How to Form a Professional Corporation in Connecticut (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
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Forming a Professional Corporation in Connecticut

If you would like to start and learn how to form a corporation in Connecticut, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Connecticut are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Connecticut or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in Connecticut?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Connecticut. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Connecticut, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Connecticut

To form a Professional Corporation in Connecticut 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 Resident Agent, filing the Certificate 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 Connecticut, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Connecticut

After you have decided to form a professional corporation in Connecticut, you must choose a name for your corporation. Here are some pointers to consider when 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)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In Connecticut, 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. You must file a name reservation application in the Connecticut Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Connecticut DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Connecticut Resident Agent

The next step in forming a professional corporation is hiring a Resident Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Connecticut. Forming a professional corporation for your service will be easier if you have Resident Agent in Connecticut.

Alternatively, you can serve as your own Resident Agent if you have the time. Usually, in Connecticut, a Resident Agent costs is ranging from $50 – $200. To make it easier, you can hire Connecticut Resident Agent Services for your professional corporation.

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Step 4: File the Certificate of Incorporation in Connecticut

After you hire a Resident Agent to form a professional corporation, the next step is to file the Connecticut Certificate of Incorporation. In writing the Certificate of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Certificate of Incorporation in Connecticut may be done with three ways, online, by mail and in-person. The Certificate of Incorporation fee may vary from different state. However, in Connecticut, it costs $250 for filing online, in-person and by mail. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. . For offline filing, Send the form by mail to Business Service Division, Connecticut Secretary of the State, P.O. Box 150470, Hartford, CT 06115. Or drop it off in person to Business Services Division, Connecticut Secretary of the State, 165 Capitol Ave., Suite 1000, Hartford, CT 06106..

Step 5: Write an Operating Agreement in Connecticut

An operating agreement in Connecticut is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in Connecticut

The next step is to form the first board of directors for your PC in Connecticut. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Connecticut Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Connecticut, you must have Three directors in forming your Professional Corporation.

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.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Connecticut Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Connecticut.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Connecticut. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

The application of an EIN in Connecticut 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 four 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 several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Connecticut for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Connecticut easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Connecticut

Before your professional corporation operates in Connecticut, you must have Connecticut Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Connecticut ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Connecticut

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Connecticut tax classification for the taxes that an LLC in Connecticut must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Connecticut.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • Connecticut Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Connecticut

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Connecticut

In Connecticut, you must submit a report. The owners’ and Resident 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 the report every 1 year (31st March every year) in the Connecticut Secretary of State.

