Starting a Professional Corporation in DC 2024: Ultimate Guide

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How to Start a Professional Corporation in DC

Licensed professional? Level up your business with DC professional corporation! Enjoy unique benefits like DC 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 DC with your professional corporation today!

This guide will review the requirements for starting a professional corporation in DC, 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 DC 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 DC.

The primary purpose of DC 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, DC 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 DC.

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Who Can File Under Professional Corporation Laws

Under DC 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 DC, 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: DC 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 DC 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 DC 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 DC: A Guide

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

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in DC. 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 DC and be available during regular business hours.

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

Step 2: Choosing the Name of the Corporation

Selecting a name for your DC 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 DC 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 DC 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

DC professional corporations must file an annual report with the DC 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 Office of Tax and 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 DC Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in DC

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

  • State Laws and Regulations: To form a professional corporation in DC, it is crucial to comply with the state laws and regulations governing professional corporations. The District of Columbia Code Title 29 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 DC is to draft and file the Articles of Incorporation with the DC Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $220 for most professions. However, it is essential to check with the DC 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 DC. 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 DC Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of $50 online and Not available mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in DC. 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 Articles of Incorporation must be filed with the DC 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 DC may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the DC Secretary of State every April 1st of filing the Articles of Incorporation. The filing fee for this form is $150.
    • 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 – $200, 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 DC:

Federal income tax

A professional corporation in DC 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

DC Professional Corporation is also subject to state taxes, such as the DC 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 DC.

Tax deductions and exemptions

A professional corporation in DC 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 DC

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 DC avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a Professional Corporation (PC) and can I form one in DC?
A Professional Corporation (PC) is a business structure that allows professionals, such as doctors or lawyers, to operate as a corporation and offers certain legal protections. Yes, you can form a PC in DC.
Do I need to be licensed in DC in order to start a PC there?
Yes, you must hold a professional license from the District of Columbia Board of Professional Engineering, DC Board of Accountancy, DC Board of Architecture, or other appropriate licensing authority to form a PC in DC.
What are the benefits of forming a PC in DC as opposed to other states?
DC has no corporate income tax for corporations operating solely in DC. It also ranks second among states and territories for ease of starting a business, according to a study by the Center for International and Private Enterprise.
How do I start a PC in DC?
You must file Articles of Incorporation with the DC Department of Consumer and Regulatory Affairs, which requires information about the owners, the company’s structure, and its location.
How much does it cost to file Articles of Incorporation in DC?
As of August 1, 2021, the fee is $220, plus $100 for expedited processing.
Are there any annual fees I need to pay to keep my PC registered in DC?
Yes, you must file a biennial report with the Department of Consumer and Regulatory Affairs and pay a fee. As of August 1, 2021, the fee is $600 for each year the report is due.
Can I be the only owner of a DC PC?
Yes, you can be the sole owner and shareholder of a DC PC.
Do all owners of the PC need to be licensed professionals in DC?
At least one owner or shareholder must be a licensed professional in the field of business conducted by the PC.
Can a corporation or LLC own a PC in DC?
No, only licensed professionals can own a DC PC.
How long does it take to form a PC in DC?
Normal processing time for Articles of Incorporation is approximately 10 business days. Expedited service is available with a processing time of approximately 48 hours, but at an additional cost.
How can I check if a proposed name for my PC is available in DC?
You can check name availability using the website of the Department of Consumer and Regulatory Affairs, or by searching the business entities database of the DC Corporations Division.
Do I need to appoint a registered agent for my PC in DC?
Yes, your PC must appoint and continuously maintain a registered agent in the District of Columbia upon filing Articles of Incorporation.
Can I have my own office as registered agent?
Yes, the registered office must be a physical street address in the District of Columbia and cannot be a post office box.
What is a Director in a DC PC?
A Director is someone who oversees the business and affairs of the PC as elected or otherwise designated in the corporation’s bylaws.
Can my DC PC start business operations immediately after filing the Articles of Incorporation?
Yes, you can start business operations as soon as the Articles of Incorporation have been filed and accepted by the Department of Consumer and Regulatory Affairs.
Must a DC PC adopt bylaws?
Yes, a DC PC must adopt bylaws.
Can I change the name of my DC PC?
Yes, you can change the name of a DC PC by filing a Certificate of Amendment, along with a fee.
Do I need to file for a foreign registration if my business operates in multiple states?
Yes, if a PC created in another state operates within the District, it must register as a foreign corporation in the District.
How do I dissolve a DC PC?
A shareholder must move to dissolve the DC PC by amending the articles of incorporation to provide a date for the peaceful conclusion of the business affairs.
How long does it take to dissolve a DC PC?
Generally, it takes around 10 business days for DC PC with no business activities to complete its dissolution process.
What is a Statement of Information?
A Statement of Information is a report containing the registered agent, directors, location of offices, and the title, email and mailing address of all officers.
Do I need to file Statement of Information in DC?
Yes, a statement of information is required for all domestic corporations, and foreign corporations who are registered in the District of Columbia, that issue stock.
When is Statement of information due in DC?
Statement of Information is due biennially, on or before April 1 of all even-numbered years, and must be filed between January 1 and April 1.
What is Certificate of Authority?
If a corporation was established out-of-state but wants to do business in DC, it must file a Certificate of Authority to legally transact company business in the state.
Where do I get a Certificate of Authority application in DC?
The DCRA Corporations Division provides forms for domestic corporations, as well as foreign corporations seeking to receive a Certificate of Authority to transact business in the District.
How long does it take to get the Certificate of Authority in DC?
Depending on whether the application is submitted expeditedly or normally, it generally takes 10 business days to get the certificate of authority approval if filed non-expeditedly in DC.
Is DC a community-property state?
No, DC is not a community-property state.
Does DC allow close corporations?
Yes, DC allows Close Corporations.
What is Close Corporation?
A close corporation is a corporation that has usually fewer than 50 shareholders, enters agreements to protect fair shareholder activity balances, is highly confidential, and is not held to as many formalities as with larger corporations.
Do DC have tax benefits for small businesses?
Yes, DC allows small business tax benefits.

