How to Form a Professional Corporation in New York


Steve Goldstein
Steve Goldstein
Business Formation Expert
Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

All Posts by Steve Goldstein →
Business Formation Expert  |   Fact Checked by Editorial Staff
Last updated: 
LLCBuddy™ offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
At LLCBuddy, we don't just offer information; we provide a curated experience backed by extensive research and expertise. Led by Steve Goldstein, a seasoned expert in the LLC formation sector, our platform is built on years of hands-on experience and a deep understanding of the nuances involved in establishing and running an LLC. We've navigated the intricacies of the industry, sifted through the complexities, and packaged our knowledge into a comprehensive, user-friendly guide. Our commitment is to empower you with reliable, up-to-date, and actionable insights, ensuring you make informed decisions. With LLCBuddy, you're not just getting a tutorial; you're gaining a trustworthy partner for your entrepreneurial journey.
Form a Professional Corporation in New York

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

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

What is a Professional Corporation in New York?

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 New York. 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 New York.

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

How to Form a Professional Corporation in New York

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 New York, 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 New York

After you have decided on the idea to form a professional corporation in New York, deciding the name for your corporation is significant. There is a complete guide on New York 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 New York, 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 60 days. To keep the name, you must file a name reservation application with New York 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 New York Resident Agent

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

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

Step 4: File the Certificate of Incorporation in New York

After you hire a New York Resident Agent to form a professional corporation, the next step is to file the New York 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 New York may be done with two methods, online and by mail. The Certificate of Incorporation fee may vary from different states. However, in New York, it costs $125 for filing online, or by mail.. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to Department of State Division of Corporations, State Records and Uniform Commercial Code, One Commerce Plaza, 99 Washington Ave., Albany, NY 12231..

Step 5: Write an Operating Agreement in New York

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 New York 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 New York

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

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 New York 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 New York 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 New York

Before your professional corporation operates in New York, 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 New York, 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 New York

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

Important Information

Maintaining Professional and Business License in New York

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 New York

In New York, 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 New York, 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 New York

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

  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 (PC) in New York?
A Professional Corporation in New York is a legal entity that is formed when two or more professionals who are licensed in New York come together to provide a professional service.
What is the process for forming a Professional Corporation in New York?
To form a Professional Corporation in New York, you must first register the business with the New York State Department of State by filing Form DOS-1317 and then filing the Articles of Incorporation with the New York Department of State. You must also obtain any necessary licenses and permits, register for any applicable taxes, and establish a bank account for the business.
What are the benefits of forming a Professional Corporation in New York?
The benefits of forming a Professional Corporation in New York include liability protection, tax benefits, and increased credibility. Professional Corporations also provide an easy way for professionals to manage their business operations.
What taxes must a Professional Corporation in New York pay?
Professional Corporations in New York are subject to state and federal taxes, including income tax, payroll tax, and sales tax. The exact taxes that a Professional Corporation must pay will depend on the type of business and its location.
What paperwork is required to maintain a Professional Corporation in New York?
Professional Corporations in New York must keep corporate records, including minutes of meetings and resolutions of the board of directors, and must also file an annual report with the New York State Department of State. In addition, Professional Corporations must also file any necessary tax returns and pay any applicable taxes.
What is a Professional Corporation in New York?
A Professional Corporation in New York is a corporation established primarily to render professional services, such as those of lawyers, physicians, and accountants.
How do I form a Professional Corporation in New York?
To form a Professional Corporation in New York, you must file a Certificate of Incorporation with the New York Department of State, as well as an Application for Authority to do business in the state.
What documents do I need to form a Professional Corporation in New York?
To form a Professional Corporation in New York, you will need to file a Certificate of Incorporation, an Application for Authority to do business in the state, and any other appropriate documents as required by law.
What information is required to form a Professional Corporation in New York?
Generally, you will need to provide the corporation’s name, its registered agent and office address in the state, and the names and addresses of the incorporators.
What is the filing fee for forming a Professional Corporation in New York?
The filing fee for forming a Professional Corporation in New York is $125.
How long does it take to form a Professional Corporation in New York?
It typically takes 10-15 business days to form a Professional Corporation in New York.
Is it necessary to obtain a business license to form a Professional Corporation in New York?
No, it is not necessary to obtain a business license to form a Professional Corporation in New York.
What are the requirements for maintaining a Professional Corporation in New York?
In order to maintain a Professional Corporation in New York, you must comply with all applicable laws and regulations, file annual reports and pay state and local taxes.
Is there an annual filing requirement for Professional Corporations in New York?
Yes, Professional Corporations in New York must file an annual report with the Department of State each year.
Does a Professional Corporation in New York require a registered agent?
Yes, a Professional Corporation in New York must have a registered agent with a physical address in the state.
Can a Professional Corporation in New York have more than one shareholder?
Yes, a Professional Corporation in New York can have more than one shareholder.
Does a Professional Corporation in New York have to have a board of directors?
Yes, a Professional Corporation in New York must have a board of directors.
What are the laws governing Professional Corporations in New York?
Professional Corporations in New York are governed by the New York Business Corporation Law.
What type of taxes does a Professional Corporation in New York have to pay?
Professional Corporations in New York are subject to both corporate income taxes and state and local taxes.
Are Professional Corporations in New York required to have corporate meetings?
Yes, Professional Corporations in New York must have regular meetings of the board of directors and shareholders.
What is the minimum number of shareholders required to form a Professional Corporation in New York?
There is no minimum number of shareholders required to form a Professional Corporation in New York.
What are the liability protections offered by a Professional Corporation in New York?
Professional Corporations in New York provide limited liability protection for the corporation’s shareholders, meaning that the shareholders are not personally liable for the debts and obligations of the corporation.
Is it necessary to file a separate tax return for a Professional Corporation in New York?
Yes, Professional Corporations in New York must file a separate tax return for the corporation.
What is the process for dissolving a Professional Corporation in New York?
To dissolve a Professional Corporation in New York, you must file a Certificate of Dissolution with the New York Department of State, as well as an Application for Authority to do business in the state.
Are Professional Corporations in New York allowed to issue stock?
Yes, Professional Corporations in New York are allowed to issue stock.
What is the process for changing the name of a Professional Corporation in New York?
To change the name of a Professional Corporation in New York, you must file a Certificate of Amendment with the New York Department of State.
Is it necessary to appoint an officer to a Professional Corporation in New York?
Yes, Professional Corporations in New York must appoint an officer to handle the corporation’s day-to-day operations.
Are there any restrictions on the types of services a Professional Corporation in New York can provide?
Yes, Professional Corporations in New York are restricted to providing services related to their profession, such as legal, medical, or accounting services.
Does a Professional Corporation in New York need to have a separate bank account?
Yes, Professional Corporations in New York must maintain a separate bank account for all corporate transactions.
Is it necessary to obtain a federal tax identification number for a Professional Corporation in New York?
Yes, Professional Corporations in New York must obtain a federal tax identification number in order to open a bank account, file taxes, and otherwise conduct business.
Does a Professional Corporation in New York need to file an annual report with the IRS?
No, a Professional Corporation in New York does not need to file an annual report with the IRS.

