Starting a Professional Corporation in New York 2024: Ultimate Guide

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How to Start a Professional Corporation in New York

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

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

Start a Professional Corporation

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 New York 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 New York.

The primary purpose of New York 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, New York 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 New York.

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Who Can File Under Professional Corporation Laws

Under New York 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 New York, 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: New York 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 New York 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 New York 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 New York: A Guide

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

Step 1: Appointment of Resident Agent

The first step in forming a Professional Corporation is appointing Resident Agent in New York. 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 New York and be available during regular business hours.

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

Step 2: Choosing the Name of the Corporation

Selecting a name for your New York 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 New York 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 New York 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

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

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the New York State Department of Taxation and Finance, 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 New York Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in New York

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

  • State Laws and Regulations: To form a professional corporation in New York, it is crucial to comply with the state laws and regulations governing professional corporations. The New York Business 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 New York is to draft and file the Certificate of Incorporation with the New York 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 $125 for most professions. However, it is essential to check with the New York 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 New York. 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 New York 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 $20 mail.
  • Certificate of Incorporation: The Certificate of Incorporation is a critical document for forming a professional corporation in New York. 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 New York 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 New York may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the New York Secretary of State every Biennial report every two years of filing the Certificate of Incorporation. The filing fee for this form is $4.50.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Resident Agent Fee: Hiring of Resident 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 New York:

Federal income tax

A professional corporation in New York 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

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

Tax deductions and exemptions

A professional corporation in New York 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 New York

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

FAQs

What is a professional corporation in New York?
A professional corporation is a business formed by licensed professionals in New York, such as doctors, lawyers, and engineers, among others.
How do I know if I need to form a professional corporation in New York?
If you are a licensed professional and want to have a structure that provides personal asset protection, a professional corporation in New York is a good option.
What are the requirements to start a professional corporation in New York?
You will need to file legal paperwork, obtain a certificate of incorporation from the New York Secretary of State, draft bylaws, obtain a tax identification number and licenses for your profession, among other things.
What licenses do I need to start a professional corporation in New York?
Depending on your profession, you will need to obtain a license from the appropriate licensing board in New York State.
Can a single professional operate a professional corporation in New York?
Yes, a professional in New York can form a professional corporation as a sole shareholder.
Can out-of-state professionals form a professional corporation in New York?
Yes, out-of-state professionals can form a professional corporation in New York if they are licensed to practice in their profession there.
What is the minimum number of shareholders required to form a professional corporation in New York?
In New York, there is no minimum number of shareholders required to form a professional corporation.
What is the maximum number of shareholders allowed in a professional corporation in New York?
In New York, the maximum number of shareholders allowed in a professional corporation is usually around 75, depending on the profession.
Can non-professionals own shares in a professional corporation in New York?
No, only licensed professionals in New York can own shares in a professional corporation.
Is liability protection guaranteed in a professional corporation in New York?
Liability protection in a professional corporation in New York is not guaranteed and can depend on factors like negligence and malpractice.
Do I need to obtain any insurance when starting a professional corporation in New York?
It is recommended that professionals in New York obtain liability insurance to cover areas where LLC protections may not apply.
Can a bankruptcy or lawsuit affect the personal assets of shareholders in a professional corporation in New York?
Depending on the situation, a bankruptcy or lawsuit may be able to affect the personal assets of shareholders in a professional corporation in New York.
Who can serve as an officer in a professional corporation in New York?
Officers in a professional corporation in New York must be licensed professionals and shareholders.
Does a professional corporation in New York need to have a board of directors?
A professional corporation in New York may have a board of directors but it is not required by law.
How long does it take to form a professional corporation in New York?
The time it takes to form a professional corporation in New York can vary, however, the average processing time by the New York Secretary of State is around 2-3 weeks.
What expenses should I expect when forming a professional corporation in New York?
Fees will vary based on which professional role you occupy and include legal fees, filing fees and more business costs, depending on the corporation’s niche and mission.
Are there any tax advantages to forming a professional corporation in New York?
There may be lower tax rates, depending on the profession or location falls on the taxation spectrum in New York.
What documents should I keep up to date when operating a professional corporation in New York?
An up-to-date record of any indemnification coverage and succession plans, shareholders agreement and certificates must be maintainable.
How often should a professional corporation hold shareholder and director meetings in New York?
In New York, annual shareholder meetings and as-needed director meetings should be held.
Should I hire an attorney to help me start a professional corporation in New York?
Hiring an attorney, specialized in corporate law will help you efficiently and successful carry out your business desires according to state and federal regulations.
Do I need to file a separate corporate tax return for my professional corporation in New York?
Yes, a professional corporation in New York must file a separate tax return with the federal government based on its specific niche.
Can I have a Professional PLLC and a regular LLC with the same name operating in New York?
No, in New York if you have a name of a Professional LLC it has to continue under that name only along different forms for different sectors.
Can a professional corporation carry out activities outside the profession it was formed for in New York?
No, in New York, the activities of a professional corporation may only pertain the profession it is licensed for.
Can I change my professional corporation’s name in New York once it has been formed?
Yes, a professional corporation can generally change its name in New York under certain circumstances and amendments.
Can I have multiple professional corporations under my name in New York?
Yes, in New York licensed professional can belong to multiple corporations of their own but it should not breach any quality requirements.
Is there an annual franchise tax for professional corporations in New York?
Yes, professional corporations in New York are liable for an annual franchise tax based on the net income.
Are there differences between non-profit professional corporations and regular professional corporations in New York?
Yes, in New York, non-profit professional corporation tend to experience some taxation exceptions than normal for-profit corporate businesses.
Can anyone find out information regarding the owners and shareholders of a professional corporation in New York?
Yes, by State laws, any information regarding the owner and shareholders should be made available to the general public under the Department of State in the relevant states register.
Does a professional corporation need to file a biennial statement in New York?
Yes, biennial statements should be filed every two years by the professional corporations, it includes any changes seen and validates the corporation’s existence and truthful standings.
By the end of a certificate of sale is the professional corporation dispensed with?
No, when a professional corporation certificate expires the services might be stopped but to wind the business both both the Articles of Maintenance and dissolution documents needs to be presented to dissolve and begin the process of secluding it.

