If you’re a licensed professional, you’ve probably already jumped through a lot of hoops to get where you are, including formal education, licensing, and starting a career. The business decisions you make could have a big impact on the way you perform services and your growth potential. You may be considering forming a District of Columbia professional corporation (PC). Here are some of the things you may want to know, including how to form a professional corporation.
Determine whether a District of Columbia professional corporation structure is right for you
Professional corporations are owned and operated by licensed professionals within the same industry. These can include veterinarians, physicians, accountants, and other professionals required to hold specific licenses to perform services. One of the biggest draws to forming a District of Columbia professional corporation is that a shareholder isn’t held personally liable for negligence or malpractice of someone else in the corporation.
Forming a professional limited liability company (PLLC) is also an option. These two business structures are similar, but a PLLC consists of members who have interests in the business, while a PC has shareholders with ownership based on shares of stock.
How to Form a District of Columbia Professional Corporation
If you’ve decided that starting a District of Columbia PC is the right move for you, there are several steps you will need to take. The process may seem a little daunting, but ZenBusiness provides helpful services that can help guide you through many components.
Choose a name for your District of Columbia professional corporation
Naming your business is important. There’s a lot that goes into choosing a name, including finding something that fits your industry and the type of vibe you want to convey to potential clients. Before you get too deep down the list of potentials, it’s helpful to know that your District of Columbia professional corporation name must include the words “professional service corporation” or the abbreviation “PSC.”
You will also need to check that the name you choose is actually available, and then you can reserve it. It’s not uncommon to reserve a business name before having all the details worked out, so you can get the name you want. ZenBusiness provides business name check and reservation services to help you through this process. ZenBusiness can also help you register your domain name at the same time, so you will be ready to build an online presence and attract customers.
Select a District of Columbia registered agent
One thing many new business owners don’t think about is the importance of choosing a registered agent. A registered agent is someone with a physical address in the District of Columbia who can receive mail and legal notices during regular business hours. Having a registered agent is a requirement for corporation formation. You may designate yourself or someone else, but keep in mind that if they’re not available during regular business hours, you could face penalties. ZenBusiness can make finding and maintaining a registered agent in the District of Columbia simple and provide valuable peace of mind.
Complete your District of Columbia Articles of Incorporation
Articles of Incorporation is the legal document you file with the District of Columbia Department of Consumer and Regulatory Affairs to register your District of Columbia professional corporation. As the person who fills out this document, you’re acting as the “incorporator” and will sign the document as such. Articles of Incorporation contain general information about your District of Columbia PC, such as business name, location, registered agent, shareholders, and more.
Establish a corporate record in the District of Columbia
State law requires that your District of Columbia professional corporation keep a permanent record of important decisions made by the business. These records can be kept at the place of business or elsewhere, but electronic copies are also encouraged.
Designate a District of Columbia professional corporation board of directors
Next, state the names and contact information for each initial director you want appointed to your District of Columbia PC’s board of directors. These initial directors will serve until new directors are elected or those initial directors are officially elected at the shareholder meeting. Directors can also be elected other ways if stated in the bylaws. The incorporator may also serve as the initial director before official elections. It’s important to keep in mind that directors must all be licensed professionals in the same industry that the professional corporation serves.
Unlike the Articles of Incorporation, which provides general information about the professional corporation, bylaws govern the actual operation and internal workings of the corporation. It’s important to include details to avoid future controversy caused by ambiguity. Important areas to cover include:
- Election of directors,
- How voting will be conducted,
- Roles of officers,
- Procedures for resolving disputes,
- Conflict of interest statement, and
- Schedule for shareholder meetings.
Bylaws are an important piece of the internal structure of your District of Columbia professional corporation. They set the foundation that your business will build upon.
