Starting a Professional Corporation in Washington 2024: Ultimate Guide

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How to Start a Professional Corporation in Washington

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

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

The primary purpose of Washington 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, Washington 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 Washington.

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Who Can File Under Professional Corporation Laws

Under Washington 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 Washington, 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: Washington 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 Washington 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 Washington 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 Washington: A Guide

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

Step 1: Appointment of Registered Agent

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

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Step 2: Choosing the Name of the Corporation

Selecting a name for your Washington 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 Washington 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 Washington 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

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

Fees Associated with Professional Corporation in Washington

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

  • State Laws and Regulations: To form a professional corporation in Washington, it is crucial to comply with the state laws and regulations governing professional corporations. The Revised Code of Washington Title 23B 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 Washington is to draft and file the Articles of Incorporation with the Washington 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 $180 for most professions. However, it is essential to check with the Washington 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 Washington. 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 Washington 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 $30 online and $30 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Washington. 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 Washington 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 Washington may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Washington Secretary of State every End of the corporation’s fiscal year of filing the Articles of Incorporation. The filing fee for this form is $60.
    • 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 Washington:

Federal income tax

A professional corporation in Washington 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

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

Tax deductions and exemptions

A professional corporation in Washington 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 Washington

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 Washington 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 Washington?
A professional corporation is a form of business in which a group of professionals, typically lawyers, accountants, or doctors, combine to form a business entity.
Who can form a professional corporation in Washington?
In Washington, licensed professionals such as attorneys, physicians, dentists, architects, engineers, psychologists, and chiropractors can form a professional corporation.
What are some advantages of forming a professional corporation in Washington?
Some advantages include limited personal liability for the actions of the corporation, increased flexibility in tax planning, and the ability to raise capital more easily through the sale of shares in the corporation.
How do I form a professional corporation in Washington?
To form a professional corporation in Washington, you will need to file Articles of Incorporation and any necessary licensing documents with the Washington Secretary of State.
What is required to file Articles of Incorporation in Washington?
To file Articles of Incorporation in Washington, you will need to provide the name of the corporation, a statement of professional purpose, and the names of the professional shareholders.
What fees are associated with filing Articles of Incorporation in Washington?
The typical filing fee for Articles of Incorporation in Washington is $180.
When should I file licensing documents in Washington?
You should file licensing documents with the appropriate regulatory agency before filing your Articles of Incorporation.
Do I need to provide a registered agent when filing Articles of Incorporation in Washington?
Yes, you must designate a registered agent when filing Articles of Incorporation.
What is a registered agent?
A registered agent is a person or business designated to receive legal documents and other important information on behalf of the corporation.
Can I act as my own registered agent in Washington?
Yes, you can act as your own registered agent if you have a physical address in Washington and are available during normal business hours to receive legal documents.
What is the process for appointing a registered agent in Washington?
The process for appointing a registered agent in Washington is simple – you just need to include their name and address when filing your Articles of Incorporation.
What ongoing compliance requirements are there for professional corporations in Washington?
In Washington, professional corporations must file an Annual Report each year, which includes information about the corporation and payment of a $60 fee.
Do professional corporations need to have bylaws in Washington?
Yes, professional corporations need to have bylaws outlining their policies and procedures, as well as any rules governing the corporation.
What should be included in a professional corporation’s bylaws?
Bylaws typically include information about the corporation’s management structure, the rights and duties of shareholders, and voting procedures.
Can a professional corporation have non-professional shareholders in Washington?
No, a professional corporation can only have shareholders who are licensed professionals.
Are there any restrictions on removing a shareholder from a professional corporation in Washington?
Yes, there are restrictions on removing a shareholder from a professional corporation. You should consult with an attorney and review the corporation’s bylaws before attempting to remove a shareholder.
What is required to dissolve a professional corporation in Washington?
To dissolve a professional corporation in Washington, you will need to obtain a Certificate of Dissolution from the Secretary of State and settle any outstanding debts and taxes.
Can a foreign professional corporation do business in Washington?
Yes, a foreign professional corporation can do business in Washington, but it must first obtain a Certificate of Authority from the Secretary of State.
What is the fee to apply for a Certificate of Authority in Washington?
The filing fee for a Certificate of Authority in Washington is $200.
How long does it take to obtain a Certificate of Authority in Washington?
It typically takes 5-10 business days for the Secretary of State to process an application for a Certificate of Authority.
Is business insurance required for professional corporations in Washington?
While it is not required by law, it is recommended that professional corporations in Washington obtain liability insurance to protect against legal claims and other risks.
What are the tax considerations for professional corporations in Washington?
Professional corporations in Washington are subject to the state’s business and occupation tax, which is based on the corporation’s gross income.
Can professional corporations claim deductions on their taxes in Washington?
Yes, professional corporations can claim deductions on their taxes in Washington, which can help them reduce their overall tax liability.
What should I know before hiring employees for my professional corporation in Washington?
Before hiring employees, you should familiarize yourself with Washington state’s employment laws, including minimum wage and anti-discrimination laws.
Can professional corporations sponsor work visas for foreign employees in Washington?
Yes, professional corporations can sponsor work visas for foreign employees in Washington, provided they meet all necessary immigration requirements.
What should I do if my professional corporation is sued in Washington?
If your corporation is sued in Washington, you should consult with an experienced business attorney to review the allegations and develop a legal strategy to protect your interests.
Can professional corporations be sued for malpractice in Washington?
Yes, professional corporations can be sued for malpractice in Washington if a professional shareholder commits an error or omission while providing professional services.
How can I maintain a positive professional image for my corporation in Washington?
To maintain a positive professional image, you should provide high-quality services, respond promptly to client inquiries and concerns, and conduct yourself and your employees in a professional manner at all times.
How is a professional corporation in Washington formed?
A professional corporation in Washington is formed by filing articles of incorporation with the Secretary of State’s office.
What are the requirements for professional corporations in Washington?
Professional corporations in Washington must be formed by individuals who are licensed or authorized to provide professional services in the state.
Can any profession form a professional corporation in Washington?
No, only individuals who are licensed or authorized to provide professional services in Washington can form a professional corporation.
What types of professionals can form a professional corporation in Washington?
Professionals like doctors, lawyers, accountants, and engineers can all form a professional corporation in Washington.
Are there any restrictions on who can be a shareholder in a Washington professional corporation?
Yes, only licensed professionals can be shareholders in a Washington professional corporation.
Do professional corporations in Washington have to carry liability insurance?
Yes, professional corporations in Washington are required to carry liability insurance.
What is the tax status of a professional corporation in Washington?
A professional corporation in Washington is generally treated as a regular corporation for tax purposes.
Are there any exemptions or deductions available for professional corporations in Washington?
Yes, there are certain deductions and exemptions available for professional corporations in Washington, like the state’s B&O tax credit for certain types of professional services.
Are Washington professional corporations required to have a board of directors?
No, a board of directors is not required for a Washington professional corporation.
Can non-professional employees work for a Washington professional corporation?
Yes, a Washington professional corporation can employ non-professional staff members, such as administrative assistants or office managers.
Can a professional corporation in Washington be managed by someone who is not a licensed professional?
Yes, a Washington professional corporation can be managed by someone who is not a licensed professional if they are hired as an executive director or office manager.
How does a professional corporation in Washington pay its shareholders?
Shareholders in a professional corporation in Washington are typically paid in the form of dividends.
Are there any specific procedures for meetings and voting in a Washington professional corporation?
Yes, Washington professional corporations are required to follow specific procedures for meetings and voting, as laid out in the corporation’s bylaws.
Can a professional corporation in Washington merge with another corporation?
Yes, a professional corporation in Washington can merge with another corporation, as long as it follows the state’s merger regulations and legal documentation is filed with the state.
Can a Washington professional corporation change its name once it’s formed?
Yes, a Washington professional corporation can change its name by filing an Articles of Amendment with the Secretary of State’s office.
Does a Washington professional corporation need to submit to a filing fee when it files its Articles of Incorporation?
Yes, a Washington professional corporation must pay a filing fee when it files its Articles of Incorporation.
How long does it take to form a professional corporation in Washington, and can the process be expedited?
The process of forming a Washington professional corporation usually takes several weeks, but expedited services are available for an additional fee.
What is the minimum capital needed to start a professional corporation in Washington?
There is no set minimum capital required to form a professional corporation in Washington.
Can a Washington professional corporation issue stock?
Yes, a Washington professional corporation can issue stock, but only licensed professionals can hold the stocks.
Can a Washington professional corporation dissolve?
Yes, a Washington professional corporation can dissolve voluntarily or be forced into dissolution by law.
What happens to a Washington professional corporation’s assets when it dissolves?
The assets of a Washington professional corporation are distributed to its shareholders during dissolution.
What is the annual report requirement for a Washington professional corporation?
A Washington professional corporation must file an annual report with the Secretary of State’s office.
What information is required in a Washington professional corporation’s annual report?
The annual report for a Washington professional corporation must list its officers, directors, and shareholders.
Is there a penalty for not filing a Washington professional corporation’s annual report?
Yes, Washington professional corporations will be subject to penalties and fees if they do not file their annual reports on time.
Is Washington a good state to form a professional corporation in compared to other states?
This ultimately depends on the specific business and location, but Washington can be a good state to form a professional corporation due to its business friendly regulations.
How can I learn more about forming a professional corporation in Washington?
You can find more information about forming a professional corporation in Washington on the state’s Secretary of State’s website.