FAQs

What is a professional corporation in Connecticut?
A professional corporation in Connecticut is a type of business entity which limits liability for malpractice conducted by those licensed professionals who own a portion of the corporation.
Who is allowed to form a professional corporation in Connecticut?
Connecticut allows only certain licensed professionals to form professional corporations, such as physicians, dentists, lawyers, accountants, and architects.
What are the benefits of forming a professional corporation in Connecticut?
Professional corporations in Connecticut provide limited liability for the owners, limited annual fees, and increased credibility in the marketplace as professional services firms.
How does forming a professional corporation in Connecticut differ from forming other types of corporations?
Professional corporations in Connecticut are regulated by state law and their entity documents must meet specific statutory requirements.
How many owners must a professional corporation have in Connecticut?
In Connecticut, a professional corporation must have at least one owner.
Can non-professionals own part of a professional corporation in Connecticut?
No, only licensed professionals can own part of a professional corporation in Connecticut.
What is the process of incorporating as a professional corporation in Connecticut?
The process of incorporating as a professional corporation in Connecticut involves filing with the Secretary of State’s office, filing Articles of Incorporation specifying that the corporation will be a professional corporation, and obtaining necessary licenses, permits, and approvals.
What is the cost of forming a professional corporation in Connecticut?
The cost of forming a professional corporation in Connecticut depends on various factors such as legal and professional fees, filing fees, and annual fees. Generally, a professional corporation can be formed for a few hundred to a few thousand dollars.
How many states allow for professional corporations?
Not all states provide for the creation of professional corporations. But Connecticut, along with some other states, does allow professionals like lawyers, accountants, doctors or certified public accountants to form their practices as professional corporations.
How are profits and losses handled in a professional corporation in Connecticut?
Profits and losses of a professional corporation in Connecticut are typically split based on ownership shares.
How are taxes handled for a professional corporation in Connecticut?
A professional corporation in Connecticut is taxed as a regular corporation.
Can professional corporations in Connecticut be publicly traded?
No, professional corporations in Connecticut cannot issue stock on public exchanges.
What type of liability protection does a professional corporation in Connecticut provide?
The specific type of liability protection provided by a professional corporation in Connecticut may depend on the specific profession being carried on by the corporation. Generally, it provides protection against any professional malpractice-related liability claims.
Can a professional corporation in Connecticut go bankrupt?
Yes, a professional corporation in Connecticut may go bankrupt like any other business corporation.
What types of professionals can form professional corporations in Connecticut?
Connecticut allows licensed professionals such as medical doctors, dentists, chiropractors, accountants, and attorneys to form professional corporations.
Can a professional corporation in Connecticut merge with another corporation?
Yes, a professional corporation in Connecticut can merge with another corporation.
Can a professional corporation in Connecticut convert to another entity type like an LLC or LLP or vice versa?
Yes, a professional corporation in Connecticut can convert to an LLC or LLP or vice versa.
How long does it take to form a professional corporation in Connecticut?
It can vary, but typically 4-6 weeks is sufficient.
Can a professional corporation only operate within the state of Connecticut?
No, a professional corporation in Connecticut can conduct business in other states of the United States as well.
Do I need a professional license to form a professional corporation in Connecticut?
Yes, Connecticut requires every professional owners to be licensed in their particular field in order to form a professional corporation.
Can my spouse co-own the professional corporation with me?
Yes, your spouse can co-own the professional corporation with you in Connecticut.
Can a professional corporation in Connecticut hire non-licensed employees?
Yes, professional corporations in Connecticut can hire non-licensed employees to provide administrative, marketing, or operational support.
Is there a limit to the number of professional corporations a professional can own in Connecticut?
Connecticut has no limits on the number of professional corporations that a licensed professional can own.
Is it mandatory to have a Connecticut registered agent to form a professional corporation in Connecticut?
Yes, Connecticut requires that every corporation maintains a registered agent with a physical address within Connecticut.
Can I form a professional corporation on my own or do I need a lawyer?
You can incorporate a professional corporation on your own in Connecticut, however, seeking guidance from a qualified attorney may be a good decision given the complexities associated with forming several types of professional practices.
Do I need a special permit to form a medical or dental professional corporation in Connecticut?
Although a medical or dental professional may require additional steps such as obtaining necessary permits, licenses these individuals still need to start a professional corporation in the same way as other professional.
Can I provide both medical and dental care from a single professional corporation in Connecticut?
No, you can’t provide different services under a single professional corporation that needs to be separate.Authority should need to be taken for the purpose of providing both type of services.
Are foreign professionals allowed to form professional corporations in Connecticut?
If they are licensed in Connecticut, then they are certainly permitted to form professional corporations in Connecticut.
Is it possible to dissolve a professional corporation in Connecticut?
Yes, it is possible to dissolve a professional corporation in Connecticut.
How is a professional corporation formed in Connecticut?
A professional corporation in Connecticut can be formed by filing Articles of Incorporation with the Connecticut Secretary of State.
Can a professional corporation carry out business activities other than professional services in Connecticut?
No, a professional corporation in Connecticut can only carry out the professional services specified in its Articles of Incorporation.
Who can form a professional corporation in Connecticut?
Professionals such as doctors, lawyers, architects, accountants, and engineers can form a professional corporation in Connecticut.
How do I name my professional corporation in Connecticut?
The name of your professional corporation must include one of the approved designations such as “Professional Corporation”, “Professional Association”, or “P.C.”.
How do I choose the right nominees for my professional corporation in Connecticut?
You should choose individuals who are qualified professionals in their respective fields and who meet state requirements for shareholders and directors of professional corporations.
What is meant by the term ‘resident shareholder’ in Connecticut?
A resident shareholder in Connecticut is someone who resides and practices within the state boundaries.
What is the difference between a resident and non-resident shareholder?
A resident shareholder is someone who practices within the state boundaries, while a non-resident shareholder does not.
What is a registered agent and why is it necessary in Connecticut?
A registered agent in Connecticut is a person or entity authorized to receive legal documents on behalf of the corporation. It is required by law to have one.
Can I act as the registered agent for my Connecticut professional corporation?
Yes, you can act as the registered agent for your Connecticut professional corporation, provided you are a registered office in the state.
Can the Bylaws of my Connecticut professional corporation govern certain elements of the corporation’s structure?
Yes, bylaws can govern some elements of your corporation but Not the corporation’s business activity or ownership structure.
Can I use electronic communication to carry out professional corporation activities?
Yes. Electronic communication is allowed for corporation-related activities.
What legal documents have to be filed with the Connecticut Secretary of State to form my professional corporation in Connecticut?
Forming a corporation in Connecticut documents include the Articles of Incorporation, initial report, corporate kit, and any necessary permits, licenses and approvals.
How long does it take the Connecticut Secretary of State to process an application for forming a professional corporation?
The estimated time within which the Connecticut Secretary of State processes entries is 3 to 5 business days.
What licenses or permits are necessary to form a professional corporation in Connecticut?
Depending on the profession and field, some licenses common licensed professionals in Connecticut may require additional permits or clearance procedures.
Can the corporation or individual shareholders be subject to a lawsuit in Connecticut?
Yes, the individual shareholders and the corporation may be subject to lawsuits for issues like Negligence, malpractice, lawsuit with confidential information.
How much does it cost to form a professional corporation in Connecticut?
For Professionals to form a corporation in Connecticut costs $390.
Are any other filings necessary after the corporation is formed?
Yes. Several other filings are required after the corporation is formed, including annual reports, tax returns, and regulatory reports
Can an individual own a professional corporation in Connecticut?
No, only professionals such as doctors, lawyers, accountants, architects, or engineers, can own professional corporations.
How many shareholders are required to form a professional corporation in Connecticut?
Connecticut law requires a minimum of one shareholder, with no maximum under the Connecticut Professional Service Corporation Act of 1994.
Once my Connecticut professional corporation is formed, do I have to file a separate tax return for the corporation?
Yes, you must file a separate tax return for the corporation.
What is the annual report and do I have to file it with the Connecticut Secretary of State?
The annual report is a statement that provides information about the corporation’s shareholders, directors, and business activities. Yes, professional corporations in Connecticut must file an annual report with the Connecticut Secretary of State.
What happens if I don’t file the annual report for my Connecticut professional corporation?
Failure to file a timely annual report may result in administrative termination of the corporation.
How do I reinstate a Connecticut professional corporation that has been administratively terminated?
You may reinstate a Connecticut professional corporation that has been administratively terminated, by changing your corporation’s formal status, overhauling documentation and reporting to the secretary of state.
Can I dissolve my Connecticut professional corporation after it’s been incorporated?
Yes, you can dissolve your Connecticut professional corporation after it has been incorporated.
Is it mandatory by law for Connecticut professional corporation to maintain adequate liability insurance?
Most Connecticut licensed professional corporations are required by state law to maintain adequate liability insurance.

