Starting a Professional Corporation in Virginia 2024: Ultimate Guide

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How to Start a Professional Corporation in Virginia

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

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

The primary purpose of Virginia 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, Virginia 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 Virginia.

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Who Can File Under Professional Corporation Laws

Under Virginia 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 Virginia, 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: Virginia 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 Virginia 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 Virginia 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 Virginia: A Guide

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

Step 1: Appointment of Registered Agent

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

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Step 2: Choosing the Name of the Corporation

Selecting a name for your Virginia 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 Virginia 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 Virginia 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

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

Fees Associated with Professional Corporation in Virginia

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

  • State Laws and Regulations: To form a professional corporation in Virginia, it is crucial to comply with the state laws and regulations governing professional corporations. The Virginia Code Title 13.1 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 Virginia is to draft and file the Articles of Incorporation with the Virginia 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 $75 for most professions. However, it is essential to check with the Virginia 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 Virginia. 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 Virginia 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 $10 online and $10 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Virginia. 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 Virginia 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 Virginia may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Virginia Secretary of State every End of the corporation’s fiscal year of filing the Articles of Incorporation. The filing fee for this form is $50.
    • 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 – $150, 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 Virginia:

Federal income tax

A professional corporation in Virginia 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

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

Tax deductions and exemptions

A professional corporation in Virginia 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 Virginia

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 Virginia 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 is a type of corporation formed by professionals, such as doctors, lawyers, and accountants, to provide services in their respective areas.
How do I start a Professional Corporation in Virginia?
To start a Professional Corporation in Virginia, you should first file articles of incorporation with the State Corporation Commission.
What information do I need to include in my articles of incorporation?
In your articles of incorporation, you will need to include the names of all the shareholders in the Professional Corporation, the business name and address, and the type of services the corporation will provide.
How many shareholders do I need to start a Professional Corporation in Virginia?
In Virginia, a Professional Corporation can have one or more shareholders.
Can I form a Professional Corporation with people who are not licensed professionals?
No, only licensed professionals can form a Professional Corporation.
What licensing requirements do I need to meet to form a Professional Corporation in Virginia?
Each professional forming the corporation must hold a valid and active license in their respective profession in Virginia.
Do I need a lawyer to start a Professional Corporation in Virginia?
No, you do not need a lawyer to start a Professional Corporation, but it is recommended to seek legal advice.
What is the first step to obtain a license to operate my Professional Corporation?
You need to register your corporation with the Virginia Department of Professional and Occupational Regulation.
How can I check if my preferred business name is available in Virginia?
You can check the availability of your business name on the State Corporation Commission website.
Can I operate my Professional Corporation under a different name than my own name?
Yes, you can operate your Professional Corporation under a trade name, but you will need to register the name with the State Corporation Commission.
Can I form a multi-state Professional Corporation?
You can only form a Professional Corporation in the state where you or your shareholders are licensed to practice.
What is the corporate income tax rate in Virginia?
The corporate income tax rate in Virginia is 6%.
What other taxes do I need to pay as a Professional Corporation in Virginia?
As a Professional Corporation in Virginia, you may also need to pay taxes on personal property, real estate, and sales.
Do I need any permits or licenses from the state to operate my Professional Corporation?
This will depend on the type of service you provide. Some professions require a state-issued license to operate.
Can my Professional Corporation do business in other states?
Yes, but each state has its own requirements for foreign corporations doing business in their state.
Do I need to have a physical office for my Professional Corporation in Virginia?
No, but it is recommended to have an office location or mailing address for your corporation.
Do I need to hold an initial meeting for my Professional Corporation?
Yes, but it can be waived under certain circumstances.
What documents should I keep for my Professional Corporation in Virginia?
You should keep a copy of your articles of incorporation, bylaws, annual reports, and meeting minutes.
How often do I need to file an annual report for my Professional Corporation?
You need to file an annual report every year by the last day of your corporate anniversary month.
What happens if I don’t file an annual report on time?
Your corporation may be administratively dissolved, and you will need to file for reinstatement.
Can I change the type of Professional Corporation I have registered in Virginia?
Yes, but you will need to file articles of amendment with the State Corporation Commission.
Can I convert my existing sole proprietorship into a Professional Corporation?
Yes, but you will need to file articles of incorporation with the State Corporation Commission and obtain new licenses.
Can I change the name of my Professional Corporation after it’s been registered?
Yes, you can do so by filing articles of amendment with the State Corporation Commission.
Can my Virginia Professional Corporation be owned by another corporation or entity?
No, only licensed professionals can own a Professional Corporation.
How do I dissolve my Professional Corporation in Virginia?
To dissolve your Professional Corporation, you will need to file articles of dissolution with the State Corporation Commission.
Does Virginia have any training requirements for Professional Corporation shareholders?
Virginia does not have specific training requirements, but each profession may have its own continuing education requirements.
How long does it take to register a Professional Corporation in Virginia?
The registration process can take up to 2 weeks, depending on the complexity of your application.
Do I need to have liability insurance for my Professional Corporation in Virginia?
It is recommended to have liability insurance as a Professional Corporation, but it is not required by Virginia law.
Can I register a non-profit Professional Corporation in Virginia?
No, Professional Corporations cannot be non-profit entities in Virginia.
What is a professional corporation in Virginia?
A professional corporation in Virginia is a business entity formed for the purpose of providing certain professional services that require licensure in the state.
Can anyone form a professional corporation in Virginia?
No, only licensed professionals in certain fields, such as doctors, lawyers, and accountants, can form a professional corporation in Virginia.
What type of professionals can form a professional corporation in Virginia?
Dentists, veterinarians, architects, engineers, registered nurses, psychologists, and others can form a professional corporation in Virginia.
What are the benefits of forming a professional corporation in Virginia?
Some benefits of forming a professional corporation in Virginia include personal liability protection, tax benefits, and increased professional status.
How do I form a professional corporation in Virginia?
To form a professional corporation in Virginia, you must file articles of incorporation with the State Corporation Commission and obtain any necessary business licenses.
What information do I need to include in my professional corporation’s articles of incorporation in Virginia?
Your articles of incorporation in Virginia must include your professional corporation’s name, purpose, professional services provided, and the names of your initial shareholders.
Do I need a lawyer to form a professional corporation in Virginia?
No, you can form a professional corporation in Virginia without a lawyer, but seeking legal advice is recommended to ensure compliance with state laws.
Can I form a professional corporation in Virginia if I am licensed in another state?
Yes, as long as you obtain a license to provide professional services in Virginia, you can form a professional corporation in Virginia.
Is there a limit to the number of shareholders allowed in a Virginia professional corporation?
No, Virginia does not have a limit on the number of shareholders allowed in a professional corporation.
Do Virginia professional corporations require a board of directors?
Virginia professional corporations are not required to have a board of directors.
Can I form a Virginia professional corporation as a sole proprietor?
No, Virginia requires at least two individuals to form a professional corporation.
What is a registered agent in Virginia?
A registered agent in Virginia is a designated person or entity authorized to accept legal documents on behalf of a business.
Do Virginia professional corporations need a registered agent?
Yes, Virginia law requires a professional corporation to have a registered agent located in Virginia.
Can I be my own registered agent for my Virginia professional corporation?
Yes, Virginia allows a professional corporation’s shareholder, officer, or employee to be the registered agent.
Can I change my Virginia professional corporation’s registered agent?
Yes, Virginia professional corporations can change their registered agent by filing a statement of change with the State Corporation Commission.
How often do Virginia professional corporations need to file annual reports?
Virginia professional corporations must file annual reports with the State Corporation Commission each year by the last day of their anniversary month.
What information is required in Virginia professional corporations’ annual reports?
Virginia professional corporations must provide their name, registered agent’s name and address, principal office address, and list of directors and officers in their annual reports.
What happens if I don’t file my Virginia professional corporation’s annual report on time?
If you don’t file your Virginia professional corporation’s annual report on time, your corporation may be administratively dissolved.
How do I obtain a business license for my Virginia professional corporation?
Virginia professional corporations must obtain business licenses from the locality where they will operate.
What taxes do Virginia professional corporations need to pay?
Virginia professional corporations may be subject to state income tax, unemployment tax, sales and use tax, and other taxes and fees.
Can Virginia professional corporations be exempt from taxes?
Virginia professional corporations may be eligible for certain tax exemptions, such as income tax exemptions for some medical practices.
What happens if my Virginia professional corporation is sued?
If your Virginia professional corporation is sued, it is typically liable for any damages awarded.
Will my personal assets be protected from lawsuits against my Virginia professional corporation?
Virginia professional corporations can provide personal liability protection for their shareholders, meaning their personal assets may be protected from lawsuits against the corporation.
Can a Virginia professional corporation practice other types of business besides its professional services?
No, Virginia professional corporations are only authorized to provide the professional services for which they are licensed.
Can a Virginia professional corporation operate in other states?
Yes, Virginia professional corporations can register to do business in other states where they want to provide their licensed professional services.
How do I dissolve my Virginia professional corporation?
To dissolve a Virginia professional corporation, you must file articles of dissolution with the State Corporation Commission and fulfill any outstanding obligations.
What happens if I don’t dissolve my Virginia professional corporation properly?
If you don’t dissolve your Virginia professional corporation properly, your corporation may continue to be liable for taxes, debts, and other obligations even after it ceases to operate.