Also Read

How to Save Money While Forming Washington Professional Corporation

First and foremost, it’s important to do your research. Understanding the legal requirements and steps involved in forming a professional corporation in Washington can save you both time and money in the long run. By familiarizing yourself with the process, you can avoid any costly mistakes or unnecessary expenses that may arise from lack of knowledge.

One way to save money is to consider becoming familiar with the necessary forms and documents required by the state for registering your professional corporation. By preparing these documents yourself, you can avoid the need for costly legal assistance or a professional filing service.

Another way to save money is to carefully consider the business structure of your professional corporation. Choosing the right entity structure based on your business goals and needs can help you avoid unnecessary costs down the line. Consulting with a business attorney or accountant can help you determine the best structure for your professional corporation while saving you money on potential tax liabilities or legal issues.

When it comes to paying for services related to forming your professional corporation, it’s important to shop around. By comparing rates for legal services, filing fees, and other related costs, you can find the most cost-effective options available to you. Don’t be afraid to negotiate or seek out discounts to make the process more affordable.

Additionally, consider utilizing online resources and tools to assist you in forming your professional corporation. There are many free or low-cost resources available that can help guide you through the process and provide you with the necessary forms and information to get started. Taking advantage of these resources can save you money on professional help while still ensuring your corporation is set up correctly.

Finally, consider joining a professional organization or network that can provide you with support and resources as you form your professional corporation. By networking with other professionals and receiving guidance from experienced individuals, you can save money on costly mistakes and legal fees that may arise during the formation process.

Forming a Washington professional corporation doesn’t have to break the bank. By researching the process, preparing necessary documents yourself, choosing the right entity structure, shopping around for services, utilizing online resources, and joining a professional organization, you can save money while still creating a successful and legally compliant business. By following these tips, you can ensure your professional corporation is set up properly while keeping costs down.

Conclusion

Washington 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 Washington.

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