How to Form a Professional Corporation in North Carolina

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

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

What is a Professional Corporation in North Carolina?

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 North Carolina. 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 North Carolina.

– 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 North Carolina if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in North Carolina

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 North Carolina, 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 North Carolina

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

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

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

Step 4: File the Articles of Incorporation in North Carolina

After you hire a North Carolina Registered Agent to form a professional corporation, the next step is to file the North Carolina 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 North Carolina may be done with three methods that are online, by mail and in-person. The Articles of Incorporation fee may vary from different states. However, in North Carolina, it costs $125 for filing online, or by mail.. Create a wizard on the SOS site, fill out the online form and submit online. Or download the PDF form, fill it up offline and upload it back to the SOS site. . For offline filing, Send the form by mail or drop it off in person at The Secretary of State, Business Registration Division, P.O. Box 29622, Raleigh, NC 27626..

Step 5: Write an Operating Agreement in North Carolina

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 North Carolina 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 North Carolina

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

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 North Carolina 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 North Carolina 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 North Carolina

Before your professional corporation operates in North Carolina, 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 North Carolina, 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 North Carolina

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

Important Information

Maintaining Professional and Business License in North Carolina

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 North Carolina

In North Carolina, 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 North Carolina, 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 North Carolina

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

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.

2. 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.

3. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

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• Form a Professional Corporation in North Carolina
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Why North Carolina Professional Corporation is So Important

One of the main reasons why North Carolina Professional Corporation is so important is because it allows professionals to pool their resources and expertise to better serve their clients. By forming a corporation, professionals can combine their skills and knowledge to provide a more comprehensive range of services that may not be possible as individual practitioners. This collaboration not only benefits the professionals themselves but also the clients who can access a higher level of expertise and quality of service.

Furthermore, professional corporations help foster a culture of innovation and growth within various industries. By bringing together like-minded professionals, these entities create a supportive environment where ideas can be shared, and new solutions can be developed. This exchange of knowledge and expertise often leads to the development of groundbreaking technologies and practices that benefit not only the professionals involved but also the broader community.

In addition to fostering collaboration and innovation, professional corporations also play a crucial role in providing a sense of credibility and legitimacy to the services being offered. By operating as a corporation, professionals can project a more professional image to their clients and stakeholders. This can be particularly important in industries where trust and credibility are key factors in attracting and retaining clients.

Another key reason why professional corporations are so important in North Carolina is the legal and financial protections they offer to their members. By registering as a professional corporation, individuals can protect their personal assets from business liabilities. This means that if the corporation faces any legal action or financial difficulties, the personal assets of its members are safeguarded.

Additionally, professional corporations also offer tax benefits to their members. By structuring their business as a corporation, professionals can take advantage of various tax incentives and deductions that may not be available to sole practitioners or partnerships. This can result in significant cost savings for the members of the corporation, allowing them to reinvest in their business or further their professional development.

In conclusion, North Carolina Professional Corporation is an essential component of the business landscape in the state. By promoting collaboration, innovation, credibility, and legal protections, these entities play a vital role in driving growth and success in various industries. Professionals in North Carolina would be wise to consider the benefits of forming a professional corporation to maximize their potential and contribute to the overall prosperity of the state.

Conclusion

In forming a professional corporation in North Carolina, 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.