A Vermont professional corporation (PC) is a business created for the purpose of rendering professional services. Vermont defines this as a service that may be lawfully rendered only by a person licensed or otherwise authorized by a licensed authority in the state of Vermont. These types of services may not be lawfully rendered by a general corporation. Examples include:
- Medical professionals
- Real estate appraisers
- Financial professionals
If you need more information about professional limited liability companies (PLLCs) operating in Vermont, ZenBusiness has compiled a guide highlighting important characteristics and obligations of Vermont PLLCs as well.
Determine whether a Vermont PC structure is right for you
Vermont offers the option of either a PC or a PLLC for Vermont professionals seeking to offer their services through a registered entity.
Liability and Taxation
PCs and PLLCs both provide liability protection for their shareholders and members, respectively.
PCs are generally taxed as C corporations, meaning they’re subject to double taxation. Double taxation means that the profits of the PC are taxed at both the corporate level and on the individual income tax returns of the shareholders.
However, in certain circumstances, PCs can elect to be taxed as S corporations. S corporations receive “pass-through” taxation status, meaning that the profits of the business are taxed only on the individual income tax returns of the shareholders.
PCs are bound by the formalities of corporate law, meaning they’re required to comply with statutory requirements for Vermont corporations. Corporations must issue shares of stock, draft corporate bylaws, and establish a board of directors.
PLLCs, on the other hand, are governed by the terms of their operating agreement, providing the business owners with significantly more control over the initial processes of a PLLC than a PC.
Both types of entities must file an annual report each year to keep their state registration up to date. If you need help, ZenBusiness offers an annual report service to help keep your business compliant with state law.
PCs issue shares of stock to shareholders to signify ownership in the PC. PC shareholders are subject to strict rules governing the transferability of their shares.
PLLCs, on the other hand, issue membership interests to their members to signify ownership in the business. Members of PLLCs in Vermont are subject to similar restrictions on transferring their membership interests.
Choose a name for your Vermont professional corporation
Choosing the right name for your professional corporation is an exciting step in forming your business. However, you have to comply with Vermont’s naming requirements. Vermont requires all businesses to have distinguishable names, meaning you can’t name your company something that is already in use by another Vermont entity. Vermont business names are also prohibited from including:
- Discriminatory language
- Indecent language
- Obscene language
- False implication of government affiliation
Furthermore, Vermont law requires corporations to identify the type of business entity they operate at the end of their name. Thus, you must include one of the following in the name:
- Professional corporation (“PC”)
- Professional association (“PA”)
- Service corporation (“SC”)
- Limited (“Ltd”)
Once you’ve decided on a name for your business, you might want to advertise your brand to potential customers. Many clients search for products and services online, so securing an online presence is crucial to operating a competitive business. A business domain name is a unique name claimed through the domain registrar to represent a company’s brand online. With ZenBusiness’s domain name service, we can help secure your domain name to prevent someone else from purchasing it before you do.
If you have the right name selected for your Vermont PC, but aren’t quite ready to get your business off the ground, there is a chance someone else could register their Vermont PC under the same name. All the time you spent figuring out the perfect name would be wasted. You can prevent this by taking advantage of our name reservation service.
Select a Vermont registered agent
Vermont requires business entities to designate and maintain a registered agent in the state. The registered agent accepts service of process and other important documents on behalf of your company.
The only requirement for a Vermont registered agent is that the agent have a street and mailing address located in Vermont. Vermont allows individuals and business entities to serve as registered agents.
ZenBusiness offers a registered agent service to help you find a registered agent that satisfies the state’s requirements.
Complete your Vermont Articles of Incorporation
Vermont requires a person licensed to render the professional service offered by your PC to file the Articles of Incorporation, also referred to as Articles of Association, with the Secretary of State to validly incorporate your PC. The Articles of Association must include:
- Business name
- The end of the fiscal year for your company
- Description of the professional services provided
- Business contact information
- Principal office
- Registered office and agent details
- The number of authorized shares issued by the corporation and whether the shares are divided into classes or series
- Name and signature of the incorporator
- The names and addresses of all the original shareholders, directors, and officers of the PC
- A certificate by the regulating board of the professional involved that each of the incorporators, directors, and shareholders is duly licensed to practice such profession
After filing your Articles of Association, you must deliver a certified copy of the Articles to each licensing authority with jurisdiction over the professional service you offer.
Establish a corporate record in Vermont
Vermont law requires corporations to document and keep a permanent record of the important decisions made by the PC. Keep the official corporate record in your PC’s principal office or stored in a safe location.
Designate a board of directors for your Vermont PC
The incorporator selects and names the initial board of directors on the Articles of Association for the PC. The directors are responsible for overseeing the day-to-day operations of the PC. The next board of directors is elected at the annual shareholder meeting.
