How to Form a Professional Corporation in Connecticut


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in Connecticut

Are you considering starting a professional corporation in Connecticut? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Connecticut can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Connecticut, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Connecticut!

What is a Professional Corporation in Connecticut?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Connecticut. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Connecticut.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Connecticut if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Connecticut

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Certificate of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Connecticut, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Connecticut

After you have decided on the idea to form a professional corporation in Connecticut, deciding the name for your corporation is significant. There is a complete guide on Connecticut LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Connecticut, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with Connecticut Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Connecticut Resident Agent

The next step in forming a professional corporation is hiring the Connecticut Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Connecticut. Forming a professional corporation for your service will be easier if you have Resident Agent in Connecticut.

Alternatively, you can serve as your own Connecticut Resident Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Connecticut.

Step 4: File the Certificate of Incorporation in Connecticut

After you hire a Connecticut Resident Agent to form a professional corporation, the next step is to file the Connecticut Certificate of Incorporation. In writing the Certificate of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Certificate of Incorporation in Connecticut may be done with three ways, online, by mail and in-person. The Certificate of Incorporation fee may vary from different states. However, in Connecticut, it costs $250 for filing online, in-person and by mail. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. . For offline filing, Send the form by mail to Business Service Division, Connecticut Secretary of the State, P.O. Box 150470, Hartford, CT 06115. Or drop it off in person to Business Services Division, Connecticut Secretary of the State, 165 Capitol Ave., Suite 1000, Hartford, CT 06106..

Step 5: Write an Operating Agreement in Connecticut

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Connecticut operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Connecticut

The next step is to appoint the initial board of directors in your PC in Connecticut. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Connecticut SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Connecticut

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Connecticut can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Connecticut might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Connecticut

Before your professional corporation operates in Connecticut, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Connecticut, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Connecticut

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Connecticut classification of taxes for the taxes an LLC in Connecticut has to pay.

Important Information

Maintaining Professional and Business License in Connecticut

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Connecticut

In Connecticut, you will be required to submit a report each year. The owners’ and Resident Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Connecticut, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Connecticut

