Professional Corporations, abbreviated PC, are a form of legal entity. These corporations allow licensed professionals to limit their personal liability. They also provide tax advantages. Typically, professional PCs are created by a group of people who are experts in the same field. However, these businesses may not be applicable for everyone. There are other forms of business structure that offer similar benefits.
In 1986, the Internal Revenue Service (IRS) changed the tax classification of PCs. These businesses now have a special designation: a “professional service corporation” or PSC. This tax designation allows PCs to be taxed like a C-Corporation. While a PC is taxed at a flat rate, it is still subject to double taxation. During this process, the shareholders of the business are responsible for both the individual and corporate income taxes.

A PC is a legal entity, meaning it has a board of directors that oversees operations. This structure allows members of a PC to share duties. It is not as flexible as a standard corporation, but it can give professionals more control over their operations. Many types of professionals choose to use this type of structure. For example, a doctor can form a PC to protect himself from malpractice lawsuits, and a real estate agent can create a PC to limit their liability.
Professional PCs have a rigid structure, which requires extensive record keeping. Each shareholder must be a licensed professional in the industry in which the PC is operating. Some states require that all PC shareholders be licensed in the same profession. Moreover, some states limit the number of shareholders in a particular PC.
Another benefit of a PC is its ability to shield its shareholders from the liabilities of other owners. For example, a landlord renting an office space cannot hold a PC doctor individually liable for rent. Also, the corporation can pay damages to a client who has fallen on the company’s steps.
As a result, a PC can be considered a very attractive form of business structure. However, it does not offer the same level of liability protection as a standard corporation. Nonetheless, a PC provides a way for professionals to get tax free insurance, and it can be easy to transfer ownership. The PC can also be used to create a tax-free retirement plan.

Other advantages of a PC include its streamlined structure. All PCs are formed by licensed professionals, and the only shareholders are those who are qualified in the profession in which the corporation is operating. To keep the corporation compliant, a professional PC needs to meet regularly and have an annual report.
Despite these advantages, a PC does not give a business owner the flexibility to branch out into other fields. It limits the professional’s personal liability, but it does not protect a professional from being sued by a customer. And because it is a corporation, it is also limited by its own liabilities.
Ultimately, a professional corporation is not the best choice for every business. Depending on the business and its needs, you should consider a different legal structure.