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Professional Corporations are incorporated so that trained and experienced professionals of their respective professions can carry out their businesses. Professional Corporations are given many privileges by the authority in the USA. The owners of Professional Corporations are also given some privileges so that they can work and expand their business. US Professional Corporations are set up to provide a platform to work for a specific category of professionals. In this article, we will discuss the complete overview of Professional Corporations in USA.
The corporate entities for which special provisions are made in the statutes of corporations are Professional Corporations in USA. These provisions formed by Corporate in statutes are made to regulate the usage of the corporate by licensed professionals such as architects, attorneys, architects, doctors, engineers, and public accountants. There are many different rules and regulations related to Professional Corporations in the USA. These rules and regulations are different from the laws applicable to regular corporations in USA.
Professional Corporations, having a single director or several directors, do not generally afford that person or persons of the same degree of restriction in liability as to the other ordinary business corporations. Hence, these corporations recognize themselves as Professional Corporations in USA by including “P.C.” or “PC” after the name of the firm.
As each state in the USA has different state rules and regulations, so it is always advisable to check the prescribed regulations and rules before incorporating Professional Corporations in the USA. Mostly, the states in USA have stringent criteria for all the professionals who are eligible to create Professional Corporations in the USA. A specific category of professionals are eligible for Registration of Professional Corporations in USA.
The professionals who are eligible to register Professional Corporations in the USA are as follows:
These eligible professionals’ require broad experience and specialized knowledge in their respective domains to start and register a Professional Corporation. The main intention and purpose behind incorporating Professional Corporations in USA are to deliver excellent professional services to the general public at large and the individuals as well. The trained and experienced professionals who acquire the required or appropriate license for their respective professions can help workers to exchange proficiency and ideas, thus enriching their knowledge.
The Procedure of Incorporation in USA is as follows:
The process of Incorporation of Professional Corporations in the USA is not very complicated and is somehow identical for all states in the USA. Though, only a registered or authorized agent or person can start with the Registration of Professional Corporations in the USA.
So, it is always relevant and advisable to appoint a trained or qualified agent to start Professional Corporations in the USA. The appointed agent or person is responsible for documentation, collection, and final submission of the required documents with the respective state authority.
The next important step is to choose a unique name of the Corporation as per guidelines prescribed by the respective state. The name of the Professional Corporation is required to be unique and should not be matching any pre-existing Corporation in the state. The owner should appoint an authorized agent as mentioned above in the first step to incorporate a Professional Corporation in the USA.
The primary work of the agent is to initiate the search of name availability with the Trademark authority of the USA, and then further proceed with the filing of an application of approval of the name before the authority. After the approval of the name of the Corporation, the Professional Corporation can further proceed to register the logo and name of the Corporation with a Trademark authority in the USA.
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The next important step is drafting the bye-laws for the Professional Corporations as per the guidelines prescribed by the respective state in the USA where the Corporation is located. Each Professional Corporation in the USA is working according to the bye-laws, which are a set of rules and regulations. It is not appropriate to submit the bye-laws of Professional Corporations with the respective authorities while incorporating a Professional Corporation in the USA. Though, each Professional Corporation in the USA is required to draft the bye-laws and follow it competently, as per the prescribed guidelines.
The Bye-laws of a Professional Corporation is the essence of the contract between a Corporation and the owners or directors. Detailed guidelines are laid by the by-laws of the Corporation, which in the future, help to run the business proficiently.
The registered agent is responsible for collection and submission of the required records of all the proposed directors, owners, and members of the company to the concerned authority. However, all the officers and directors in the Corporation are mandatorily required to be from the same field, and to prove the same, the officers and directors should submit their respective professional licenses with authority to conduct the activity which is licensed.
Each state in the USA has different rules and regulations, with respect to the required total number of directors in the Corporation. For example, in the state of California, every Professional Corporation should appoint directors, and the directors should not be less than the total number of shareholders or owners in the Corporations.
It is mandatory to conduct a Board Meeting in the Company in a few states in the USA after the directors are appointed. Professional Corporations hold such Board Meetings to conduct the appointment of some key managerial personnel and to implement all the required by-laws.
The next step is the issuance of the corporate shares of the Company to the shareholders or owners of the Company in exchange for the shareholding contribution. Such a contribution by the Company is usually used by the company to run the initial operations of the Professional Corporation and to meet all the initial expenses of the Corporation. The different states in USA have prescribed various guidelines in regard to the issuance of shares in Professional Corporations.
Professional Corporations in USA are required to make some compliances after the shares are issued. For example, in the state of California, Professional Corporations are required to file for LEON (Limited Offering Exemption Notice), post-issuance of the shares. The LEON is filed to check whether the new Corporation is eligible to get registered as a Professional Corporation in USA or not.
After filing the Articles of Incorporation, Professional Corporations in the USA, are required to file statement of information with respective authorities.
The applicant applying for the Incorporation of a Professional Corporation is required to file all the necessary paperwork and documents with authority in the manner prescribed.
The applicant applying for the Incorporation of Professional Corporations is required to apply for all the required permits and licenses as required by the state.
As state laws in USA vary from state to state the rate of tax payable on the services offered by the corporation are also different. It is very important to register Professional Corporations with the respective tax authority of the state. The registration with the state tax authority is done to get all the necessary tax permits. Furthermore, Professional Corporations in the USA are required to report and take taxes with the respective juristic tax authority of the state after the Registration of a Professional Corporation in USA.
It is mandatory to open a USA based account in a bank to accept USA based payments. It is always relevant and advisable to take the assistance or help of a registered or authorized agent to open a bank account for Professional Corporations in the USA.
The essential advantages of Professional Corporations in the USA over all other business entities like proprietorship firms, LLC, or partnership firms are as follows:
The Tax Deductions in Professional Corporations in the USA are comparatively less than other Corporations like partnership firms, LLCs, etc. Like other professional corporations, business entities may also debit some business expenses such as marginal privileges for the employees, equipment costs, operating costs, etc. The value of the taxes collected is comparatively much lesser than the value of the total income earned by Professional Corporations.
The owners of Professional Corporation are not personally liable for any business obligations as they bear limited liability as compared to LLC’s or partnership firms. In case the Professional Corporation in the USA goes insolvent, or any lawsuit is filed against the Professional Corporation, the owners of the Corporation do not have any personal liability. However, no protection is given to the owners in the case in case of criminal acts or negligence or criminal act by owners themselves.
The Government has given some privileges to Professional Corporations with respect to the retention of generated profits from the total income of the Corporations. To improvise the condition of the Corporation, the retention of the profit amount is done by professional Corporations.
Corporations in USA are allowed to retain up to $150,000. Such retention is permitted only after paying the prescribed amount of tax by the state government. This retained amount can also be used by the Professional Corporations to invest in activities of renovation, for buying new appliances, for investment in real estate, etc.
A provision can also be included relating to the division of income of Professional Corporations among the owners or between the family members of the owner of the Corporations. Corporations in the USA are given a privilege in which the Corporation’s owners are allowed to pay a dividend to their respective family members. Such a privilege is available in any other kind of Corporations in the USA.
The employees of Professional Corporations are eligible to get certain benefits or perks for working with the entity. However, such perks or benefits may not be available to the employees in case such employees are the sole owner of the Corporation, and no employee engagement is there in the Corporation. The employees working in Professional Corporations are given many perks or benefits, which include health care benefit, pension, welfare benefit, and many more.
Other perks and benefits such as dividends given with the basic monthly salary to the employees of the Professional Corporations in USA.