So you’re ready to take the next step in making your California business dreams a reality. Here’s what you should know about creating a professional corporation in the Golden State.
One of the first steps in starting a business in California is choosing your business structure. Follow these 12 steps to set up your new business as a California professional corporation.
1. Determine whether a California professional corporation structure is right for you
Should you form a professional corporation?
Navigating the options for starting a business entity in California can be challenging. If you’re ready to take the next step in your business, you might consider registering as a professional corporation (PC), which provides various liability protections to its owners. Licensed professionals, such as lawyers, accountants, nurses, architects, veterinarians, and therapists, own business entities as California professional corporations.
Unlike many other states, California does not permit licensed professionals to incorporate as LLCs.
Who can be the PC’s shareholders?
In a PC, its shareholders are the people with ownership stake in the business. According to California law, a PC’s shareholders need to be licensed in the state and practice the same profession. Entities that provide medical services are the only exception to this rule. For more information, see the Moscone-Knox Professional Corporation Act and the Medical Board of California’s website.
If you prefer to go solo, you can be the shareholder and the sole director as long as you hold and maintain the proper licensing in California.
Who will be the professional corporation’s officers?
Only authorized licensed professionals can serve as officers. In practice, this means that the shareholders (your “partners”) will likely serve as the officers. Most professional corporations will have a president, vice president, treasurer, and secretary. However, the PC can create additional officer roles as needed in its bylaws.
If a PC only has one shareholder, then the sole shareholder must serve as director, president, and treasurer.
2. Choose a name for your California professional corporation
A professional service corporation in California must have a proper designator or abbreviation in its name, as detailed in the California Corporations Code. You can include information pertaining to the specific profession that the PC will practice, such as “the law firm of,” or something something. See the California Corporations Code California Business and Professions Code.
Check whether your preferred name is available
There can’t be two professional corporations with the same name in California. Once you decide on your top name choice, you can conduct a search to see if it’s in use.
Reserve a name and domain
If your name is available, for a fee of $10 you can reserve it with the state for 60 days using a Name Reservation Request form. However, you have to print out the form and mail it in, which can be time-consuming. That’s why using the ZenBusiness name reservation service is great. It removes the hassle handles the process for you.
After that, you’ll want to make sure you have a website to start growing your online presence. So, you’ll need a domain name. ZenBusiness can take care of that, too! Go here to use our domain registration service.
3. Select a California registered agent
By law, your business must appoint an agent for service of process (known in most states as a “registered agent”) to accept legal notices and official state correspondence from the Secretary of State. ZenBusiness offers reliable registered agent services to meet this requirement. You could appoint yourself as the agent, but registered agents must be present at a registered state address during normal business hours, leaving you tied to the office all day. You need a trustworthy professional to handle this role so you can meet the legal requirement and get the proper notification in the event of a lawsuit.
4. Complete your California Articles of Incorporation
It’s necessary to complete and finalize the Articles of Incorporation so you can register formally as a professional corporation. You must sign and submit these articles to the California Secretary of State.
5. Establish a corporate record in California
As a professional corporation in California, you’re legally required to maintain a record of significant business decisions. You should have a physical copy safely stored in your office or other secure location, and it’s also a good idea to have a digital backup version.
6. Designate a California professional corporation board of directors
As you register your business as a professional corporation in California, it’s a good time to appoint its initial directors. As the owner and shareholder, it’s your duty to document these appointments and file this record as an incorporator’s statement. All directors need to hold the appropriate licensing. Your bylaws should also outline electing new directors, particularly at annual general meetings or other designated dates.
7. Create California corporate bylaws
Lay the foundation for successful business practices with detailed bylaws. As the corporate rules for professional corporations, bylaws cover elements that include voting, director election, meeting requirements, and internal disputes. California does not require professional corporations to file their bylaws; however, record, sign, and keep these bylaws close by.
8. Hold the first board meeting
The initial California professional board meeting should include the shareholders and cover several important tasks, including:
- Appoint the board of directors
- Hire officers
- Review and ratify bylaws
- Delegate roles for daily business activities
- Discuss annual report requirements
- Select bank and tax preferences
- Sign off on stock certificates
9. Handle California tax obligations
To pay federal tax as a professional company in California, you’ll need an employer identification number (EIN) from the IRS. It’s required to file business taxes whether you choose to be a C corp or an S corp. You can get one for free from the IRS, or you can use ZenBusiness’s EIN service and sit back and relax.
Corporate tax requirements may include franchise, income, and sales tax. Go to the California Tax Service Center’s website for more information.
As a California professional, check with your city or county to cover any local taxes.
10. Obtain California business licenses and permits
General business license
To obtain a general business license for your California professional corporation, apply on the California State Government website. You may also be required to obtain a local business certificate; check with your city or county for additional information.
Depending on the specialty area of your professional corporation, you may require industry licensing. Contact the California governing body for your profession to learn more.
There are many other types of permits you might need, such as building, signage, occupational, health, or zoning permits. To eliminate the stress and make sure your professional corporation has everything in hand when you open your doors, use the ZenBusiness business license service.
11. Acquire insurance for your California professional corporation
Workers’ compensation and general liability insurance protect California professional corporations from unexpected events. Depending on your industry, there may be specific insurance necessary to protect your staff and investments.
12. Open a business bank account
Every California professional corporation needs a business bank account. This is essential for business documentation, accounting, and taxes. Find a reputable bank that offers incentives for California professional corporations.
Ready to kick-start your business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain name, our goal is to help you succeed. Check out our services and contact us today to see how we can help you grow your company.
California Professional Corporation FAQs
What are the filing fees for a California professional corporation?
According to California Government Code, it costs $100 to file Articles of Incorporation.
Do I need a lawyer to form a California professional corporation?
While you don’t legally need a lawyer to form a professional corporation in California, many licensed professionals find legal assistance useful. You do need a California registered agent.
Does California have a professional limited liability company (PLLC) entity?
California does not have a PLLC entity.
Can professionals from different fields form a California professional corporation together?
No, all shareholders forming the professional corporation need to be licensed in the same field.
Will I be taxed as an S corp or C corp in California?
Professional corporations are taxed as a C corp by default, but you can elect to be taxed as an S corp instead. This election must be made, using IRS Form 2553, no more than two months and 15 days into the tax year that you plan to file as an S corp.