How to Form a Professional Corporation in North Carolina


Steve Goldstein
Steve Goldstein
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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.
  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 North Carolina?
A professional corporation in North Carolina is a business entity that is formed under the North Carolina Business Corporation Act and is authorized to provide professional services.
Can I form a professional corporation in North Carolina?
Yes, you can form a professional corporation in North Carolina. You will need to file Articles of Incorporation with the Secretary of State, pay all applicable fees, and meet the requirements of the North Carolina Business Corporation Act.
What is required to form a professional corporation in North Carolina?
To form a professional corporation in North Carolina, you will need to file Articles of Incorporation with the Secretary of State, pay all applicable fees, and meet the requirements of the North Carolina Business Corporation Act. Additionally, each professional corporation must have a professional service agreement between the incorporators and each shareholder who will be providing professional services.
Is a professional corporation in North Carolina required to have a professional service agreement?
Yes, each professional corporation must have a professional service agreement between the incorporators and each shareholder who will be providing professional services.
Are there any restrictions on who can form a professional corporation in North Carolina?
Yes, certain professionals are restricted from forming a professional corporation in North Carolina. These professions are physicians, surgeons, dentists, optometrists, podiatrists, and chiropractors.
Are there any limitations on who can own shares of a professional corporation in North Carolina?
Yes, only individuals who are licensed to practice the profession or a professional association or corporation that is owned by licensed professionals may own shares of a professional corporation in North Carolina.
Are there any tax implications for forming a professional corporation in North Carolina?
Yes, a professional corporation in North Carolina is subject to taxes on income, property, and sales. Additionally, the shareholders of the professional corporation are subject to taxes on their share of the earnings.
What is a Professional Corporation in North Carolina?
A professional corporation in North Carolina is a type of corporation established under state law that provides professional services. The services must fall within one of the approved professions listed under North Carolina’s General Statutes.
What are the approved professions that can form a Professional Corporation in North Carolina?
The approved professions include
What are the benefits of forming a Professional Corporation in North Carolina?
Professional corporations in North Carolina offer limited liability protection for its owners, help to establish a professional identity, are easy to set up and maintain, provide a tax-advantaged structure for the owners, and can help provide continuity for the practice.
What are the steps to form a Professional Corporation in North Carolina?
The steps to form a professional corporation in North Carolina include
What is included in a Certificate of Incorporation in North Carolina?
The Certificate of Incorporation in North Carolina must include the professional corporation’s name, address, purpose, registered agent information, authorized shares, and the names and addresses of the incorporators.
Does a Professional Corporation in North Carolina need a Registered Agent?
Yes, a Professional Corporation in North Carolina must have a registered agent in the state. The registered agent is responsible for receiving legal and tax documents on behalf of the corporation.
Is there an annual filing requirement for a Professional Corporation in North Carolina?
Yes, Professional Corporations in North Carolina must file an annual report with the Secretary of State within one year of incorporation and every two years thereafter.
What are the advantages of forming a professional corporation in North Carolina?
Forming a professional corporation in North Carolina provides limited liability protection for the shareholders, as well as a more flexible and tax-advantaged structure.
What are the requirements to form a professional corporation in North Carolina?
To form a professional corporation in North Carolina, you must submit Articles of Incorporation to the North Carolina Secretary of State and obtain a Certificate of Authority.
What documents must be filed to form a professional corporation in North Carolina?
The documents required to form a professional corporation in North Carolina are Articles of Incorporation, which must be filed with the North Carolina Secretary of State.
How long does it take to form a professional corporation in North Carolina?
It typically takes 2-3 weeks to form a professional corporation in North Carolina.
Is there a fee to form a professional corporation in North Carolina?
Yes, there is a filing fee to form a professional corporation in North Carolina, which is currently $125.
Who can form a professional corporation in North Carolina?
Any individual or group of individuals who are licensed in one of the following professions may form a professional corporation in North Carolina
How do I maintain a professional corporation in North Carolina?
To maintain a professional corporation in North Carolina, you must file an Annual Report each year with the North Carolina Secretary of State. You must also comply with other applicable laws and regulations.
Are there any restrictions on how I can use the name of my professional corporation in North Carolina?
Yes, the name of your professional corporation in North Carolina must include a corporate designator such as “PC,” “P.C.,” “Professional Corporation,” or “P.C.P.A.” Additionally, the name cannot be too similar to the name of any existing North Carolina corporation.
Do I need to register my professional corporation with the North Carolina Department of Revenue?
Yes, if you are forming a professional corporation in North Carolina, you must register with the North Carolina Department of Revenue and obtain a Certificate of Authority.
How do I obtain a Certificate of Authority for my professional corporation in North Carolina?
To obtain a Certificate of Authority for your professional corporation in North Carolina, you must complete an application and submit it to the North Carolina Department of Revenue.
Is there a fee to obtain a Certificate of Authority for my professional corporation in North Carolina?
No, there is no fee to obtain a Certificate of Authority for your professional corporation in North Carolina.
Do I need to obtain a license to operate my professional corporation in North Carolina?
Yes, you must obtain a license to operate a professional corporation in North Carolina. The type of license required depends on the type of service you are providing.
Are there any other requirements to operate a professional corporation in North Carolina?
Yes, you must comply with all applicable laws and regulations, and you may also need to obtain specific licenses or permits depending on the services you are providing.
What tax obligations do I have with my professional corporation in North Carolina?
Professional corporations in North Carolina are subject to state and federal income taxes, as well as other applicable taxes and fees.
What records need to be kept for my professional corporation in North Carolina?
You must keep accurate and complete records for your professional corporation in North Carolina, including financial records, tax documents, and any other documents related to the business.
Is it possible to dissolve a professional corporation in North Carolina?
Yes, it is possible to dissolve a professional corporation in North Carolina. This can be done by filing a Certificate of Dissolution with the North Carolina Secretary of State.