Also Read

How to Save Money While Forming Virginia Professional Corporation

One of the first steps in saving money while forming a professional corporation is to do your research and understand all the legal requirements and regulations that apply to your specific profession in Virginia. By being informed about what is required for forming a professional corporation in your field, you can avoid costly mistakes or oversights that might result in fines or delays in the formation process.

Another way to save money when forming a professional corporation in Virginia is to consider utilizing online resources or services to help you navigate the process. There are many affordable options available that can provide you with the necessary forms and guidance to complete the formation of your professional corporation efficiently and accurately. Additionally, some online services offer fixed fees for their services, which can help you budget more effectively and avoid unexpected costs.

Consider using a registered agent service to help you comply with the legal requirement of having a registered agent for your professional corporation. This can save you money by avoiding the need to hire an individual to fulfill this role, which can be expensive and time-consuming. Registered agent services typically charge a reasonable annual fee and can help ensure that all legal documents and correspondence are properly managed on your behalf.

When considering the structure of your professional corporation, think about the long-term implications for your business and finances. Choosing the right structure from the start can help you save money on taxes, liability protection, and future growth opportunities. Consulting with a business attorney or accountant can provide you with valuable insights into the best structure for your professional corporation based on your specific needs and goals.

Before rushing into any decisions about forming a professional corporation in Virginia, take the time to create a detailed business plan and budget. By outlining your estimated start-up costs, ongoing expenses, and revenue projections, you can identify areas where you can cut costs or find opportunities to save money. Consider ways to reduce overhead expenses, such as shared office space, virtual services, or cost-effective marketing strategies, to help increase your profitability.

Overall, taking the time to research your options, utilize affordable resources, and plan carefully can help you save money while forming a professional corporation in Virginia. By being proactive in your approach and seeking out cost-effective solutions, you can set your business up for success and achieve your financial goals in the long run.

Conclusion

Virginia 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 Virginia.

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