A Connecticut professional corporation (PC) is a unique corporate structure made up of licensed professionals in the same industry, such as doctors, chiropractors, lawyers, accountants, and others. These specialized professionals have the option to own their own practice or form a separate legal entity, one of which is a professional corporation. Connecticut PCs are legally referred to as “professional service corporations.”
Determine whether a Connecticut professional corporation structure is right for you
In Connecticut, licensed professionals have the option of creating a professional corporation (PC) or a limited liability corporation (LLC). Some states also offer professional limited liability corporations (PLLC), but Connecticut is not one of them.
If you choose to form a Connecticut LLC, ZenBusiness can take some of the stress off your plate.
Differences Between a Connecticut PC and LLC
An LLC is made up of members, but a Connecticut PC is made up of shareholders. This means that Connecticut professional corporation ownership is based on shares of stock, whereas LLC ownership involves membership interests in the company. Officers are elected in a professional corporation and handle the management of the company.
How to Form a Connecticut Professional Corporation
Once you have determined that a Connecticut PC corporation is right for you, it is time to start checking the boxes on formation.
Choose a name for your professional corporation
Different states have different naming requirements. In Connecticut, you must include the words “professional service corporation” in the actual name of your corporation, or the abbreviation “PSC.” It cannot include the abbreviation of any other type of business, such as “LLC.” Your corporation must not imply any other business type. For example, if you are a veterinary PC, you wouldn’t want the words “law office,” in the name of your business.
In determining the name of your Connecticut PC, you should make sure to check that the name is available. ZenBusiness provides business name reservation services, so you can make sure no other business claims the name before you’re ready to file your paperwork with the state.
You may choose to register your business name before your business is fully formed to make sure it is ready and available when you are. This is also a good idea when it comes to registering your website domain name, which you can also do easily with the help of ZenBusiness. Having an online presence is extremely important for virtually any business, so having a domain name that is concise and makes sense could be crucial to customers finding and learning about your Connecticut professional corporation.
Select a Connecticut registered agent
A Connecticut professional corporation is required to designate a registered agent to receive legal notices on behalf of the company. This point of contact must be available at a physical address in Connecticut during normal business hours. You can legally be your own registered agent, but this essentially ties you to that physical address all the time. Using registered agent services is often a much more efficient way to meet this requirement and provide peace of mind. ZenBusiness offers registered agent services to help you comply with state requirements.
Complete Connecticut Articles of Incorporation
The Articles of Incorporation is the document that formally serves to register your Connecticut professional corporation with the state. This document can be filed online or mailed to the Connecticut Secretary of State. The person who fills out this form is called the “incorporator,” which kind of sounds like it could be a comic book character name, but it’s real. Generally, Articles of Incorporation will include all pertinent information about the corporation, including name, purpose, stock information, registered agent, and more.
You must also file an Organization and First Report along with the Articles of Incorporation. This document records the officers and directors of your Connecticut professional corporation.
Establish corporate records in Connecticut
Connecticut professional corporations are required to document and maintain permanent records of all important decisions made by the business. Records may be kept at a physical location, but it is also wise to keep digital records for safety and ease of access.
Designate a Connecticut professional corporation board of directors
You and the other founders must select initial directors for your Connecticut professional corporation. These appointed directors should be recorded in an Incorporator’s Statement, to be filed with other permanent records.
Directors must all have the same professional license and provide the same type of service that the business was established to provide. Once an initial shareholders’ meeting is held, new directors may be elected by shareholders.
Create Connecticut corporate bylaws
Establishing well-thought-out bylaws is essential because they will govern the rules of your Connecticut professional corporation, as well as procedures for how the business will operate. Bylaws are required for all Connecticut PCs and require a vote by the shareholders to make changes. It’s best to try and get it right the first time. Some important areas covered in bylaws may include:
- Procedures for resolving disputes within the corporation
- How voting will be conducted
- The total number of directors for the corporation
- How directors will be elected
- The roles of appointed officers
- How often meetings will take place
Bylaws do not have to be filed with the state of Connecticut but should be properly prepared and recorded.
Hold your first board meeting
There are several important decisions that must be made at the initial board meeting to move forward with business operations. These decisions include:
- Approving corporate bylaws
- Choosing which bank to use for the business account
- Deciding which officers will be responsible for managing business operations
- Approving and distributing stock certificates
- Deciding which type of corporate structure the business should use for tax purposes
A copy of the decisions should be recorded as minutes of the meeting and kept with other company records.
Handle Connecticut tax obligations
Every Connecticut professional corporation must obtain a federal employer identification number (EIN) from the IRS. This allows you to hire employees, open business accounts, and file taxes.
The biggest decision when it comes to tax obligations in Connecticut is deciding whether your business should be taxed as an S corporation or C corporation.
C corporation profits are taxed at the corporate level and again on the shareholders’ personal tax returns. This concept is called double taxation. The benefit of a C corporation is that it is subject to fewer restrictions than an S corporation.
An S corporation is an option if the Connecticut professional corporation has fewer than 100 shareholders. The corporation can’t be owned by another business entity, have foreign shareholders, or have more than one class of stock. The benefit of an S corporation is pass-through taxation, which means that profits are taxed only to the shareholders and not the corporation.
State and Local Taxes
The Connecticut State Department of Revenue Services requires most professional corporations to pay a Business Entity Tax. Depending on the nature of your service industry, income, sales, use, and other taxes may also apply. Local taxes may apply to the specific municipality where your corporation is located.
Obtain Connecticut business licenses and permits
There is no general business permit required in the state of Connecticut, but you must obtain all licenses, registrations, and permits that apply to your specific profession. Certain activities may also require licenses. You can refer to the Connecticut Department of Consumer Protection’s list of permits to see what you may need to obtain at the state level, but there’s no one place to check to see if you have all the federal, state, and local licensing your company requires. You can try to do the research yourself or get a business license report from ZenBusiness.
Acquire insurance for your Connecticut professional corporation
Connecticut requires any business with employees to carry workers’ compensation insurance. You can learn more about how to acquire workers’ compensation through the State of Connecticut Workers’ Compensation Commission. You may also want to consult a qualified insurance agent to see about general liability insurance and any insurance specific to your industry.
Get help forming a Connecticut professional corporation
Forming a Connecticut professional corporation can be a lengthy process with a number of steps to perform. Once you’re finished, ZenBusiness has a wide range of services to help you run and grow your new business. Contact us today to learn how we can help.
Connecticut Professional Corporation FAQs
What are the filing fees for a Connecticut professional corporation?
The fees to file Articles of Incorporation for a Connecticut professional corporation can change, so be sure to check current fees on the Secretary of State’s website. Expedited processing is available for an additional fee.
Do I need a lawyer to form a Connecticut professional corporation?
You’re not legally required to hire a lawyer to form a Connecticut PC.
Does Connecticut have other professional entity types?
Connecticut has a specific professional corporation statute but also allows business entities to form limited liability companies as long as all members of the corporation are licensed to provide the same professional services.
Can professionals from different fields form a Connecticut professional corporation together?
Shareholders must be licensed to perform the same professional services to form a Connecticut professional corporation.
Will I be taxed as an S corporation or C corporation in Connecticut?
Directors of the professional corporation should vote during the first shareholders meeting to determine how the corporation will be taxed.