corporations. This process is generally more affordable than hiring a third party to handle filings on your behalf and can save you money in the long run. By taking advantage of this option, you can also ensure that your paperwork is processed quickly and accurately, avoiding any unnecessary delays or complications that can arise from submitting documents via traditional mail.

In conclusion, there are several ways to save money while forming a Delaware professional corporation. By doing your research, considering online incorporation services, understanding the specific needs of your industry, budgeting appropriately, and filing documents online, you can streamline the process and keep costs down. With careful planning and consideration, you can set up a professional corporation in Delaware that meets your needs without breaking the bank.

Conclusion

Delaware Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Delaware.

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