Are you ready to grow your business the way you have always envisioned? There are a lot of different paths to take, depending on your objectives. If you’re a licensed professional in Pennsylvania, you may be considering joining with others in your field to form a Pennsylvania professional corporation (PC). Let’s take a closer look at what a professional corporation is, and how ZenBusiness may be able to simplify the process.
Determine whether a Pennsylvania professional corporation is right for you
When a group of licensed professionals wants to open a joint practice, one option they should consider is a professional corporation. However, PCs aren’t the only professional entity option in Pennsylvania.
Select groups may also elect to form a professional limited liability company (PLLC). These include chiropractic, dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology, and veterinary medicine.
Though both entities can be formed by licensed professionals, there are several differences. Pennsylvania professional corporations are owned by shareholders who hold stock in the business. PLLCs are made up of members with an ownership interest in the company. This changes the operating structure of the business. PLLCs are easier to form but don’t have quite as much liability protection as corporations. Additionally, the entities are taxed differently: PCs are taxed at both the corporate and individual level (double taxation), while PLLC income is taxable only to the individual members (pass-through taxation). However, PCs that meet certain requirements can elect S corporation status, which allows them to be taxed similarly to PLLCs.
Generally, PLLCs are a good option for those who seek fewer maintenance requirements, but a professional corporation is a solid choice for high-income ownership groups because of the tax structure options and high-level liability protection.
How to Form a Pennsylvania Professional Corporation
Though forming a Pennsylvania professional corporation is a worthwhile endeavor to get your business started, there are a lot of moving pieces. We recommend going in knowing that you may need to ask for a little help to avoid over-complicating the tasks you have to complete. At ZenBusiness, we offer a number of business services and tools to help you along the way.
Choose a Name for Your Pennsylvania professional corporation
It’s important that you choose a name that conveys the professional nature of your business and isn’t misleading. There are other restrictions that apply to naming a Pennsylvania professional corporation as well. Typically, corporations must include one of the following words in their name:
With PCs, if the name contains the last names of one or more shareholders and no other words (with the exception of “and,” “&,” “associates” or “P.C.”), then they don’t need to include one of the words above. For example, a law firm could be called “Smith & Jones” or “Smith & Associates.”
Registering Your Business Name
Once you have decided on a name, you need to quickly check that it’s not already being used. If you find a name you like but aren’t ready to incorporate yet, you can reserve it with the state. One way ZenBusiness can help is by taking care of the business name registration process for you. That way, you can move on to the other aspects of your business formation, with one less thing to worry about.
Securing a Domain Name
The next task on your list is to register your business domain name. In the 21st century, having an online presence is essential for most businesses This means that you need a website with a domain name that makes sense. We can reserve your domain name with our domain name registration service.
Select a Pennsylvania registered office
Selecting a Pennsylvania registered office, called a registered agent in other states, is a legal requirement for all registered Pennsylvania businesses. A registered agent is a person or entity that has a physical address where mail and legal notices can be served during regular business hours. This address must be within the state of Pennsylvania. You may serve as your own registered agent, but this could prove troublesome if you would like to take a vacation or go on a coffee run. Many businesses find it much easier to hire a registered agent service, like those provided by ZenBusiness’s registered agent service providers.
Complete your Pennsylvania Articles of Incorporation
The official document you use to register your business with the state is called the Articles of Incorporation. This document contains relevant information about your Pennsylvania PC, and it must be filed with the Secretary of State.
Establish a corporate record
Pennsylvania professional corporations are required to keep a permanent record of all important company decisions. Corporate records can be kept at the primary place of business, a safe location elsewhere, or electronically as long as they can be produced for review when needed. Keeping digital copies is a simple way to provide access for all shareholders.
Designate a Pennsylvania professional corporation board of directors
The incorporator has the responsibility of naming initial directors to serve on the board for the Pennsylvania PC. These directors must be licensed professionals in the field the corporation was formed to serve, though there a few exceptions,
Create Pennsylvania corporate bylaws
Corporate bylaws for your Pennsylvania professional corporation don’t need to be filed with the Secretary of State. However, they’re a very important part of your corporate structure, and you need to be thoughtful in drafting them. These are essentially the rules that will govern the way your business operates. Some important topics to cover in your corporate bylaws include:
- How voting will be conducted for various topics
- The frequency and location of board meetings
- Officer appointments and their responsibilities
- Procedures for internal dispute resolution
- Election procedures for directors
- How to handle conflicts of interest
- Conducting transfer of shares
The board of directors will vote on the initial bylaws at their first meeting. If necessary, bylaws can be amended by shareholder vote.
