How to Form a California Professional Corporation

How to Form a California Professional Corporation

If you are a professional looking to start your own business in California, forming a professional corporation (PC) can be a beneficial option. A PC is a type of corporation specifically designed for individuals who provide professional services, such as doctors, lawyers, accountants, and architects. Here is a step-by-step guide on how to form a California professional corporation:

Step 1: Choose a Name
Select a unique name for your professional corporation. Make sure the name complies with the California Corporations Code and is not already in use by another business entity. You can check name availability on the California Secretary of State’s website.

Step 2: Draft Articles of Incorporation
Prepare the Articles of Incorporation, which include the name of the corporation, the purpose for which it is formed, the names and addresses of the initial directors, and other required information. You can find a template for the Articles of Incorporation on the Secretary of State’s website.

Step 3: File the Articles of Incorporation
Submit the Articles of Incorporation to the California Secretary of State along with the required filing fee. You can file online or by mail. Once approved, you will receive a stamped copy of the Articles of Incorporation, confirming the formation of your professional corporation.

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Step 4: Obtain Necessary Licenses and Permits
Depending on your profession, you may need to obtain specific licenses or permits to operate legally. Research the requirements for your profession and ensure all necessary licenses are obtained before commencing business operations.

Step 5: Create Bylaws
Develop bylaws that outline the internal rules and procedures of your professional corporation. Bylaws typically cover areas such as shareholder rights, director responsibilities, meeting procedures, and the process for making corporate decisions.

Step 6: Hold an Organizational Meeting
Conduct an organizational meeting with the initial directors and shareholders to adopt the bylaws, elect officers, and handle other important matters. Document the actions taken during the meeting in corporate minutes.

Step 7: Obtain an Employer Identification Number (EIN)
Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is necessary for tax purposes and is required when hiring employees or opening business bank accounts.

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Step 8: Comply with Ongoing Corporate Formalities
As a professional corporation, you must comply with ongoing corporate formalities, including holding regular shareholder and director meetings, maintaining accurate records, and filing required annual reports with the California Secretary of State.

Frequently Asked Questions:

1. Can professionals from different fields form a professional corporation together?
Yes, professionals from different fields can form a professional corporation together, as long as they are all licensed in their respective fields.

2. Can a non-licensed individual own shares in a professional corporation?
No, only licensed professionals can own shares in a professional corporation.

3. Do I need to have a physical office to form a professional corporation?
Yes, a professional corporation must maintain a physical office in California.

4. How long does it take to form a professional corporation in California?
The processing time for forming a professional corporation can vary, but it typically takes around 2-4 weeks.

5. Can a professional corporation be converted into a different business entity?
Yes, a professional corporation can be converted into another business entity, such as a limited liability company (LLC) or a general corporation.

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6. Do professional corporations have limited liability protection?
Yes, professional corporations provide limited liability protection to their shareholders, similar to other types of corporations.

7. Can a professional corporation offer services outside of California?
Yes, a professional corporation can offer services outside of California, but it must comply with the regulations and licensing requirements of each jurisdiction.

8. Can a professional corporation issue stock?
Yes, a professional corporation can issue stock to its shareholders.

9. Can a professional corporation have non-professional employees?
Yes, a professional corporation can hire non-professional employees to assist with administrative tasks and business operations.

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