How to Form a Professional Corporation in DC


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in DC

Are you considering starting a professional corporation in DC? 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 DC can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in DC, 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 DC!

What is a Professional Corporation in DC?

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 DC. 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 DC.

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 DC if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in DC

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 Registered Agent, filing the Articles 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 DC, 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 DC

After you have decided on the idea to form a professional corporation in DC, deciding the name for your corporation is significant. There is a complete guide on DC 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 DC, 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 DC 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 DC Registered Agent

The next step in forming a professional corporation is hiring the DC Registered 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 DC. Forming a professional corporation for your service will be easier if you have Registered Agent in DC.

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

Step 4: File the Articles of Incorporation in DC

After you hire a DC Registered Agent to form a professional corporation, the next step is to file the DC Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered 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 Articles of Incorporation in DC may be done with two methods, online and by mail. The Articles of Incorporation fee may vary from different states. However, in DC, it costs $220 for filing online and by mail filing. Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site. . For offline filing, Send the form by mail to Department of Consumer and Regulatory Affairs, Corporations Division, P.O. Box 92300, Washington, D.C. 20090.

Step 5: Write an Operating Agreement in DC

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 DC 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 DC

The next step is to appoint the initial board of directors in your PC in DC. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the DC 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 DC

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 DC 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 DC 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 DC

Before your professional corporation operates in DC, 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 DC, 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 DC

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 DC classification of taxes for the taxes an LLC in DC has to pay.

Important Information

Maintaining Professional and Business License in DC

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 DC

In DC, you will be required to submit a report each year. The owners’ and Registered 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 DC, 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 DC

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

  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 DC?
A professional corporation in DC is a type of business entity that is formed by licensed professionals for the purpose of providing professional services.
How do I form a professional corporation in DC?
To form a professional corporation in DC, you must first choose a name for the entity, file a Certificate of Incorporation with the DC Department of Consumer and Regulatory Affairs, obtain a Federal Tax ID number, and appoint a registered agent in DC.
What are the requirements for forming a professional corporation in DC?
The requirements for forming a professional corporation in DC include the name of the corporation, the names of the incorporators, the registered agent and office address, the purpose of the corporation, the authorized shares, and the duration of the corporation.
What documents must I file to form a professional corporation in DC?
To form a professional corporation in DC, you must file a Certificate of Incorporation with the DC Department of Consumer and Regulatory Affairs.
Do I need to register my professional corporation in DC with the IRS?
Yes, you must obtain a Federal Tax ID number to register your professional corporation with the IRS.
Is there a filing fee for forming a professional corporation in DC?
Yes, there is a filing fee of $220 for filing the Certificate of Incorporation with the DC Department of Consumer and Regulatory Affairs.
What is a registered agent for a professional corporation in DC?
A registered agent is an individual or entity designated to receive legal documents and service of process on behalf of the professional corporation.
What are the benefits of forming a professional corporation in DC?
Forming a professional corporation in DC provides limited liability protection for its shareholders, allows for easier transfer of ownership, allows for the deduction of business expenses from personal income, and provides tax advantages.
What is the process for dissolving a professional corporation in DC?
To dissolve a professional corporation in DC, you must file a Certificate of Dissolution with the DC Department of Consumer and Regulatory Affairs and pay the associated filing fee. You must also submit a final report to the DC Department of Taxation and Regulatory Affairs.
What is a Professional Corporation in DC?
A Professional Corporation in DC is a business entity formed by a professional or group of professionals that provides services regulated by the laws of the District of Columbia.
What are the benefits of forming a Professional Corporation in DC?
Benefits of forming a Professional Corporation in DC include limited liability protection, tax-advantaged business structure, flexibility, and the ability to hire employees as needed.
What are the requirements for forming a Professional Corporation in DC?
Requirements for forming a Professional Corporation in DC include filing Articles of Incorporation with the DC Department of Consumer and Regulatory Affairs, obtaining a certificate of good standing from the DC Board of Professional Corporations, and having the required number of professional shareholders.
How long does it take to form a Professional Corporation in DC?
On average, it takes about 1-2 weeks to form a Professional Corporation in DC.
What is the filing fee for forming a Professional Corporation in DC?
The filing fee for forming a Professional Corporation in DC is $220.
How much does it cost to maintain a Professional Corporation in DC?
The cost to maintain a Professional Corporation in DC varies depending on the number of shareholders, the number of employees, and other factors. Generally, the annual cost to maintain a Professional Corporation in DC is approximately $1,000.
Are there any restrictions on forming a Professional Corporation in DC?
Yes, there are restrictions on forming a Professional Corporation in DC. All shareholders of the Professional Corporation must be licensed in their respective professions and the business must provide professional services that are regulated by the laws of the District of Columbia.
What are the steps involved in forming a Professional Corporation in DC?
The steps involved in forming a Professional Corporation in DC include filing Articles of Incorporation with the DC Department of Consumer and Regulatory Affairs, obtaining a certificate of good standing from the DC Board of Professional Corporations, and having the required number of professional shareholders.
How do I choose a name for my Professional Corporation in DC?
When choosing a name for your Professional Corporation in DC, you must choose a name that does not conflict with the name of any other existing business in the District of Columbia. The name must include the words “Professional Corporation,” “P.C.,” or the abbreviation “PC.”
Do I need to register my Professional Corporation with the DC Department of Tax and Revenue?
Yes, you must register your Professional Corporation with the DC Department of Tax and Revenue.
Are there any reporting or filing requirements for a Professional Corporation in DC?
Yes, Professional Corporations in DC are required to file an annual report with the DC Department of Consumer and Regulatory Affairs. Additionally, Professional Corporations must file their taxes with the DC Department of Tax and Revenue.
What are the taxes for a Professional Corporation in DC?
Professional Corporations in DC are subject to corporate income taxes, franchise taxes, excise taxes, and sales and use taxes.
Do I need to pay an annual fee for a Professional Corporation in DC?
Yes, Professional Corporations in DC must pay an annual franchise tax to the DC Department of Consumer and Regulatory Affairs.
Are there any restrictions on professional shareholders in a Professional Corporation in DC?
Yes, all professional shareholders of a Professional Corporation in DC must be licensed in their respective professions and must provide services that are regulated by the laws of the District of Columbia.
What is the liability protection for Professional Corporations in DC?
Professional Corporations in DC provide limited liability protection for their shareholders. This means that the shareholders are not held personally liable for the debts and obligations of the business.
How do I dissolve a Professional Corporation in DC?
To dissolve a Professional Corporation in DC, you must file Articles of Dissolution with the DC Department of Consumer and Regulatory Affairs.
What is the penalty for not filing the annual report for a Professional Corporation in DC?
The penalty for not filing the annual report for a Professional Corporation in DC is a $200 late fee.
Are there any restrictions on the types of services that can be offered by a Professional Corporation in DC?
Yes, Professional Corporations in DC must provide services that are regulated by the laws of the District of Columbia.
What are the benefits of hiring employees for a Professional Corporation in DC?
Benefits of hiring employees for a Professional Corporation in DC include increasing the business’s efficiency, expanding its services, and providing additional support for existing services.
Is there a minimum or maximum number of shareholders for a Professional Corporation in DC?
Generally, there must be at least two shareholders for a Professional Corporation in DC and there is no maximum number of shareholders.
Can I transfer ownership of a Professional Corporation in DC?
Yes, you can transfer ownership of a Professional Corporation in DC. To transfer ownership, you must file Articles of Amendment with the DC Department of Consumer and Regulatory Affairs.
Can I change the name of my Professional Corporation in DC?
Yes, you can change the name of your Professional Corporation in DC. To change the name, you must file Articles of Amendment with the DC Department of Consumer and Regulatory Affairs.
Do I need to obtain a business license for a Professional Corporation in DC?
Yes, you must obtain a business license for a Professional Corporation in DC. The process for obtaining a business license is different depending on the type of business and the location of the business.
Are there any restrictions on where I can locate my Professional Corporation in DC?
Generally, there are no restrictions on where you can locate your Professional Corporation in DC. However, you may need to obtain a business license from the local jurisdiction if you plan to operate from a specific location.