Draft corporate bylaws for your Vermont PC
Vermont law requires corporations to adopt corporate bylaws that are not inconsistent with Vermont’s corporate law or the Articles of Association for your PC. The topics addressed by the bylaws typically include things like:
- How shareholders will vote
- How the PC will resolve internal disputes
- Which bank your PC will use
- The number of directors on the board
- The roles of directors and officers of the PC
Bylaws help businesses run smoothly by outlining procedures at the outset of the company’s formation. While the bylaws are required by the state, they don’t have to be filed with the state. You will want to record your bylaws in an internal company document and file them in the corporate record.
Hold your Vermont PC’s first board meeting
If the initial directors for the PC are named in the Articles of Association, the initial directors are responsible for holding the first board meeting. In the initial meeting, the matters of business include:
- Appointing officers for the PC
- Adopting bylaws
- Selecting a bank for the PC
- Approving the issuance of stock certificates
If the incorporator doesn’t name the initial board of directors in the Articles of Association, the incorporator will hold the initial meeting to elect the initial board of directors.
Handle Vermont tax obligations
To maintain good standing, your PC has to comply with its tax obligations at the federal, state, and local levels.
Professional corporations are taxed as C corporations by default, which is commonly referred to as “double taxation.” That means that a corporation’s profits are taxed both at the corporate level and on the personal tax returns of the corporation’s shareholders.
However, your Vermont PC can elect for S corporation status if it has:
- Under 100 stockholders;
- One class of stock;
- No business entities as owners of the corporation; and
- No foreign shareholders
S corporation status makes a Vermont PC a “pass-through” entity. In a pass-through entity, the profits of the corporation are taxed once, on the shareholders’ personal income tax returns.
Regardless of whether you elect for C corporation taxation or S corporation taxation, you have to pay state taxes in Vermont. C corporations are subject to a corporate income tax, while entities taxed as S corporations are subject to a business entity tax.
Some cities and counties impose taxes on businesses operating within their boundaries. Contact your local tax authorities to determine if your PC is subject to any local taxes.
Obtain Vermont Business Licenses and Permits
Vermont doesn’t require businesses to obtain a general business license to operate within the state.
However, it’s crucial that your directors and shareholders keep their professional licenses active. The Vermont Secretary of State provides a list of the professionals regulated by the Vermont Office of Professional Regulation. Additionally, some industries require licenses or permits before they can legally start working.
ZenBusiness can create a single report for you listing the licenses and permits you might need for your business at the local, state, and federal levels. This can save you the time and effort of compiling your own checklist and help you avoid missing important requirements.
Acquire insurance for your Vermont PC
Vermont businesses are required by law to have workers’ compensation insurance. Additionally, other insurance policies can protect your corporation from incurring serious obligations in the event of damage or a lawsuit.
General Liability Insurance
General liability insurance, also referred to as general business insurance, protects your Vermont PC from bodily injury claims, property damage claims, and other legal claims that can put your business or your business’s assets in jeopardy. This coverage isn’t required but is strongly recommended.
Professional Liability Insurance
Professional liability insurance pays claims arising from wrongful acts, errors and omissions, and malpractice by physicians, attorneys, or other professionals. While Vermont doesn’t require professionals to hold malpractice insurance, it can protect your PC from facing serious liability in the event of a malpractice suit.
Open a business bank account
You need an employer identification number (EIN) to open a business bank account. EINs are issued by the IRS and operate as essentially a social security number to identify your business. ZenBusiness can retrieve an EIN for you with our EIN service.
ZenBusiness can help you operate your Vermont PC
ZenBusiness offers services that can allow you to focus your attention on the operations of your company while we worry about the formalities. ZenBusiness can help you:
- Secure a business domain name
- Stay compliant with state filing requirements
- Reserve your business name
- Apply for an EIN
- Find a registered agent service
Don’t allow the minor details of running your business prevent you from maximizing your PC’s potential. Let us take care of the small stuff for you.
Vermont Professional Corporation FAQ
What are the filing fees for a Vermont PC?
Filing fees change frequently. Check sos.vermont.gov for the most up-to-date information.
Do I need a lawyer to form a Vermont PC?
Hiring an attorney isn’t required to form a Vermont PC.
Does Vermont have other professional entity types?
In addition to a professional corporation, Vermont allows professionals seeking to start their professional services business to form a PLLC.
Can professionals from different fields form a Vermont PC together?
As a general matter, PCs in Vermont can offer professional services only within a single profession. Thus, individuals who practice the same profession in different specialties are permitted to form a Vermont PC together.
However, Vermont allows professionals to form a PC rendering two or more professions to the extent that the combination of professional services is authorized by the licensing law of each profession.
Will I be taxed as an S corporation or a C corporation in Vermont?
By default, PCs in Vermont are taxed as C corporations. S corporation tax status can be obtained by meeting certain requirements and filing an election form.