A professional corporation is a special type of corporate structure designed for licensed professionals like doctors, engineers, and lawyers.
In Kentucky, professional corporations (also called professional service corporations) allow groups of professionals to lower their risk of liability and sometimes get better tax treatment.
The process of forming a Kentucky professional corporation is a little complicated. But don’t worry, our handy guide will walk you through the process step by step.
Determine whether a professional corporation is the right fit for you
Before you start up a professional corporation, consider whether it’s the best business entity for you and your goals.
Is a professional corporation or a PLLC the right choice for your business?
Kentucky allows both professional corporations and professional limited liability companies (PLLCs).
There are several differences between PCs and PLLCs. One key difference is how the ownership of the entity is divided. As the names suggest, a professional corporation operates more like a corporation. And just like any other corporation, the ownership of a professional corporation is measured by stock ownership.
By contrast, ownership stakes in a PLLC can be freely divided amongst various members regardless of how much each member contributes to the entity. That means you need to think about who has an ownership interest and how you want to divide ownership among the owners.
It’s also important to consider who you want to make business decisions. A PC leaves most business decisions to a board of directors.
However, PLLCs have a more flexible management style where any member (or group of members) can act as the PLLC’s manager.
Choose a name for your Kentucky professional corporation
The first step to starting a professional corporation in Kentucky is choosing a name.
Kentucky law imposes several naming restrictions. For example, your professional corporation’s name must include the phrase “professional service corporation” or the abbreviation “PSC.”
Your company name also needs to be unique. Use our business name reservation service to see whether your preferred name is available. If it is, we can reserve it for you while you work on your paperwork. Your Kentucky name reservation will last for 120 days. You may also want to consider using our domain name registration service, so you’ll be able to start advertising your business online when you get up and running.
Select a Kentucky registered agent
Registered agents exist to accept official correspondence — like government documents and legal notices — on your professional corporation’s behalf. The registered agent then passes these documents on to the PC.
Kentucky law requires professional corporations to designate a registered office and a registered agent. However, any individual living in the Commonwealth of Kentucky can serve as a registered agent if their business address is the same as the registered office.
ZenBusiness provides a registered agent service to help connect you with a registered agent who meets Kentucky’s registered agent requirements.
File Your Kentucky Articles of Incorporation
For this step, you need an incorporator — someone you authorize to sign and file your Articles of Incorporation. Your Articles of Incorporation will include information such as:
- The name of the professional corporation
- The number of shares
- The name and address of the registered agent
- The address of the professional corporation’s principal office
- The names and addresses of the original shareholders
- The name and address of the incorporator
The incorporator needs to sign the Articles of Incorporation to certify that the information is correct. The registered agent also needs to sign, acknowledging that they agree to serve as the registered agent.
Establish a corporate record in Kentucky
Once the Commonwealth reviews and accepts the Articles of Incorporation, your professional corporation officially exists. Take a moment to congratulate yourself on your big achievement.
However, there are still a few steps left in the process.
Establishing a corporate record means designating a place where you can keep your critical corporate documents. Specific files that you must maintain in written form include copies of the following:
- Articles of Incorporation and amendments
- Minutes for all shareholder and board of directors meetings in the past three years
- Accounting records
- Actions taken by shareholders without a meeting in the past three years
- Directors’ and officers’ contact information
- Trademarks (if any)
- Corporate resolutions
- Tax returns
- List of current shareholders
You’ll also need to include a copy of your professional bylaws. More on those in a moment!
Designate your Kentucky professional corporation’s board of directors
You need to have at least one director. However, it’s a good idea to have multiple directors to help oversee the daily operation of the professional corporation. There’s no requirement on where directors must live or how old they need to be.
Create corporate bylaws
Bylaws serve as the regulations and procedures for the corporation’s operation. Bylaws cover a large range of important topics, including:
- Board of directors meetings
- Stock shares
- Shareholder meetings
- Corporate officer roles
By regulating these topics, bylaws help your professional corporation run smoothly and fairly. You don’t need to submit your articles to the Commonwealth, but you do need to keep a written copy as part of your corporate record.
Hold the first board meeting
Once you’ve taken care of all of these steps, it’s a good idea for your PC to hold its first board meeting. At this initial meeting, you’ll appoint officers, adopt bylaws, issue stock, and elect the board of directors.
Be sure to carefully record the minutes of the meeting for your records.
Handle Kentucky tax obligations
Unless it elects to file as a S corporation, a PC is treated as a C corporation under federal tax laws. This means that its revenue will be taxed twice: once at the business level and once at the personal level.
Kentucky taxes the income of LLCs and corporations at a flat 5% tax rate. You’ll have to file a Form 720, which you can find by going to the Kentucky Department of Revenue site.
In addition to statewide requirements, you may have to pay special occupational fees and taxes to certain districts in Kentucky. You can find more information about these districts on the occupational tax section of the Kentucky Secretary of State website.
Obtain Kentucky business licenses and permits
Professional corporations are responsible for obtaining and maintaining all required licenses and permits. It’s really hard to check online for all the licenses you’ll need because of the different layers of federal, state, and local requirements.
Luckily, ZenBusiness offers a business license report service to help you discover what local and state business licenses you need to run your professional corporation.
Acquire insurance for your Kentucky professional corporation
General Business Insurance
While Kentucky doesn’t require general business insurance or commercial liability insurance, it’s still a good idea to acquire a policy to cover your professional corporation.
Professional Malpractice Insurance
Depending on your profession, you may have to carry professional malpractice or professional liability insurance.
For example, the Kentucky Supreme Court enacted Supreme Court Rule 3.024 requiring attorneys to carry professional liability insurance.
Other Insurance Requirements
Kentucky law requires most corporations — including professional corporations — to provide workers’ compensation insurance and unemployment insurance for their employees.
Open a business bank account
The final step in forming a Kentucky professional corporation is simple. Just open a business bank account.
Once you’ve finished this last step, give yourself a pat on the back. You’ve formed your own professional corporation in Kentucky!
Ready to launch your business?
At ZenBusiness, we’re 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, our goal is to help you stay on the road to success.
Check out our services, and contact us today to see how we can help you grow your company.
Kentucky Professional Corporation FAQs
- What are the filing fees for a Kentucky professional corporation?
The current fees to file Articles of Incorporation for a Kentucky professional corporation can be found on the Kentucky Secretary of State website.
- Do I need a lawyer to form a Kentucky professional corporation?
Kentucky law doesn’t require that you retain an attorney for this process, and depending on the size and complexity of your business, it may not be necessary. ZenBusiness provides many tools to help you run your Kentucky professional corporation on your own, such as our registered agent service, name reservation service, and Worry Free Compliance services.
- Does Kentucky have other professional entity types?
Yes. As discussed above, professionals can also form PLLCs.
- Can professionals from different fields form a Kentucky professional corporation together?
Only in rare situations. Under Kentucky law, all the members of a professional service corporation must be from the same professional service or from “related” professional services.
- Will I be taxed as an S corporation or C corporation in Kentucky?
All new corporations are taxed as C corporations by default. You must file an additional form (form 2553) with the IRS and meet S corporation requirements to have your professional corporation taxed as an S corporation.