Also Read

Why DC Professional Corporation is So Important

First and foremost, professional corporations offer a way for individuals in certain regulated fields, such as law, medicine, or accounting, to pool resources and expertise. By establishing a formal structure for collaboration, these entities enable professionals to combine their skills and knowledge to better serve clients and achieve common goals. This synergy can result in more effective service delivery, expanded offerings, and increased competitiveness in the marketplace.

Moreover, professional corporations provide a shield of protection for their members. In industries where liability is a significant concern, such as healthcare or finance, having a legal entity separate from individual professionals can mitigate risk and safeguard personal assets. In the event of a lawsuit or other legal challenge, the corporation assumes responsibility, shielding its members from potential financial ruin.

Additionally, professional corporations serve as a conduit for innovation and professional development. By fostering a culture of collaboration and knowledge sharing, these entities facilitate continuous learning and skill development among their members. This, in turn, can lead to improved outcomes for clients and enhanced professional satisfaction for practitioners.

Furthermore, professional corporations in Washington, D.C., often play a critical advocacy role on behalf of their members. Through lobbying, public outreach, and educational initiatives, these entities work to promote the interests of their industries and ensure that regulations and policies are conducive to professional success. In a city known for its regulatory complexity and ever-changing landscape, having a seat at the table is essential for professionals seeking to thrive and grow.

Finally, professional corporations can be a vehicle for social responsibility and community engagement. Many of these entities have formalized charitable giving programs, pro bono initiatives, or corporate social responsibility efforts that aim to give back to the community and support those in need. By leveraging their collective resources and expertise, professional corporations can make a meaningful difference in improving society beyond their individual professional pursuits.

In conclusion, professional corporations are not just a legal structure or business entity – they are a vital component of the professional ecosystem in Washington, D.C., and beyond. By providing a framework for collaboration, protection, innovation, advocacy, and social responsibility, these entities play an integral role in supporting professionals in their endeavors and contributing to the greater good. As we navigate a rapidly changing and increasingly complex world, the importance of professional corporations will only continue to grow.

Conclusion

In forming a professional corporation in DC, 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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