Also Read

How to Save Money While Forming Connecticut Professional Corporation

First and foremost, it is crucial to do thorough research and fully understand the legal requirements associated with forming a professional corporation in Connecticut. Knowledge is power, and acquiring a comprehensive understanding of the necessary steps and documents will prove invaluable in saving money in the long run. Instead of solely relying on pricey legal professionals to guide you through the entire process, consider utilizing online resources, forums, and even consulting with entrepreneurs who have gone through this experience themselves. Equipping yourself with the right information can help prevent unnecessary expenses or misunderstandings.

Another way to save money while establishing a Connecticut professional corporation is by carefully considering which professional services you need assistance with, and which ones you can handle independently. Lawyers and accountants tend to charge high fees for their services, but if you have the time and capabilities to handle certain tasks yourself, it can greatly reduce expenses. Undertaking tasks like drafting and filing required documents, selecting a business name, and even organizing your professional corporation’s bylaws can be done by referring to available templates or utilizing online filing services. While expert advice is essential for legal nuances, striking a balance between tackling tasks on your own and seeking guidance when needed can yield significant cost savings.

Additionally, closely managing expenses during the formation process is essential. There are numerous expenses associated with establishing a professional corporation, and being aware of them can help you budget effectively. Some common costs include filing fees, legal consultations, registered agent fees, and taxes. Be proactive and compare costs from different service providers to ensure you are getting the best deal possible. Prioritize essential expenses required by the state, rather than spending on unnecessary extras that may not contribute long-term value.

Additionally, exploring shared resources and collaborative spaces can save entrepreneurs considerable amounts of money when setting up a professional corporation. Traditional office space comes with numerous costs, including rent, furniture, and utilities. By leaning towards shared offices or co-working spaces, entrepreneurs can dramatically reduce overhead costs while still accessing a professional environment. This provides the added benefit of networking opportunities and collaboration with like-minded professionals.

Lastly, adopting and integrating efficient digital solutions can help in streamlining processes and lowering expenses while forming a Connecticut professional corporation. Nowadays, various software applications and online tools can aid in managing accounting, finance, legal, and administrative tasks. Utilizing such solutions can not only save time but also provide cost-effective ways to handle essential tasks.

In conclusion, establishing a Connecticut professional corporation does not necessarily imply exorbitant expenses. By gaining a thorough understanding of the requirements, carefully selecting professional services, managing expenses, exploring shared resources, and adopting digital solutions, individuals and business owners can successfully navigate the complex process while saving money in the process. Emphasizing cost awareness and resourcefulness can pave the way for a sustainable and successful professional corporation.

Conclusion

In conclusion, forming a professional corporation in Connecticut is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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