Is forming a North Carolina professional corporation the right choice for your business? If your business meets the right criteria, this business structure offers benefits that can protect your personal assets and increase the financial stability of your business. If you’re ready to get started, ZenBusiness offers information and services that can help you on your way.
A professional corporation (PC) is a business entity structured for those providing licensed professional services. Its owners (stockholders) can only be professionals licensed to perform the same professional services the corporation offers. Examples of who may own shares of a professional corporation in North Carolina include:
In most cases, 100% of the PC’s stock must be owned by licensed professionals.
Non-licensed employees can own one-third of professional corporation stock involving architecture, landscape architecture, engineering, land surveying, geology, or soil science. If the professional corporation is for certified public accountants, 49% of the corporate stock can be owned by non-licensed individuals, as long as licensed individuals own and control voting stock that represents 51% or more of the votes entitled to elect corporate directors.
Both structures limit the personal liability of shareholders, directors, and officers for PCs, and members for PLLCs. However, there are a number of differences between them.
By default, a PLLC enjoys pass-through taxation, which means that profits are taxed only on individual members’ tax returns. On the other hand, PCs are subject to double taxation, which means that their profits are taxed both at the corporate level and on the shareholders’ individual tax returns. Your PC may be able to avoid corporate double taxation by electing to be taxed as an S corporation.
Although both PCs and PLLCs provide protections for your business, PCs require more paperwork and formalities, but transferring ownership interest between licensed professionals is much easier. PLLCs are easier to form and maintain, but ownership changes require more work than with a PC.
Starting a North Carolina PC requires preparation. Completing the steps below will be important to starting your business off on the right foot.
Your PC’s name communicates your values and abilities to prospective clientele. By law, your PC’s name must contain a corporate designation such as “corporation,” “incorporated,” “company,” “limited,” “corp.,” “inc.,” “co.,” “ltd.,” “professional association,” “P.A.,” “professional corporation,” or “P.C.”
The name cannot contain language that states or implies that your PC is organized for an unlawful purpose or a purpose other than its actual purpose, and it must also be distinguishable from other North Carolina business entities. You must also check with the licensing authority of your profession to determine whether it has additional naming requirements.
We can help you reserve a domain name with our Domain Name Service. If you want to do business under a name different from the business name on your Articles of Incorporation, you must file an Assumed Business Name Certificate. ZenBusiness’s DBA Service can help you with this.
Every North Carolina corporation must have a registered agent. A registered agent can be a resident of North Carolina or a business entity authorized to conduct business in North Carolina. Any registered agent you choose must have a business office in North Carolina that is also your registered office.
Registered agents are necessary to receive important business and legal documents for your business. Documents served to registered agents could be lawsuits, collection notices, or notices from government agencies. Because registered agents serve this purpose, they need to be continuously available during business hours to receive time-sensitive documents on your behalf.
Serving as your own registered agent has its drawbacks. You will likely need to leave the office during business hours to handle important matters, and don’t want your clients or potential clients to see service of process while they are waiting for an appointment. To protect your privacy and free up your business management options, ZenBusiness provides registered agent services to help you find a registered agent that suits your needs.
To form your business, you must file Articles of Incorporation with the Secretary of State. Your Articles of Incorporation and formation documents must include:
You can find detailed instructions for filing your PC’s formation documents at sosnc.gov.
Running a corporation requires diligent note-taking and bookkeeping. By law, North Carolina corporations must keep records of minutes from all meetings involving incorporators, shareholders, and directors, and they must keep a record of all actions taken by shareholders or directors (without a meeting) as well as actions taken by director committees. Your corporation must maintain accounting records, records of its shareholders, and the number of shares each shareholder owns.
At its principal office, your corporation must keep the following records:
Your corporate records must be written or reasonably convertible into writing.
Your PC must have a board of directors. Your board of directors authorizes or exercises corporate powers, and it authorizes or manages corporate business and affairs. At least one of your PC’s directors and one of its officers must be licensed in the professional services your corporation offers.
Your incorporators or board of directors must adopt PC bylaws. Corporate bylaws normally contain terms for managing the business and regulating corporate affairs. Corporate bylaws can include provisions regarding:
Your Articles of Incorporation can include provisions from your bylaws, but that isn’t required.
Your PC needs to hold its initial organizational meeting immediately after incorporation. If the Articles of Incorporation name directors, the majority of your directors hold the meeting. If your Articles of Incorporation don’t name directors, the incorporators call the meeting. During the meeting, your corporation appoints officers, elects directors, adopts bylaws, and/or handles any other business presented.
Your corporation is subject to federal and state tax obligations. Your corporation may also be subject to local tax obligations.
To pay federal taxes, hire employees, and open corporate bank accounts, your professional corporation needs an employer identification number (EIN). ZenBusiness provides EIN services to help you obtain an EIN quickly.
You must pay corporate income taxes and franchise taxes to North Carolina. You don’t need a state tax identification number to pay these taxes. North Carolina uses your federal EIN for your state taxes.
Depending on the nature of your business, you may also need to apply for sales and use taxes at the local level. You can reach out to your city and county to determine what taxes apply.
You and your shareholders are responsible for maintaining proper and up-to-date professional licenses to run your PC. Depending on your industry and location, you may also need business licenses at the federal, state, and/or local levels. There is no central place for business license requirements, and you need to review industry rules at the federal, state and/or local levels to determine what other licenses you may need.
Fortunately, our partners at Avalara can do the research for you. Through this business license service, you will receive a report identifying the local, state, and federal licenses and permits required to run your business.
While the corporate structure might limit your personal liability for many corporate torts and debts, insurance is still important and even required under certain circumstances.
If your PC employs three or more employees, you must have workers’ compensation insurance. You may also want to purchase multiple forms of business insurance to protect your business assets from lawsuits and unforeseen harms. Lastly, you’re still liable for your personal negligence and any professional malpractice you personally commit or supervise. Professional malpractice insurance is important for protecting you and your license when running a PC.
Once you have your EIN, you can open a business account to separate your business funds, protect your capital, and provide easy financial access to authorized agents. The rates and benefits a financial institution might offer to businesses could be key in keeping your professional corporation financially healthy. If you’re looking to open a business bank account, ZenBusiness can help.
Although professional corporations don’t have to file annual reports in North Carolina, they do have to hold annual shareholder meetings and keep professional licenses, registrations, and certifications current.
A North Carolina professional corporation can offer a practitioner like you many business benefits. The number of tasks you must complete may seem daunting, but ZenBusiness has the tools you need to help you through the process.
There are many filing fees to incorporate and maintain your PC, and you can find them at sosnc.gov. North Carolina law also sets maximum fees for certification and registration of professional licenses. You may have to pay additional fees to the state and local government to conduct business.
No. You can form your PC on your own and ZenBusiness can help with tools like Registered Agent Service and Business License Reports.
Yes. You can form a professional limited liability company in North Carolina.
Typically, no. In most cases, a North Carolina PC can provide only one type of professional service. However, there are some exceptions for architecture, landscape architecture, engineering, land surveying, geology, soil science, and healthcare professionals.
Normally, you will be taxed as a C corporation. If you have 100 shareholders or less and otherwise qualify to file as an S corporation with the IRS, North Carolina taxes you as an S corporation.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
North Carolina Business Resources
Get a Professional Corporation in These States
Start Your Professional Corporation in the Following States
Ready to Start Your North Carolina Corporation?