Starting a Professional Corporation in Pennsylvania 2024: Ultimate Guide

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

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

The primary purpose of Pennsylvania 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, Pennsylvania 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 Pennsylvania.

Recommended: Hire a formation service to make your dream a reality! Choose the best for a seamless professional corporation setup in Pennsylvania. We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Who Can File Under Professional Corporation Laws

Under Pennsylvania 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 Pennsylvania, the following professionals can typically form a professional corporation:

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.

Launching a professional corporation in Pennsylvania? Get in touch with the best LLC formation services in Pennsylvania for expert guidance and support tailored to your unique venture. Let their skilled assistance pave the way for seamlessly setting up your professional corporation, so you can focus on growing your business!

Structure of a Professional Corporation

• Shareholders: Pennsylvania 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 Pennsylvania 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 Pennsylvania 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 Pennsylvania: A Guide

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

Step 1: Appointment of Registered Agent

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

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

Step 2: Choosing the Name of the Corporation

Selecting a name for your Pennsylvania 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.

Recommended: Lock down your ultimate business name confidently with the name reservation by a reliable business formation service. Effortlessly scope out name options with just a few clicks! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

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 Pennsylvania 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 Pennsylvania 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.

Need trustworthy guidance on business licenses, permits, and compliance? Look no further than the best business attorneys in Pennsylvania who are adept at navigating your specific industry’s legal ins and outs. With their friendly support, you can confidently and seamlessly manage your business requirements!

Step 8: Filing of Statement of Information

Pennsylvania professional corporations must file an annual report with the Pennsylvania 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 Pennsylvania Department 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 Pennsylvania Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Pennsylvania

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

• State Laws and Regulations: To form a professional corporation in Pennsylvania, it is crucial to comply with the state laws and regulations governing professional corporations. The Pennsylvania Consolidated Statutes Title 15 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 Pennsylvania is to draft and file the Articles of Incorporation with the Pennsylvania 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 $125 for most professions. However, it is essential to check with the Pennsylvania 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 Pennsylvania. 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 Pennsylvania 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 $70 online and $70 mail.
• Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Pennsylvania. 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 Pennsylvania 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 Pennsylvania may involve other costs, such as:
  • Annual Report: professional corporations must file an initial Statement of Information with the Pennsylvania Secretary of State every Anniversary month of the corporation of filing the Articles of Incorporation. The filing fee for this form is $70.
  • 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 Pennsylvania:

Federal income tax

A professional corporation in Pennsylvania 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

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

Tax deductions and exemptions

A professional corporation in Pennsylvania 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 Pennsylvania

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

FAQs

Also Read

• Start a Professional Corporation in Alabama
• Start a Professional Corporation in Alaska
• Start a Professional Corporation in Arizona
• Start a Professional Corporation in Arkansas
• Start a Professional Corporation in California
• Start a Professional Corporation in Colorado
• Start a Professional Corporation in Connecticut
• Start a Professional Corporation in DC
• Start a Professional Corporation in Delaware
• Start a Professional Corporation in Florida
• Start a Professional Corporation in Georgia
• Start a Professional Corporation in Hawaii
• Start a Professional Corporation in Idaho
• Start a Professional Corporation in Illinois
• Start a Professional Corporation in Indiana
• Start a Professional Corporation in Iowa
• Start a Professional Corporation in Kansas
• Start a Professional Corporation in Kentucky
• Start a Professional Corporation in Louisiana
• Start a Professional Corporation in Maine
• Start a Professional Corporation in Maryland
• Start a Professional Corporation in Massachusetts
• Start a Professional Corporation in Michigan
• Start a Professional Corporation in Minnesota
• Start a Professional Corporation in Mississippi
• Start a Professional Corporation in Missouri
• Start a Professional Corporation in Montana
• Start a Professional Corporation in Nebraska
• Start a Professional Corporation in Nevada
• Start a Professional Corporation in New Hampshire
• Start a Professional Corporation in New Jersey
• Start a Professional Corporation in New Mexico
• Start a Professional Corporation in New York
• Start a Professional Corporation in North Carolina
• Start a Professional Corporation in North Dakota
• Start a Professional Corporation in Ohio
• Start a Professional Corporation in Oklahoma
• Start a Professional Corporation in Oregon
• Start a Professional Corporation in Pennsylvania
• Start a Professional Corporation in Rhode Island
• Start a Professional Corporation in South Carolina
• Start a Professional Corporation in South Dakota
• Start a Professional Corporation in Tennessee
• Start a Professional Corporation in Texas
• Start a Professional Corporation in Utah
• Start a Professional Corporation in Vermont
• Start a Professional Corporation in Virginia
• Start a Professional Corporation in Washington
• Start a Professional Corporation in West Virginia
• Start a Professional Corporation in Wisconsin
• Start a Professional Corporation in Wyoming

How to Save Money While Forming Pennsylvania Professional Corporation

One of the first steps to saving money when forming a professional corporation in Pennsylvania is to thoroughly research and understand the different types of corporations available. By selecting the right type of corporation for your business, you can potentially save money on taxes and other expenses in the long run. Consulting with a professional to determine whether a C corporation, S corporation, or professional corporation is the best fit for your business can help you make an informed decision and avoid costly mistakes down the road.

Another key way to save money when forming a professional corporation in Pennsylvania is to handle as much of the paperwork and filing process yourself as possible. While hiring professional services may seem like the easier option, it can be quite costly. By taking the time to research the necessary forms and requirements, and filling them out correctly, you can save on fees associated with hiring a professional service.

Additionally, when it comes to registering your professional corporation with the state of Pennsylvania, opting for a DIY approach can also save you money. While using an online service or attorney to handle the registration process may seem convenient, the fees associated with these services can add up quickly. By taking the time to register your professional corporation through the Pennsylvania Department of State website and following the step-by-step instructions provided, you can save on unnecessary expenses.

When it comes to naming your professional corporation, opting for a simple and unique name can help you save money on trademark searches and registrations. Avoiding common names or names that are already in use by other businesses can prevent costly legal disputes and save you time and money in the long run.

Another way to save money when forming a professional corporation in Pennsylvania is to shop around for essential services such as accounting or legal assistance. By comparing quotes from different providers and negotiating on fees, you can potentially save a significant amount of money on professional services. Additionally, consider leveraging online resources such as templates and guides to help you navigate the formation process on your own and avoid unnecessary costs.

In conclusion, forming a professional corporation in Pennsylvania does not have to break the bank. By researching the different types of corporations available, handling paperwork and registration yourself, choosing a simple and unique name, and shopping around for essential services, you can effectively save money during the formation process. With careful planning and strategic decision-making, you can set yourself up for success without overspending on unnecessary expenses.

Conclusion

Pennsylvania 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 Pennsylvania.