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

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Forming a Professional Corporation in DC

If you would like to start and learn how to form a corporation in DC, 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 DC are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in DC 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.

Form a Professional Corporation in DC

What is a Professional Corporation in DC?

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 DC. 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 DC, if you changed your mind.

– WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in DC

To form a Professional Corporation in DC 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 Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Biennial report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in DC, 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 DC

After you have decided to form a professional corporation in DC, 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 DC, 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 DC 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 DC 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 DC Registered Agent

The next step in forming a professional corporation is hiring a Registered 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 DC. Forming a professional corporation for your service will be easier if you have Registered Agent in DC.

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

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Step 4: File the Articles of Incorporation in DC

After you hire a Registered Agent to form a professional corporation, the next step is to file the DC Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered 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 Articles of Incorporation in DC may be done with two methods, online and by mail. The Articles of Incorporation fee may vary from different state. However, in DC, it costs $220 for filing online and by mail filing. Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site. . For offline filing, Send the form by mail to Department of Consumer and Regulatory Affairs, Corporations Division, P.O. Box 92300, Washington, D.C. 20090.

Step 5: Write an Operating Agreement in DC

An operating agreement in DC 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 DC

The next step is to form the first board of directors for your PC in DC. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the DC 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 DC, 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 DC 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 DC.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in DC. 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 DC 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 DC 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 DC 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 DC

Before your professional corporation operates in DC, you must have DC 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 DC ranges from $75 – $400. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in DC

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 DC tax classification for the taxes that an LLC in DC 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 DC.

  • 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.
  • DC 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 DC

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 Biennial Report in DC

In DC, you must submit a report. The owners’ and Registered Agent’s names and contact details are listed in the Biennial Report. Also, it should include all of your yearly financial activity. You must submit the report every 2 years in the DC Secretary of State.

