What Are Professional Corporations?

Many professionals are barred from formingin a tortuous manner. For instance, an
limited liability companies or basic corporations forincorporated surgeon who is accused of
their practices. Instead, their only option is oftenmalpractice during a surgery will receive no liability
to form a professional corporation.protection from the professional corporation. He
When it comes to business entities, there areor she is personally liable as a matter of law if the
many forms a business can choose from. Forplaintiff is successful in bringing a claim.
certain professions, however, states restrict theSo, why would anyone form a professional
choices because of a public policy. This policy boilscorporation? The primary reason is the entity
down to the idea that professionals should not bedoes provide a liability shield against all disputes not
able to escape personal liability if they fail toarising from the rendering of services. If our
perform properly. For instance, a doctor orincorporate surgeon has someone slip and fall in
lawyer should not be able to hide behind ahis office, the person cannot sue the surgeon
corporation if they fail to provide competentpersonally. Instead, the professional corporation will
services.provide liability protection.
In many states, the only business entity availableSo, who must use a professional corporation?
to a professional is a "professional corporation."Well, the answer depends on the state you are in.
This corporation is a hybrid business entity that isSome restrict the entity to doctors, lawyers and
created by state law. Every state handles theaccountants while other states go much further.
issue differently, but there are some generalIn California, for instance, doctors, lawyers and
aspects that almost always appear.accounts are on the hook but so are shorthand
With your average professional corporation, thecourt reporters, marriage therapist and architects
shareholders usually must all be licensed in the fieldto mention only a few. You should check the
of services being rendered by the corporation. Forrequirements in your state if you are a
instance, a professional corporation offeringprofessional considering incorporation.
medical care can only have licensed doctors asAll and all, professional corporations are often
shareholders.treated much differently than general
Another twist to the professional corporation iscorporations. Forming and running a professional
limited liability. Simply put, the corporate entitycorporation can be complex and should only be
provides no protection for the professional againstdone with professional legal help.
claims he or she rendered the services in question