Virginia law authorizes certain individuals to form a professional corporation (PC) for the specific purpose of providing professional services. The professionals authorized to operate a PC include:
- Physical therapists
- Nurse practitioners
- Practitioners of the behavioral science professions
- Land surveyors
- Public accountants
- Insurance consultants
- Speech pathologists
Read on to learn more about professional corporations operating in Virginia, and how the team at ZenBusiness can help you along the way.
Determine whether a Virginia PC structure is right for you
Virginia offers the option of either a PC or a professional limited liability company (PLLC) for Virginia professionals seeking to establish a business where they can offer their services. These entities have some similarities but some important differences as well.
Liability and Taxation
PCs and PLLCs both provide liability protection for their shareholders and members, respectively.
PCs are taxed as C corporations by default, meaning they are subject to double taxation. Double taxation means that the profits of the PC are taxed at two different levels: on 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, meaning that the profits of the business are taxed only once; on the individual income tax returns of the shareholders. Unlike PCs, PLLCs are subject to pass-through taxation by default.
PCs are bound by the formalities of corporate law, meaning they are required to comply with statutory requirements for Virginia corporations. Under Virginia law, corporations must:
- Create corporate bylaws
- Issue shares of stock
- File an annual report
- 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.
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.
Alternatively, PLLC members are issued membership interests to signify ownership in the business. Members of PLLCs in Virginia are subject to similar restrictions on transferring their membership interests.
Virginia law requires the shareholders in a PC and members of PLLCs to possess the same licensure or certification required to perform the services offered by a professional entity, except in certain industries where only two-thirds of the shareholders must be licensed or certified to render the professional service.
Step 1: Choose a name for your Virginia professional corporation
Choosing the right name for your professional corporation is an exciting step in forming your business. However, you have to ensure that you comply with Virginia’s naming requirements. Virginia requires all corporations to have distinct names, meaning you cannot name your business something that is already in use by another Virginia corporation.
The Virginia State Corporation Commission Name Check Availability search allows you to enter your preferred name and lets you know if that name is available or not. For detailed instructions on how to use it, check out our Virginia business entity search guide.
In addition, Virginia 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:
- “Corporation” or “Corp.”
- “Incorporated” or “Inc.”
- “Limited” or “Ltd.”
- “Company” or “Co.”
Instead of one of these designations, you may, but are not required, to include one of the following at the end of your business name:
- Professional corporation
- A professional corporation
Once you’ve chosen a name for your business, you might be ready to create an internet presence. Many clients search for professional services online, so securing a website that accurately reflects your company 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 our domain name registration service, we can help secure your domain name and eliminate the risk of someone else taking the domain name you want.
While it sounds simple, choosing a name for your Virginia PC that meets state guidelines, accurately reflects your business, and isn’t already reserved by another entity can prove difficult. If you have the right name selected for your Virginia PC but aren’t quite ready to get your business off the ground, there is a chance someone else could register their Virginia business under the same name. All the time you spent figuring out the perfect name would be wasted. With ZenBusiness’s name reservation service, we can help reserve your preferred business name so this doesn’t happen to you.
Step 2: Select a Virginia registered agent
Virginia requires all registered business entities to designate a registered agent within the state to receive important legal documents such as service of process on behalf of the PC. Both business entities and individuals are permitted to act as registered agents.
If you select an individual as your registered agent, Virginia law requires that the registered agent be over the age of 18 and have a physical address in the state of Virginia. Additionally, the registered agent must either be part of the management of the business (e.g., an officer or director of the PC) or be a member of the Virginia State Bar.
If your registered agent is a business entity, the company must have an operating office in Virginia. Virginia law prohibits your PC from acting as its own registered agent.
ZenBusiness offers a registered agent service to help you find a registered agent that satisfies Virginia’s registered agent requirements.
Step 3: Complete your Virginia Articles of Incorporation
Filing your Virginia Articles of Incorporation with the state registers your PC. Your PC cannot legally provide professional services until it is registered with the state. The person responsible for signing and delivering the Articles of Incorporation for filing is called the “incorporator.” For PCs, the incorporator must be licensed or authorized in the state of Virginia to provide the professional services offered by the company.
You can complete the Articles of Incorporation online or by submitting the Articles of Incorporation of a Virginia Professional Stock Corporation form. To fill out the form, you’ll need the following information:
- Your PC’s name
- The professional service provided by your PC
- The shares of stock your PC will issue
- The name and address of your registered agent
- Names and addresses of your first board of directors
- The name and signature of your incorporator
Acting as an incorporator does not prevent the incorporator from acting as an officer, director, or shareholder of the PC.
Step 4: Establish a corporate record in Virginia
Virginia law mandates that corporations document and keep a permanent record of their important company decisions. That includes:
- Minutes of all shareholder and board of directors meetings
- Actions taken by shareholders and the board of directors
- Accounting records
- A list of current shareholders
- A copy of the Articles of Incorporation
The corporate record can be stored at your principal place of business. Keeping your corporate record accurate and up to date is critical to effectively operating your business.
Step 5: Designate a board of directors for your Virginia PC
The incorporator can designate the first board of directors in the Articles of Incorporation. If the incorporator chooses not to do so, the first board of directors will be elected at the first annual shareholders’ meeting. The board of directors is responsible for managing the operations and affairs of your PC. Virginia law requires all corporations to have at least one director.
Each director must be licensed or authorized to render the professional services of the PC, except in the case of the following professions:
- Professional engineers
- Land surveyors
- Landscape architects
- Certified interior designers
- Any combination thereof
For these professions, only two-thirds of the board of directors have to be licensed to provide the service.