FAQs

What is a professional corporation in DC?
It is a type of corporation composed of professionals like attorneys, doctors, accountants, and architects who are licensed in DC.
Can a professional corporation provide professional services throughout DC?
Yes, a professional corporation can provide professional services in DC, subject to any applicable licensing requirements and regulations.
How many incorporators are needed to form a professional corporation in DC?
One or more persons can form a professional corporation in DC, and they are known as incorporators.
What are the benefits of forming a professional corporation in DC?
Limited liability, flexibility in management, and tax savings are some of the benefits of forming a professional corporation in DC.
Can a DC professional corporation be owned entirely by non-professionals?
No, DC law requires that at least one shareholder must be licensed in DC to form and own a professional corporation.
What types of businesses cannot form a professional corporation in DC?
Banks and other financial institutions are not allowed to form a professional corporation in DC.
Do DC professional corporations have to fulfill annual reporting requirements?
Yes, DC professional corporations must file an Annual Report with the DC Department of Consumer and Regulatory Affairs.
What types of professionals can form a professional corporation in DC?
Licensed professionals like doctors, lawyers, architects and accountants can form a professional corporation in DC.
Can a single professional form a professional corporation in DC?
Yes, a single professional can form a professional corporation in DC.
What is the minimum and maximum number of shareholders that a professional corporation can have in DC?
A professional corporation in DC can have a minimum of one and a maximum of 75 shareholders.
What are the restrictions on a professional corporation’s name in DC?
The name of a professional corporation in DC must contain “Professional Corporation” or abbreviation “P.C.”
Can a professional corporation change its name after formation in DC?
Yes, a professional corporation can change its name after formation for valid reasons with prior approved consent from a licensed agency in DC.
Can a professional corporation protect its shareholders from professional malpractice claims in DC?
Yes, the professional corporation in DC offers its shareholders limited liability protection from professional malpractice claims.
Can a professional corporation engage in a non-professional service business in DC?
Yes, a professional corporation in DC can own an interested company that offers non-professional service business.
What is the minimum amount of paid-in capital requirement for a DC professional corporation?
There is no minimum paid-in capital requirement for a professional corporation in DC.
How long does it take to form a DC professional corporation?
It typically takes between two to four weeks to form a DC professional corporation.
Can a non-resident form a professional corporation in DC?
Yes, a non-resident can form a professional corporation in DC.
Can a professional corporation in DC distribute profits to non-professionals?
No, a professional corporation in DC cannot distribute profits to non-professionals.
Do DC professional corporations pay corporate income tax?
Yes, DC professional corporations pay corporate income tax to the Internal Revenue Service, unless you choose to be taxed as an S Corporation.
Is there any exemption from franchise tax for DC professional corporations?
No, DC mandated that all professional corporations must pay franchise tax that ranges from $250 – $1000.
Do DC professional corporations need bylaws?
Yes, DC professional corporations must have bylaws that govern the regulation and management of the corporation.
What is the role of a registered agent in a professional corporation in DC?
The registered agent is a person or entity designated to receive official notices and service of process for the professional corporation or its shareholders.
Can a professional corporation in DC merge with another corporation or partnership?
Yes, a professional corporation in plan and take part in the process of merging with another corporation or partnership.
When are DC professional corporations required to file their annual report?
Professional Corporations in DC should file an annual report by April 1 each year, beginning the year following their corporation formation.
How can a professional corporation in DC amend its articles of incorporation?
A professional corporation must file Articles of Amendment with the Department of Consumer and Regulatory Affairs.
How long can a professional corporation continue doing business in DC?
A professional corporation in DC will exist in perpetuity unless disassembled legally.
Can an employee be a shareholder of a professional corporation in DC?
Yes, an employee can be a shareholder of a professional corporation in DC.
What is a foreign professional corporation in DC?
A foreign professional corporation is an entity that is incorporated outside of DC but wishes to do business in DC.
Does a foreign professional corporation need a DC office?
Not necessarily, but a foreign professional corporation must have an agent in DC that represents them before the DC government.
What is a professional corporation and how is it different from other types of corporations in Washington DC?
A professional corporation (PC) is a type of corporation organized to provide professional services. In DC, a PC must be formed by individuals who are licensed or certified to provide specific professional services, such as doctors, attorneys, and accountants.
Do I need a professional corporation to offer professional services in DC?
No, you can offer professional services in your own name or through a sole proprietorship, but forming a PC may offer you more protection and tax benefits.
Can non-professionals invest in my professional corporation?
No, in DC only licensed or certified professionals can own or be shareholders in a PC.
Do I need to have a physical office in DC to form a professional corporation?
No, but you need to have a registered agent located in DC who can receive important legal documents on your behalf.
Is it necessary to have a specific number of shareholders to form a PC in DC?
No, in DC a PC can have only one shareholder or many, but all must be licensed or certified professionals.
How do I choose a name for my professional corporation in DC?
In DC, the name of your professional corporation must include “professional corporation” or “PC”. You can search the DCRA database to make sure no other business entity uses your chosen name.
What documents do I need to submit to form a PC in DC?
You will need to submit articles of incorporation, a statement of purpose, and a registered agent form to the DCRA.
How long does it take to form a professional corporation in DC?
It typically takes 7-10 business days to process your application and receive your certificate of incorporation.
Can I change the purpose of my professional corporation after it’s formed in DC?
Yes, you can amend your articles of incorporation to change the purpose or other details of your PC.
What kind of insurance do I need for my professional corporation in DC?
At the minimum, you may need liability insurance to protect yourself and your business from any claims or lawsuits. Consult with an insurance professional to determine your specific needs.
Can I form a PC with professionals from different industries in DC?
No, individuals forming a PC must be licensed or certified to provide the same professional services.
Do I need to file a separate tax return for my professional corporation in DC?
Yes, you will need to file a corporate tax return in addition to your personal income tax return.
Does my PC need to pay district income tax in DC?
Yes, professional corporations must pay district income tax on DC-source income in addition to federal income tax.
What happens if I am sued for malpractice in my professional corporation?
A PC shields personal assets from business liabilities, but you may still be held personally responsible if you committed malpractice or violated ethics rules.
Can I form a PC if I am also employed full-time by another company in DC?
Yes, but you must ensure that there are no conflicts of interest that could arise as a result of your other employment.
Do I need to hold corporate meetings for my professional corporation in DC?
Yes, you are required to hold meetings of your shareholders and board of directors annually in DC.
What is the fee to form a professional corporation in DC?
The fee to file your articles of incorporation and other required forms is $220 for online filing, and $240 for paper filing.
Can I use my own personal bank account for my professional corporation in DC?
No, as a separate legal entity you will need to open a separate bank account for your PC.
How do I dissolve my professional corporation in DC?
You will need to file articles of dissolution and pay all taxes owed to the district before dissolving your professional corporation in DC.
Can I hold shares of my own professional corporation in DC?
Yes, but you must ensure that doing so does not create a conflict of interest or violate any state laws or regulations.
Do I need to register my professional corporation with any state agencies in DC?
Yes, you need to register with the District of Columbia Department of Consumer and Regulatory Affairs (DCRA).
Can I appeal a decision made by the DCRA for my professional corporation application?
Yes, you can appeal a decision made by the DCRA to the DC Court of Appeals in accordance with applicable rules of procedure.
How often do I need to renew my professional corporation registration in DC?
You must renew your professional corporation registration with the DCRA every other year.
Is it possible to be taxed as an S corporation for my professional corporation in DC?
Yes, your professional corporation can request an S corporation classification for federal tax purposes, which will allow the company’s income to be taxed like a partnership rather than a traditional corporation.
Do I need to publish any notices when forming a professional corporation in DC?
No, DC does not require publication or posting of any notices before or after formation of a professional corporation.
Are there any specific requirements for my company seal for my professional corporation in DC?
No, while a company seal is not required, you are permitted to use one if desired.
Can I own multiple professional corporations in DC?
Yes, but you must ensure that there are no conflicts of interest between multiple professional corporations in DC.
How do I change the name of my professional corporation in DC?
You must file articles of amendment to change the name of your professional corporation in DC.