Also Read

Why New York Professional Corporation is So Important

One of the main reasons why New York professional corporations are so important is the level of liability and asset protection they offer. By forming a professional corporation, professionals can shield their personal assets from any potential legal claims or financial obligations of the business. This protection is crucial, especially in fields where risks and liabilities are high, such as in the healthcare or legal industries.

Furthermore, professional corporations provide professionals with a sense of legitimacy and credibility in their respective fields. By operating under a corporate structure, professionals are able to convey a level of professionalism and reliability to their clients and peers. This not only helps in attracting and retaining customers but also in establishing trust and confidence in the services provided.

In addition to liability protection and credibility, professional corporations also offer tax advantages to their members. Through various tax-saving strategies and deductions available to corporations, professionals can maximize their wealth and minimize their tax liabilities. This financial benefit is crucial in a high-cost city like New York, where every dollar saved can make a significant impact on a professional’s bottom line.

Moreover, professional corporations facilitate greater scalability and growth opportunities for professionals. By structuring their business as a corporation, professionals can easily bring in partners, secure financing, and expand their operations. This scalability ensures that professionals can readily adapt to the evolving marketplace and grow their businesses sustainably.

Another critical aspect of New York professional corporations is the regulatory compliance and oversight that they provide. By operating as a professional corporation, professionals must adhere to specific rules and regulations set forth by state and local governing bodies. This regulatory oversight ensures that professionals maintain high standards of ethics, conduct, and competence in their practice, thus safeguarding the public interest.

Furthermore, professional corporations promote collaboration and innovation among professionals in the same industry. By creating a collective and unified entity, professionals can work together to share resources, exchange knowledge, and foster innovation. This collaborative approach not only benefits the professionals themselves but also enhances the overall quality and competitiveness of the services offered to the public.

In conclusion, the importance of New York professional corporations cannot be understated. From providing liability protection and credibility to offering tax advantages and growth opportunities, these entities serve as valuable assets to professionals in various industries. By forming a professional corporation, professionals can not only safeguard their personal assets but also elevate their business practices, foster innovation, and contribute to the overall growth and success of their industry.

Conclusion

In forming a professional corporation in New York, 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.

Leave a Comment