What is a Professional Service Corporation?

There are many different types of corporations. However, one of the most common forms of corporations are professional service corporations. These corporations are designed to provide licensed professionals with an option for obtaining the benefits of being a partner in a corporate entity. Yet, this style of corporation has numerous regulations that differ from a typical corporation. In particular, each partner in the corporation must be fully licensed in their field of practice.

Regulations for Formation

The process of forming a professional service corporation is similar to the process of creating a traditional corporation. Typically, individuals must file the required paperwork with the appropriate governmental department. Also, there is a fee that must be paid in order to complete the application process. The amount of this fee will vary from state to state. However, it is usually only a few hundred dollars. An interesting difference between this type of corporation and a traditional corporation pertains to ownership regulations. In particular, only fully licensed members of the profession may be owners of this corporation. This is in contrast to a traditional corporation, which allows anyone with the required amount of capital to become an owner.

 Internal Regulations

There are numerous regulations regarding what qualifications a person must possess in order to hold a management position in a professional service corporation. In particular, any person holding a management position must be a licensed practitioner in the relevant field, and they must be in good standing with the body that regulates the profession. However, anyone can work in positions that are not classified as management. In other words, it is possible for an unlicensed person to work for a professional service corporation. However, they are not qualified to hold any management style positions.

Liability Protection

One of the primary benefits of incorporating is to obtain the legal protections that accompany incorporation. However, professional service corporations do not provide the same amount of protection for shareholders. In particular, this type of corporation is not able to protect the practitioner from malpractice suits. This has been done to ensure that clients receive the same high quality care that they would receive if the professional did not work for a corporate body.