Hold your first board meeting
You may have a lot to talk about in this first gathering. It might be a good idea to order pizza and have your agenda set. The initial board meeting is arranged by the incorporator and attended by the appointed board of directors. There are several important decisions to be made, including:
- Determining how the corporation will be taxed
- Creation and approval of bylaws
- Choosing a bank
- Issuing stock certificates
- Designating officers to manage the business
Don’t forget to record the minutes of the meeting, including all decisions made.
Handle Pennsylvania tax obligations
How to be taxed is one of the biggest decisions your Pennsylvania professional corporation will make. Your Pennsylvania professional corporation may be taxed as either an S corporation or a C corporation:
- C corporation — Profits for a C corporation are taxed at both the corporate level and on the personal tax returns of shareholders. This concept is called “double taxation.” Despite double taxation, many professional corporations choose to become C corporations because there are fewer restrictions than S corporations.
- S corporation — Profits for S corporations are taxed only on personal income tax returns, but there are a number of limitations. You may file as an S corporation only if your corporation has fewer than 100 shareholders, isn’t owned by another business entity, issues only one class of stock, and doesn’t have any foreign shareholders.
You may want the help of an experienced business finance or tax professional to determine what structure is best for your business.
State and Local Tax Requirements
There may also be specific business taxes for the local municipality where you conduct business. You can learn more about Pennsylvania tax regulations by visiting revenue.pa.gov.
Depending on the type of services you provide, your business may need to pay taxes specific to what you do. You will need to check with your local government, so you’re aware of all these taxes.
Federal Tax ID Number
To pay taxes, open business accounts, and hire employees, you will need a federal tax identification number (EIN). You can obtain your EIN on your own from the Internal Revenue Service (IRS) or you can relieve some of the stress of additional paperwork by using ZenBusiness’s EIN acquisition service.
Acquire insurance for your Pennsylvania professional corporation
If you’re planning on hiring at least one employee, you will need to satisfy Pennsylvania’s workers’ compensation requirements to cover potential work-related injuries. You can purchase a policy from a private insurance company or the State Workers’ Insurance Fund, or you can opt to self-insure either individually or as part of a group.
It’s a good idea for every business to have general liability insurance. This is important to help cover any claims for bodily harm or property damage that may occur at your place of business.
Professional malpractice insurance also applies to many professional corporations because of the nature of the business. There may be other forms of insurance that are necessary for your specific industry.
Open a business bank account
Mixing personal and corporate finances is very high up on the list of things not to do. Once you have an EIN, you can open a business account specifically dedicated to those funds. At ZenBusiness. we can help you apply to open a small business bank account.
Forming a Pennsylvania Professional Corporation
If you’re feeling a little overwhelmed, just take a breath. Maybe grab a cup of coffee and have another look at the ZenBusiness services that are available to help make the process run more smoothly. Let’s help you find the best way to move your business forward together.
Pennsylvania PC FAQs
What are the filing fees for a Pennsylvania professional corporation?
Basic filing fees for Pennsylvania Articles of Incorporation are subject to change. You can find the most current fees for these and other business documents on the Pennsylvania Department of State’s website.
Do I need a lawyer to form a Pennsylvania professional corporation?
You don’t need a lawyer to form a Pennsylvania professional corporation; you can file your Articles of Incorporation on your own. But you may need some extra support as you go through the process of setting up your business. The business tools and services offered by ZenBusiness can help you stay compliant and sane.
Does Pennsylvania have other professional entity types?
Licensed professionals in Pennsylvania may form a professional corporation. Select groups may also be permitted to form a professional limited liability company (PLLC). These include chiropractic, dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology, veterinary medicine.
Can professionals from different fields form a Pennsylvania professional corporation together?
Professional corporations generally must consist of shareholders who are licensed to perform the same services. Under certain circumstances, multi-purpose Pennsylvania professional corporations may exist.
Will I be taxed as an S corporation or C corporation in Pennsylvania?
Directors of a Pennsylvania professional corporation have the opportunity to determine whether they want the business to be taxed as an S corporation or a C corporation. It’s important to understand the tax implications of each prior to making a decision.