 |
New Articles |
What Is A Professional Corporation?The number of possible business entities has grown over the years and the professional corporation is one of them. Okay, so what is a professional corporation? The professional corporation is a specialty entity created to provide certain licensed individuals with a business entity. Why is this necessary? Well, they are barred from forming other entities as a matter of course due to certain social policies established by the courts or, in the case of California, by the state government. What does this mean in plain English? Let’s take a look. A person defined as a professional in the state of California may only form a professional corporation. They may not for a basic corporation, limited partnership or limited liability company, better known as an “LLC.” The professional may designate their professional corporation as either a “C” or “S” entity for tax purposes. While there are exceptions, most will go with the “S” designation. You should always consult with your CPA to make a determination. Okay, so what is a professional corporation? Well, it is very similar to a traditional corporation with one huge exception. The professional corporation does not provide the licensed individual with protection from their tortuous acts when performing the service they are licensed for. Put another way, we are talking about malpractice. The entity does provide protection, however, for other areas. An example will help explain this. Assume I am a primary care physician. I form a professional corporation for my practice. I then have two disputes arise. One is a patient claiming I failed to diagnose a condition, an act of malpractice. The second is a dispute with my office landlord over an air conditioning system that is on the fritz. I am personally liable for any loss I suffer in the malpractice claim, but only the corporation is liable should I lose the case with the landlord. One involves the field I am licensed to practice in and one does not. Should you form a professional corporation in California? Well, let me answer it this way. There are over 200,000 attorneys in the state. What do you think? |