Also Read

How to Save Money While Forming Dc Professional Corporation

First and foremost, one of the most significant costs when forming a professional corporation is legal fees. Laws and regulations can be complex, and it is essential to consult with an attorney who is well-versed in corporate law in Washington, D.C. However, there are several ways to save money on legal fees. One option is to shop around and compare rates from different law firms. Many attorneys offer free consultations, allowing you to discuss your needs and negotiate fees. Additionally, consider utilizing online legal services or legal document templates to prepare some of the needed paperwork yourself, which can help to reduce costs.

Another significant expense when forming a professional corporation is filing fees with the D.C. Department of Consumer and Regulatory Affairs (DCRA). These fees can add up quickly, but there are strategies to minimize costs. One option is to make sure you have all necessary paperwork completed accurately the first time. Mistakes or missing information can result in additional fees for resubmitting paperwork, so thorough preparation is crucial. Additionally, consider using a business formation service to assist with the filing process. While this service may have an upfront cost, it can save you time and money in the long run by ensuring your paperwork is filed correctly.

It’s also important to consider the ongoing costs associated with maintaining a professional corporation in D.C. One key expense is an annual report fee required by the DCRA. To save money, mark your calendar and make sure to file your annual report on time to avoid late fees. Additionally, if you are a small professional corporation, consider appointing one of the corporation’s owners or officers as the registered agent to save money on hiring a third-party registered agent. This can help avoid additional monthly or yearly fees associated with utilizing a registered agent service.

When setting up banking and financial accounts for your professional corporation, keep an eye on fees associated with banking services. Many banks offer free business checking accounts for new business customers. It’s also worth considering online-only banks that may offer lower fees or higher interest rates on business savings accounts. By carefully selecting a banking partner, you can save money on monthly fees that can add up over time.

In conclusion, forming a professional corporation in Washington, D.C., doesn’t have to break the bank. By carefully considering all costs associated with the formation process and exploring cost-saving strategies, individuals can save money while still ensuring their corporation is compliant with all laws and regulations. With some thoughtful planning and research, forming a professional corporation can be a financially feasible and rewarding venture.

Conclusion

In conclusion, forming a professional corporation in DC 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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