Also Read

How to Save Money While Forming Dc Professional Corporation

One of the first steps to saving money when starting a professional corporation is to do your research. Understanding the requirements and regulations for forming a professional corporation in DC can help you avoid unnecessary expenses. By carefully reviewing the necessary paperwork and procedures, you can ensure that you are only paying for what you need, rather than getting bogged down in costly and time-consuming mistakes.

Another important way to save money when forming a professional corporation in DC is to shop around for affordable legal services. While it may be tempting to hire the first lawyer you come across, taking the time to compare rates and services can result in considerable savings. Look for attorneys who specialize in business law and have experience helping professionals set up corporations. Many lawyers offer flat rates for incorporation services, which can help you budget and avoid any unexpected costs down the line.

In addition to finding a cost-effective attorney, you can also save money by taking advantage of online resources and self-help tools. Platforms like LegalZoom and Rocket Lawyer offer low-cost options for forming a professional corporation, providing templates and guidance for navigating the process on your own. While hiring a lawyer is always a good idea for complex legal matters, utilizing these resources can help you save money on initial paperwork and filing fees.

Another way to cut costs when forming a professional corporation in DC is to consider whether you truly need a professional corporation, or if there are other business structures that may be more cost-effective. For some professionals, a limited liability company (LLC) or partnership may better suit their needs and budget. By working with a financial advisor or accountant to analyze your business goals and financial situation, you can determine the most suitable structure for your business that will also save you money in the long run.

Finally, remember to take advantage of any tax deductions or incentives available to businesses in DC. By keeping meticulous records of your expenses related to forming your professional corporation, you may be able to deduct certain costs from your taxes. Additionally, DC offers a range of incentives for small businesses, such as tax credits or grants, that can help offset the costs of starting a new venture.

In conclusion, forming a professional corporation in DC does not have to break the bank. By carefully researching your options, finding a cost-effective attorney, using online resources, considering alternative business structures, and taking advantage of tax incentives, you can save money while setting up your professional corporation and pave the way for a successful and financially stable business.

Conclusion

DC 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 DC.

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