Also Read

How to Save Money While Forming New York Professional Corporation

One of the first things to consider when forming a professional corporation in New York is to thoroughly research and understand the legal requirements and regulations. By having a clear understanding of the legal framework, you can avoid unnecessary expenses and compliance issues down the line. This may involve consulting with legal professionals or utilizing online resources to gather information and guidance.

Additionally, when it comes to choosing the right business structure for your professional corporation, it is important to consider the costs associated with each option. While a professional corporation may offer certain tax benefits and liability protections, it may also come with higher maintenance and administration costs. By weighing the pros and cons of each business structure, you can determine which option best suits your financial goals and resources.

Furthermore, it is important to shop around and compare prices when it comes to hiring professionals such as accountants, lawyers, and consultants to assist with the formation process. By obtaining multiple quotes and negotiating fees, you can save significant amounts of money without compromising on the quality of services provided.

Another key factor in saving money while forming a professional corporation is to avoid unnecessary expenses and consider cost-effective alternatives. For example, instead of renting office space from the onset, you may consider starting out in a co-working space or working remotely to reduce overhead costs. Additionally, investing in technology and automation tools can help streamline processes and reduce the need for costly manpower.

Moreover, leveraging free resources and educational materials can be a great way to save money while forming a professional corporation. There are numerous online platforms and government websites that provide valuable information and guides on starting and managing a business. By taking advantage of these resources, you can gain insights and knowledge without the need to pay for expensive courses or consultants.

In conclusion, forming a professional corporation in New York does not have to break the bank. By being proactive, diligent, and cost-conscious, you can save money and ensure that your corporation is set up for success from the start. With careful planning and smart decision-making, you can navigate the complexities of forming a professional corporation while keeping your finances in check.

Conclusion

New York 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 New York.

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