A professional corporation takes a lot of time to process and pursue. However, with the help of the Connecticut Resident Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Connecticut.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a Professional Corporation in Connecticut?
A professional corporation in Connecticut is a legal entity that is formed to conduct certain professional activities, such as medical and legal services, as authorized by the state’s Professional Corporation Act.
What are the benefits of forming a Professional Corporation in Connecticut?
Forming a professional corporation in Connecticut offers many benefits, such as limited liability and tax advantages. Additionally, forming a professional corporation protects the corporation’s assets, by ensuring that the business’s liabilities are limited to the assets owned by the professional corporation.
What are the requirements to form a Professional Corporation in Connecticut?
To form a professional corporation in Connecticut, you must file an Application for Certificate of Authority with the Secretary of the State. Additionally, the corporation must have a registered agent located in the state, and the business name must include “Professional Corporation”, “P.C.”, or “PC”.
What documents do I need to form a Professional Corporation in Connecticut?
In order to form a professional corporation in Connecticut, you must file an Application for Certificate of Authority with the Secretary of the State and include Articles of Incorporation, a registered agent declaration, and a professional corporation declaration.
How much does it cost to form a Professional Corporation in Connecticut?
The filing fee for an Application for Certificate of Authority in Connecticut is $135.
How long does it take to form a Professional Corporation in Connecticut?
The processing time for an Application for Certificate of Authority in Connecticut is typically 7-10 business days.
What is the annual fee for a Professional Corporation in Connecticut?
The annual fee for a professional corporation in Connecticut is $20.
What are the tax obligations for a Professional Corporation in Connecticut?
Professional corporations in Connecticut are subject to the same taxation as a regular corporation. This includes paying federal and state taxes on income, payroll taxes if the corporation has employees, and sales taxes if the corporation sells goods or services.
Can a Professional Corporation in Connecticut have employees?
Yes, a professional corporation in Connecticut can have employees.
How do I dissolve a Professional Corporation in Connecticut?
To dissolve a professional corporation in Connecticut, you must file a Certificate of Dissolution with the Secretary of the State. Additionally, you must notify any creditors of the corporation and pay any outstanding debts.
What are the reporting requirements for a Professional Corporation in Connecticut?
Professional corporations in Connecticut are required to file an Annual Report with the Secretary of the State each year. Additionally, the corporation must pay taxes on income and payroll taxes, if applicable.
What are the requirements for forming a Professional Corporation in Connecticut?
To form a Professional Corporation in Connecticut, you must first obtain the appropriate professional license from the state. You must also submit a Certificate of Incorporation, which includes the name, purpose, registered agent, and other information about the business. Lastly, you must file a Statement of Qualification with the Secretary of State.
Can I form a Professional Corporation in Connecticut online?
Yes, it is possible to form a Professional Corporation in Connecticut online. The process requires the completion of the necessary paperwork and filing the appropriate documents with the Secretary of State.
What is the cost to form a Professional Corporation in Connecticut?
The cost to form a Professional Corporation in Connecticut depends on the type of business and the number of shares it will issue. Generally, the filing fee is around $140 and the minimum capital requirements are $100.
What is the time frame for forming a Professional Corporation in Connecticut?
Generally, the process of forming a Professional Corporation in Connecticut takes about 3-5 business days.
Do I need to have a registered office address in Connecticut to form a Professional Corporation?
Yes, you must have a registered office address in Connecticut in order to form a Professional Corporation.
How long does a Professional Corporation in Connecticut remain in existence?
A Professional Corporation in Connecticut has a perpetual existence, unless it is dissolved.
Do I need to file annual reports with the Connecticut Secretary of State?
Yes, you must file annual reports with the Connecticut Secretary of State in order to maintain your Professional Corporation in good standing.
Are there any restrictions on who can form a Professional Corporation in Connecticut?
Yes, in order to form a Professional Corporation in Connecticut, you must have a valid professional license from the state. Additionally, the business must be engaged in the practice of a specific profession, such as accounting or medicine.
Do I need to register with the Connecticut Department of Revenue?
Yes, you must register with the Connecticut Department of Revenue in order to pay taxes and obtain a certificate of good standing.
What are the tax implications of forming a Professional Corporation in Connecticut?
The taxes paid by a Professional Corporation in Connecticut depend on the type of business and the number of shares it issues. Generally, the business is subject to the same taxes as any other corporation.
What is the process for dissolving a Professional Corporation in Connecticut?
To dissolve a Professional Corporation in Connecticut, you must file a Certificate of Abandonment with the Secretary of State. Additionally, you must provide notice to creditors and dissolve any remaining assets.
Can I change the name of my Professional Corporation in Connecticut?
Yes, you can change the name of your Professional Corporation in Connecticut by filing an Amendment to the Certificate of Incorporation with the Secretary of State.
Does a Professional Corporation in Connecticut need to hold an annual meeting?
Yes, a Professional Corporation in Connecticut is required to hold an annual meeting in order to appoint officers and directors, as well as discuss other important matters.
How do I transfer ownership of a Professional Corporation in Connecticut?
To transfer ownership of a Professional Corporation in Connecticut, you must file an Assignment of Shares with the Secretary of State.
Is there a fee to transfer ownership of a Professional Corporation in Connecticut?
Yes, there is a fee associated with transferring ownership of a Professional Corporation in Connecticut. The fee varies depending on the number of shares that are being transferred.
Do I need to keep records for my Professional Corporation in Connecticut?
Yes, you must keep records for your Professional Corporation in Connecticut, including financial records and minutes from meetings.
How often do I need to file taxes for my Professional Corporation in Connecticut?
Generally, you must file taxes for your Professional Corporation in Connecticut on a quarterly basis.
Do I need to have a business license to operate my Professional Corporation in Connecticut?
Yes, you must obtain a business license in order to operate your Professional Corporation in Connecticut.
Are there any special requirements to operate a Professional Corporation in Connecticut?
Yes, you must comply with all applicable licensing requirements in order to operate a Professional Corporation in Connecticut. Additionally, you must follow the rules and regulations set forth by the professional licensing board.

Also Read

Why Connecticut Professional Corporation is So Important

One of the key reasons why Connecticut Professional Corporation is so important is liability protection. By operating as a professional corporation, professionals can shield their personal assets from business liabilities. This means that in the event of a lawsuit or debt, the corporation is responsible for the liabilities rather than the individual professionals themselves. This protection provides peace of mind for professionals and allows them to focus on delivering quality services to their clients without the fear of personal financial ruin.

Additionally, professional corporations offer tax benefits to professionals. By structuring their practice as a corporation, professionals can take advantage of various tax deductions and strategies that are not available to sole proprietors or partnerships. This can result in significant tax savings, allowing professionals to retain more of their hard-earned income.

Moreover, professional corporations provide professionals with greater credibility and prestige in the eyes of clients and colleagues. Operating as a corporation signals professionalism, stability, and commitment to excellence. Clients are more likely to trust and engage with professionals who are part of a recognized corporate entity, improving the firm’s reputation and attracting more business opportunities.

Furthermore, professional corporations offer flexibility in terms of ownership and management structure. Professionals can choose to have a board of directors, assign officers, and issue shares of stock to partners or employees. This allows for a clear and organized hierarchy within the firm and can facilitate decision-making processes.

Professional corporations also facilitate succession planning and continuity of business operations. In the event of retirement, incapacitation, or death of a professional, the corporation can continue to operate seamlessly with minimal disruption. This provides stability for clients and employees and ensures long-term sustainability for the firm.

In conclusion, Connecticut Professional Corporation is an essential organizational structure for professionals looking to establish and grow their practices. The liability protection, tax benefits, credibility, flexibility, and continuity offered by professional corporations make them an invaluable tool for professionals seeking to thrive in their respective industries. By choosing to operate as a professional corporation, professionals can secure their financial future, safeguard their assets, and position themselves for long-term success.

Conclusion

In forming a professional corporation in Connecticut, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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