Step 6: Draft corporate bylaws for your Virginia PC
Virginia law requires corporations to adopt corporate bylaws that are not inconsistent with Virginia’s corporate law or the Articles of Incorporation for your PC. The topics addressed by the bylaws typically include:
- Which bank your PC will use
- How shareholders will vote
- How the PC will resolve internal disputes
- The number of directors on the board
- The management structure of the PC
Bylaws alleviate stress down the road and minimize internal disputes by outlining corporate procedures at the outset of the company’s formation. While PCs are required to have bylaws in Virginia, they do not have to be filed with the state. The bylaws should be recorded in an internal company document and filed in the corporate record.
Step 7: Hold your Virginia PC’s first board meeting
After designating an initial board of directors and drafting bylaws, your Virginia PC is ready to hold its first board meeting. The first meeting is typically arranged and attended by the incorporator of your PC. During the initial meeting, the topics typically discussed include:
- Adopting the corporate bylaws
- Appointing officers to manage day-to-day affairs of the PC
- Approving the issuance of stock certificates
- Determining whether to elect for S corporation taxation status
As noted above, the meeting minutes for all your board meetings must be recorded in your corporate record, including the decisions that were made during the meeting.
Step 8: Handle Virginia tax obligations
Professional corporations are double-taxed by default. 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. This is referred to as being taxed as a C Corporation.
However, your Virginia 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
- No foreign shareholders
S corporation status makes a Virginia 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. PLLCs, unlike PCs, are pass-through entities by default.
At the state level, register your PC with the Virginia Department of Taxation and obtain a Virginia Tax account number. You will be automatically enrolled in a business online services account where you can find and pay your Virginia taxes.
For corporate income taxes, Virginia imposes a flat 6% tax on net income from Virginia sources, payable to the Department of Taxation.
Some counties and municipalities require tax payments to operate a business within their boundaries. Check your local government website for information on additional tax obligations.
Step 9: Obtain Virginia business licenses and permits
As a PC, it is crucial that your directors and shareholders keep their professional licenses active. The Virginia Department of Professional and Occupational Regulation provides a list of professions and occupations that are regulated by the state.
Licenses for other activities may still be required by counties and municipalities.
ZenBusiness can compile a report listing the licenses and permits you will need for your particular business at the local, county, state, and federal levels. This can save you the time and effort of compiling your own checklist and help you avoid missing important requirements.
Step 10: Acquire insurance for your Virginia PC
Your business is required by law to have workers’ compensation insurance if you have more than three employees. Other insurance policies, though not required, can also protect your corporation from incurring serious obligations in the event of damage or a lawsuit.
Commercial General Liability Insurance
A commercial general liability policy typically provides more than one form of liability coverage. Premises and operations coverage pays bodily injury and property damage claims resulting from accidents that occur on your premises or through the operation of your business. Products and completed operations coverage covers liability arising from the handling, use of, existence of any condition in, or warranty of any goods or products manufactured, sold, handled, or distributed by your business. It also covers claims arising out of operations that have been completed or abandoned away from your business premises.
Workers’ Compensation Insurance
Companies that employ three or more full-time employees are required to provide workers’ compensation insurance coverage. Employers can purchase workers’ compensation insurance through a private insurance company or apply to be a self-insurer with the Worker’s Compensation Commission.
Professional Liability Insurance
Professional liability insurance pays claims arising from wrongful acts, errors and omissions, and malpractice by physicians, attorneys, or other professionals. Malpractice insurance is not required for medical professionals or lawyers in Virginia. However, it can protect your PC from facing serious liability in the event of a malpractice claim.
Step 11: Open a business bank account
The next step is to open a business bank account. To do so, you will need an employer identification number (EIN). EINs are issued by the IRS and operate to identify your business, similar to how a social security number identifies an individual. ZenBusiness can retrieve your EIN for you with our EIN service.
Consult with ZenBusiness for assistance operating your Virginia PC
ZenBusiness offers services that can help you operate your Virginia PC more easily. Our tools can help you with tasks like:
- Finding a registered agent service
- Reserving a business name
- Staying compliant with state filing requirements
- Applying for an EIN
- Securing a business domain name
The formalities of operating a business can slow you down. ZenBusiness can provide the assistance you need to help run and grow your business.
Virginia PC FAQs
What are the filing fees for a Virginia PC?
Filing fees change frequently. You can find current fees at scc.virginia.gov.
Do I need a lawyer to form a Virginia PC?
Hiring an attorney is not necessary to form your Virginia PC. You can complete many business formation tasks yourself. However, if you have any questions or concerns about the legal ramifications that can arise in the operation of your business, it’s best to consult a licensed Virginia attorney.
Does Virginia have a professional corporation (PC) entity?
Yes. You can form a PC entity in Virginia.
Does Virginia have other professional entity types?
As an alternative to a professional corporation, Virginia allows professionals seeking to incorporate their business to form a PLLC.
Can professionals from different fields form a Virginia PC together?
Virginia requires PCs to be formed for the purpose of rendering one specific type of professional service or related professional service. However, Virginia does allow certain professionals to combine companies offering professional services. The occupations permitted to combine are listed on the Articles of Incorporation form for Virginia PCs.
Will I be taxed as an S corporation or a C corporation in Virginia?
By default, PCs in Virginia are taxed as C corporations. You can seek S corporation tax status for your Virginia PC by meeting certain requirements and filing an election form.