Hold first board meeting
The first board meeting can be a big one because there will be a lot to cover. Bring snacks. Here are some of the topics to include:
- Review, edit, and approve your professional corporation bylaws;
- Approve stock certificates to be issued;
- Choose which bank to use for the business account;
- Decide on officers to manage the daily operations of the business; and
- Determine which corporate structure to use for tax purposes.
Make sure to record meeting minutes, which are essentially a record of the discussions and decisions that take place. A copy of these minutes need to be sent to each director for review and then filed with the other permanent records for the business.
Handle District of Columbia tax obligations
One of the biggest decisions that the board of directors will have to make is the type of corporate structure they want to use for federal taxation purposes. Before filing taxes, hiring employees, or conducting business, your District of Columbia professional corporation will need to obtain an employer identification number (EIN). This can be done through the IRS, or you can make it easy by using EIN services from ZenBusiness.
Your two choices when it comes to corporate taxation are to file as either a C corporation or an S corporation. C corporations have fewer restrictions than S corporations, but profits are taxed at both the corporate and personal income tax level. This is called “double taxation.” S corporation status is available for professional corporations that have fewer than 100 shareholders, don’t have foreign shareholders, only issue one class of stock, and are not owned by another business entity. S corporation profits are taxed only at the shareholders’ personal tax level.
District of Columbia State and Local Taxes
There are a number of state taxes that may or may not apply to your specific industry. Some of the most commonly required state business taxes include income tax, sales tax, use tax, and withholding tax. The exact area where you conduct business may also have additional taxes.
Obtain District of Columbia business licenses and permits
All shareholders in your District of Columbia professional corporation must hold the same professional license. The D.C. Department of Consumer and Regulatory Affairs requires and oversees many types of professional licenses. The department also provides comprehensive services for additional licenses and permits that may be relevant for your industry or specific services.
It’s your responsibility to obtain all licenses and permits at the federal, state, and local levels. Determining what your specific business needs can be difficult because there’s no central place to check to see if you have all the required licensing. ZenBusiness’s business license report can help by providing you with a report listing all the licenses and permits needed for your company.
Acquire insurance for your District of Columbia professional corporation
Most District of Columbia employers are required to have workers’ compensation insurance coverage for their employees. The District of Columbia does provide employers with the option to self-insure. This is done through the Department of Employee Services.
General liability insurance is also a good idea. Your specific industry may also require insurance policies based on your profession, such as malpractice insurance.
Open a business bank account
It’s crucial that you avoid mixing personal and business finances for your District of Columbia professional corporation. Shareholders can choose a company bank during the first company meeting. This is where the professional corporation finances are held unless otherwise stated in the bylaws or voted on by shareholders.
Get support for your District of Columbia professional corporation
There are a lot of moving parts to running a District of Columbia professional corporation. ZenBusiness has the tools, guidance, and expertise you need to be your own boss. Contact us today to see how our services and products can help.
District of Columbia Professional Corporation FAQs
What are the filing fees for a District of Columbia professional corporation?
Unlike many states, fees for filing Articles of Incorporation in the District of Columbia are based on the amount of authorized capital for the business. You can find the current fees on the Department of Consumer and Regulatory Affairs website. Expedited processing is available for an additional fee, depending on the level of service you need.
Do I need a lawyer to form a District of Columbia Professional Corporation?
A lawyer isn’t required to form a District of Columbia professional corporation. However, having some level of guidance and support can be very helpful to provide a streamlined process and peace of mind.
Does the District of Columbia have other professional entity types?
The District of Columbia also allows licensed professionals to form professional limited liability corporations (PLLCs), which have many of the same regulations but consist of members with ownership interests rather than shareholders.
Can professionals from different fields form a District of Columbia professional corporation together?
All professionals who are shareholders in a District of Columbia professional corporation must work in the same field and have the same type of professional license.
Will I be taxed as an S corporation or C corporation in the District of Columbia?
Professional corporation directors have the opportunity to determine which corporate taxation structure is best for their District of Columbia professional corporation, though there are stricter standards for S corporation qualification.