If your profession requires a state license and you want to start your own business, forming a professional business entity, such as a professional corporation or a professional limited liability company, could be the right move. Creating a professional business entity can help protect you from personal liability, which can be essential to your financial wellbeing.
What is a professional corporation in Florida?
A Florida professional corporation (PC) is typically formed for the purpose of providing professional services in a specific area. All corporation shareholders must be licensed in the professional service area, which can include any service that requires a license or legal authorization. Some examples include accountants, dentists, architects, attorneys, realtors, and others.
Is a Florida professional corporation structure right for you?
There are two choices when it comes to forming a Florida business for providing professional services. There are some tax benefits associated with professional limited liability companies (PLLCs), and they’re often easier to form. However, PLLCs can’t issue stock and don’t provide as much liability protection as a Florida PC. A PC may be a stronger option for high-income service providers.
How to Form a Florida Professional Corporation
There are a number of steps to successfully forming a Florida professional corporation.
Make sure all shareholders are qualified under Florida law
In Florida, shares of a professional corporation can only be owned by a PC, a PLLC, or a licensed individual authorized to provide that specific professional service. Sale or transfer of ownership must adhere to the same restrictions. This means that if you’re forming a PC to provide legal services, only licensed attorneys (or another PC or PLLC made up of licensed attorneys) can be shareholders.
Choose a name for your Florida professional corporation
Florida has restrictions on names for a PC, and the name must contain the words “chartered,” “professional association,” or “P.A.” A Florida professional corporation is prohibited from using any other terms to indicate that it’s a PC. Usually these terms can just be added on to the end of whatever name you choose.
It’s important to check that the name you choose is available in the State of Florida. ZenBusiness offers business name reservation services to help you reserve the name you want. If you’re not ready to complete the PC formation process but know the name you want to use, it’s a good idea to reserve it before it is taken. You may also want to reserve your website domain name at the same time.
Select a Florida registered agent
A registered agent is someone designated to receive legal notices and correspondence from Florida’s Department of State on behalf of your professional corporation. The person or business must have a physical address in the State of Florida and be available during business hours. This can get complicated if you choose someone within the business who may occasionally want to take a vacation or go on a coffee break. One easy way to fulfill your registered agent needs is to use ZenBusiness’s registered agent services and have one less thing to worry about.
Complete your Florida Articles of Incorporation
Florida requires that any new corporation file Articles of Incorporation. This is the document that establishes the formation of your Florida professional corporation. You will be required to submit the following:
- Name of your professional corporation;
- Street address of the principal office and the mailing address of the corporation, if different;
- Specific purpose for your professional corporation;
- Name and Florida street address of the registered agent;
- Registered agent’s signed acceptance of the appointment as registered agent; and
- Name, address, and signature of the person who arranges for the Articles of Incorporation to be filed, called the “incorporator.”
You can file Articles of Incorporation in Florida online using the Florida Division of Corporations website.
Establish a corporate record in Florida
Documenting and keeping a permanent record of all important company decisions is important for compliance and auditing purposes for all Florida corporations. Your company’s records need to be stored somewhere safe. It’s a good idea to have both a physical and digital storage system.
Designate a Florida professional corporation board of directors
You are required to name all initial directors and officers. These individuals will serve until new ones are appointed at the annual shareholders meeting. For a Florida professional corporation, all directors must share the same licensed profession.
Create Florida corporate bylaws
Corporate bylaws are important to establish all rules of the business and responsibilities of the shareholders. It’s preferable to create corporate bylaws for your Florida PC shortly after directors are chosen. Your corporate bylaws need to be specific to your business model and industry. There are several things that may be included:
- A statement of your business purpose,
- A list of the board of directors,
- Responsibilities and qualifications of directors,
- Management structure details,
- Schedule for annual shareholder meetings,
- Distribution and transfer of shares,
- How to handle conflicts of interest, and
- The process for voting on changes.
Corporate bylaws are legally binding and can be changed only by shareholder vote. You may want to seek legal counsel when forming corporate bylaws, so you don’t miss any important pieces.
Hold your first board meeting
During the first board meeting, the board of directors will often vote to adopt the corporate bylaws and issue first shares of stock. Officers may also be elected at this time as well as a permanent board of directors.
Handle Florida tax obligations
Your Florida PC will need a federal tax identification number (EIN) to operate in the state. You can obtain this from the IRS for free. The big tax-related decision is whether you want your professional corporation to be taxed as a C corporation or S corporation.
- C corporations: C corporations are taxed at the corporate level and again on the shareholders’ personal tax return. This concept is called “double taxation.”
- S corporations: If your professional corporation has fewer than 100 shareholders, does not have any foreign shareholders, isn’t owned by another by another business entity, and has only one class of stock, you may opt to file as an S corporation. The benefit of an S corporation is pass-through taxation, which means that the business itself does not pay income taxes; income taxes are reflected only on shareholder tax returns.
Regardless of which corporation form you choose, your professional corporation will be subject to a corporate state income/franchise tax in Florida and any local taxes.
Obtain Florida business licenses and permits
The type of licenses and permits your business needs are going to be very specific to your industry and location. Licenses may be federal, state, or local. For help with determining what licenses and permits your business needs, try ZenBusiness’s business license report.
Acquire insurance for your Florida professional corporation
Workers’ compensation is a requirement for most Florida businesses with employees. The details of workers’ compensation requirements are based on your industry, number of employees, and other factors. It’s also a good idea to have general liability insurance that is specific to your business.
Open a business bank account
It’s important to keep personal assets completely separate from business assets. This is really important when it comes to operating a Florida professional corporation. It’s a good idea to use the first shareholder meeting to determine which bank to use when opening a new business account.
Forming Your Florida Professional Corporation
The process of professional corporation formation can be complicated in some places and certainly takes time. It’s important to be thorough in all your decisions and document filings throughout the process to avoid future complications.
Florida Professional Corporation FAQs
What are the filing fees for a Florida professional corporation?
There are several forms that may need to be filed to complete the process for your professional corporation. You can find current fees on the Florida Department of State’s Division of Corporations website.
Do I need a lawyer to form a Florida professional corporation?
You’re not required to consult with an attorney to form a Florida professional corporation, but having guidance could certainly make the process easier.
Does Florida have other professional entity types?
Florida also allows professional limited liability companies, which are similar to Florida PCs but are structured more like a limited liability company, meaning they have more flexible tax and management options but not quite as much liability protection.
Can professionals from different fields form a Florida professional corporation together?
No. All shareholders in a Florida professional corporation must have the same professional licensing.
Will I be taxed as an S corporation or C corporation in Florida?
Your board of directors must decide whether you want to file as an S corporation or C corporation in Florida. It may be in your best interest to seek guidance from a professional accountant or business attorney to determine which is best for your business.