A Taxing Consideration: The Professional Corporation and Professional Limited Liability Company

There is actually an additional entity: the professional corporation (sometimes called a PC, professional association or PA) or the professional limited liability company (PLLC).

A “professional” entity is required for the following professions that require state licensing:

• Architects

• Attorneys

• Accountants

• Physicians

• Dentists

• Optometrists

• Osteopaths

• Chiropractors

• Registered nurses

• Veterinarians

• Podiatrists

• Psychologists

• Marriage and family therapists

• Occupational therapists

• Speech Pathologists and Audiologists

• Licensed Professional Counselors

• Engineers and Land surveyors

• Landscape Architects

• Social workers

• Geologists

• Foresters

• Soil Scientists

The “professional” designation indicates to the general public that the owner of this business is licensed and regulated by the State of North Carolina. Overall, the corporate governance and taxation are similar to the non-professional entity (sometimes known as a business corporation rather than a professional corporation). With a few limited exceptions, PCs and PLLCs must be owned by the licensed professional (ie the shareholders and members must be licensed accountants, doctors, or other professional). In addition, at least one office and one director must be a licensed professional. These don’t have to be owners as well, just licensed in the profession.

There is an extra step in forming a PC or a PLLC. Before filing your articles of incorporation or articles of organization, you send your articles to your licensing board (along with a fee) for review and certification that you are licensed to practice your profession. Some boards are pretty quick; others can take weeks to process the request. Once you have the certificate, you submit it to the Secretary of State along with your articles.

There are provisions in the NC Professional Corporations Act to govern the sale of the business when the licensed professional dies or is otherwise disqualified from owning the company.

PCs and PLLCs are not required to file annual reports with the Secretary of State, but must follow all rules of their licensing boards.

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