Also Read

Why North Carolina Professional Corporation is So Important

One of the key reasons why a North Carolina Professional Corporation is so important is because it provides a level of protection for its owners and shareholders. By forming a professional corporation, individuals can shield their personal assets from any liabilities that may arise from the business operations. This protection is essential for licensed professionals who may be at risk of malpractice lawsuits or other legal claims. Without the protection offered by a professional corporation, professionals could potentially face losing their personal assets, putting their financial stability at risk.

In addition to offering personal asset protection, a professional corporation also allows for certain tax benefits. Unlike other forms of business entities, a professional corporation can elect to be taxed as a Subchapter S corporation, which can result in lower tax rates for the shareholders. This tax advantage can lead to significant cost savings for the business owners, allowing them to retain more of their earnings and invest back into the business.

Furthermore, forming a North Carolina Professional Corporation can provide a sense of credibility and professionalism to clients and partners. By operating as a professional corporation, businesses are able to signal to others that they are serious about their profession and adhere to a high level of ethics and standards. This can help attract new clients and establish trust with existing ones, ultimately leading to increased business opportunities and growth.

Another important aspect of a professional corporation is its ability to provide a clear structure for governance and decision-making. By establishing a board of directors and officers, a professional corporation can ensure that operations run smoothly and effectively. This structure can help streamline decision-making processes, avoid conflicts, and promote accountability within the organization.

Moreover, a professional corporation can also facilitate succession planning and continuity of the business. With clear guidelines in place for transferring ownership and management roles, professionals can ensure that their businesses will continue to thrive even in the event of retirement, incapacity, or death. This level of foresight is essential for the long-term success and sustainability of the business.

Overall, the benefits of a North Carolina Professional Corporation are vast and can have a significant impact on the operations and success of a business. From asset protection and tax advantages to credibility and governance, a professional corporation provides a solid foundation for licensed professionals to build and grow their businesses. It is clear why professional corporations play a crucial role in the business landscape in North Carolina and beyond.

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.

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