P C. Meaning in law and legal documents, Examples and FAQs
This protection is a significant advantage for those in high-stakes professions where lawsuits can be common. When these professionals form a P.C., they create a corporation that is specifically designed for providing their specialized services. This means they can operate as a team, share resources, and serve clients more effectively.
Structuring your business as a PC once meant you had more tax flexibility than many other types of corporations. The Internal Revenue Service changed that in 1986, classifying all PCs as professional service corporations and charging them a flat 35 percent tax rate. Although the tax break is no longer available for PCs, other advantages make it appeal to some business owners.
- This means they can operate as a team, share resources, and serve clients more effectively.
- In most cases, a PC will need approval from the state’s governing board for that profession, in addition to the usual state requirements for forming a corporation.
- In conclusion, it’s critical to comprehend the numerous business jargon and legal requirements before starting a business.
- Remember that a professional corp leaves you liable for your own errors, omissions and malpractice but protects you from the mistakes of your partners.
- If the company plans to hire employees or conduct business in other states, an Employer Identification Number (EIN) and sales tax permit may be required.
Taxation
The main reason to set up your business as a PC is to limit your personal liability from lawsuits and business debts. This doesn’t protect you from every financial responsibility, but it helps. For example, if a client slips and falls on your steps, she can sue your corporation but not you personally; the corporation might be required to pay her damages, but she can’t touch your personal assets. However, if you’re a doctor and commit malpractice, you can still be held personally liable in addition to the corporation being liable. Your PC protects other shareholders, such as other doctors in your practice. Without PC protection, they can be held personally liable for your malpractice, but when your practice is structured as a PC, only the doctor who commits the malpractice is liable.
- When choosing between a PC vs LLC, there’s a lot to take into consideration.
- These corporations may offer professionals certain benefits.
- With a sale or change in ownership, the business continues to operate without disruption.
- But the state poses no limits on what they consider to be professional services.
- Check with your state government or Secretary of State to find out what forms to file and fees to pay.
- Professional corps are similar to LLCs and provide liability protection to business owners.
Business owners are wise to consider several types of legal entities before deciding to register as a PC or any type of corporation. In addition to federal rules, look into your state’s rules for each type as well because many states have different requirements for them. LLCs can opt to pay taxes in other ways, like being taxed as an S Corp, which can offer some tax benefits.
If a “P.C.” is sued, the corporation itself is typically responsible for the legal issues, not the individual owners. However, there are exceptions, especially if the owners acted unethically or illegally. It’s important to have proper insurance to protect against lawsuits. Is a valuable option for professionals who want to collaborate while protecting their personal assets and potentially enjoying tax advantages.
Key Characteristics of a Professional Corporation
While many states require annual registrations or what does pc stand for in business franchise taxes for LLCs, some states are free to file while others can be hundreds of dollars. If those profits are later distributed to shareholders, they are taxed again. LLCs have many benefits, but complexities like ownership changes make this business structure less attractive for some. For example, three CPA accountants may want to start a joint practice and provide accounting and tax services. The drawbacks of a “P.C.” can include more regulatory requirements, higher costs to set up and maintain, and potential limitations on the types of services that can be offered.
What is a professional corporation (PC)?
This means there are no outside investors unless they are also professionals. State law may also require professional corps to purchase specific insurance levels, appoint a board of directors and elect officers. LLCs are typically pass-through entities and pay taxes as sole proprietorships. All of the LLC’s earnings pass through to the individual owner’s personal tax returns and get reported on those income tax returns.
If you’re an attorney in an LLP, for example, you can’t be sued personally if one of your business partners commits negligence in a legal case. These different classifications might offer more tax benefits for you than a PC, but check with your accountant to confirm which incorporation structure is best for you. The primary benefit of forming a PC is limited liability protection. This can protect personal assets from business-related lawsuits or financial troubles. A limited liability company (LLC) combines the tax benefits of a partnership and the limited liability protection of a corporation. A professional corporation (PC) is organized according to the laws of the state where the professional is licensed to practice.
So, you’ve stumbled upon a business name followed by the seemingly cryptic letters “PC.” What exactly does it signify? It’s a legal designation indicating that the business is a corporation formed by licensed professionals, such as doctors, lawyers, accountants, or engineers, to provide professional services. But understanding the nuances of a PC goes far beyond just knowing the acronym’s meaning. Let’s delve into the details and uncover the implications of this designation. People must first select a distinctive company name and submit articles of organization to the secretary of state of their state in order to form an LLC. Some states could also call for filings like a statement of information or an operating agreement in addition to the articles of incorporation.
Can a professional corporation be taxed as an S Corp?
Each professional remains personally liable for their own malpractice, though not for the malpractice of other shareholders. LLCs are not required by most states to pay state taxes, but there are a few that do. Also, some states impose an annual registration, renewal, or franchise fee. Limited liability companies and professional corporations can file as an S corporation to avoid double taxation. The acronym “PC” holds significant importance in business, referring to a Professional Corporation or a Personal Computer.
Formation and Ownership Requirements
A limited liability company is like a partnership but with more limited liability. One advantage to professionals is that LLC members (as the LLC participants are called) can consist of different types of entities, such as individuals and corporations. So, a doctor in a solo practice and a PC of doctors could join an LLC that has other doctor members as well. A disadvantage, however, is that members of an LLC are generally required to carry a high level of malpractice insurance. Owners of professional corps are liable for their own negligence or malpractice while working but are not liable for the negligence or malpractice of other owners of the professional corp.
LLCs can also appeal to those planning to eventually expand or add non-licensed members or investors, which PCs do not permit. When it comes to compliance, costs, and other factors, these are popular states for forming an LLC. There are significant differences in taxation with an LLC vs PC. They are also cost-efficient in how they are run since practitioners share office space and staff. PCs also continue despite the death or withdrawal of owners. Although PCs and LLCs share many features, they are different types of entities.
LLC owners file articles of organization, and PC owners file articles of incorporation in the state where they’ll do business. By default, LLCs are disregarded for tax purposes, and members report all business income on personal tax returns. Taxation is a significant consideration when deciding what type of business to form. Choosing the right structure can help you limit your tax liability with the IRS and keep more of the money that you earn. PCs must be owned and operated by professionals licensed in the specific field of service. A PC protects against business liabilities but not personal malpractice.
The exact industries vary by state but typically focus on these licensed professionals. Specific requirements of corporations vary significantly from state to state. However, a PC protects an owner from the malpractice/negligence of the other business owners.
What does “P.C.” mean in legal documents?
This would mean you can’t open “Doe and Smith Veterinary Services and Dentist Office PC” because that mixes two different professional services. Every state will have different filing requirements to officially form an LLC or professional corp. Check with your state government or Secretary of State to find out what forms to file and fees to pay. Yes, a PC can operate in multiple states, but it will need to register as a foreign corporation in each state where it conducts business.
Doing business collectively without taking on other shareholders’ liabilities is a major advantage to forming a professional corporation. Each state has its own list of service providers that can form a professional corporation, but it typically includes licensed service professionals like doctors, accountants or dentists. People outside the industries their state designates as eligible for a professional corp can’t start one.