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

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Forming a Professional Corporation in Kentucky

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

Forming a professional corporation in Kentucky 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 Kentucky?

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 Kentucky. 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 Kentucky, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Kentucky

To form a Professional Corporation in Kentucky 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 Annual report and taxes.

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

In forming a professional corporation in Kentucky, 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 Kentucky

After you have decided to form a professional corporation in Kentucky, 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 Kentucky, 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 Kentucky 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 Kentucky 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 Kentucky 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 Kentucky. Forming a professional corporation for your service will be easier if you have Registered Agent in Kentucky.

Alternatively, you can serve as your own Registered Agent if you have the time. Usually, in Kentucky, a Registered Agent costs is ranging from $50 – $150. To make it easier, you can hire Kentucky Registered Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in Kentucky

After you hire a Registered Agent to form a professional corporation, the next step is to file the Kentucky 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 Kentucky may be done with two ways, online and by mail. The Articles of Incorporation fee may vary from different state. However, in Kentucky, it costs $40 for filing online 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 Michael G. Adams, Office of the Secretary of State, P.O. Box 718, Frankfort, KY 40602.

Step 5: Write an Operating Agreement in Kentucky

An operating agreement in Kentucky 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 Kentucky

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

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

Before your professional corporation operates in Kentucky, you must have Kentucky 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 Kentucky 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 Kentucky

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

  • 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.
  • Kentucky 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 Kentucky

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 Kentucky

In Kentucky, you must submit a report. The owners’ and Registered 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 (30th June) in the Kentucky Secretary of State.

FAQs

What requirements must be met to form a professional corporation in Kentucky?
Requirements for forming a professional corporation in Kentucky include having shareholders who are licensed professionals and including the word “Professional Corporation” or “P.C.” in the company name.
Do I need to hire a lawyer to form a professional corporation in Kentucky?
While it is not required, it is recommended to hire a lawyer to assist with the formation process to ensure that all steps are completed correctly.
How much does it cost to form a professional corporation in Kentucky?
The filing fee for articles of incorporation with the Kentucky Secretary of State is $50 as of 2021.
Is a professional corporation liable for its own debts in Kentucky?
Yes, under Kentucky law, a professional corporation is a separate legal entity and is liable for its own debts and lawsuits.
Can a professional corporation in Kentucky have a non-professional shareholder?
No, under Kentucky law, all shareholders of a professional corporation must be licensed professionals in the same field as the corporation.
How is a professional corporation taxed in Kentucky?
A professional corporation in Kentucky is generally taxed as a C corporation, meaning the corporation pays corporate income tax on its profits.
Are there any exceptions to the professional corporation ownership requirements in Kentucky?
Yes, in some cases, a professional corporation may be owned by a professional corporation with the same professionals and for the same professional purposes.
Who regulates professional corporations in Kentucky?
Professional corporations in Kentucky are regulated by the Kentucky Secretary of State’s office.
Are there any annual reporting requirements for professional corporations in Kentucky?
Yes, professional corporations in Kentucky must file an annual report with the Secretary of State’s office and pay a yearly fee as required by law.
Can a professional corporation in Kentucky have a board of directors?
Yes, a professional corporation in Kentucky can have a board of directors made up of licensed professionals in the same field as the corporation.
How is liability handled for professional corporations in Kentucky?
Liability for a professional corporation in Kentucky is limited to the assets of the corporation, and not the personal assets of the professionals involved.
How can I change the name of my professional corporation in Kentucky?
To change the name of a professional corporation in Kentucky, you must file articles of amendment with the Secretary of State’s office and meet certain requirements.
How can I dissolve a professional corporation in Kentucky?
To dissolve a professional corporation in Kentucky, you must file articles of dissolution with the Secretary of State’s office and meet certain requirements.
Can a professional corporation in Kentucky provide services outside of Kentucky?
Yes, a professional corporation in Kentucky can provide services outside of Kentucky as long as it is licensed and authorized to do so in each state.
How many shareholders can a professional corporation have in Kentucky?
There is no limit to the number of shareholders a professional corporation can have in Kentucky, but all shareholders must be licensed professionals in the same field.
Do I need to obtain a business license to form a professional corporation in Kentucky?
Depending on the type of services provided, a professional corporation in Kentucky may need to obtain additional licenses or permits.
Can a professional corporation be owned by only one person in Kentucky?
Yes, a professional corporation in Kentucky can be owned by a single licensed professional, as long as all other requirements are met.
Can a professional corporation in Kentucky be an S corporation?
No, under Kentucky law, a professional corporation cannot be an S corporation.
How are profits and losses divided among shareholders of a professional corporation in Kentucky?
Profits and losses of a professional corporation in Kentucky are typically divided according to the percentage of shares each shareholder owns.
Can professional corporations in Kentucky offer different types of services?
No, under Kentucky law, a professional corporation can only offer services related to the licensed profession of its shareholders.
What types of professionals can form a professional corporation in Kentucky?
Any licensed professional can form a professional corporation in Kentucky, including doctors, dentists, lawyers, and accountants.
How often must shareholders meet and make decisions for a professional corporation in Kentucky?
Professional corporations in Kentucky must follow the same rules and regulations as other corporations, including holding meetings and making decisions as required by law.
Can a professional corporation in Kentucky participate in certain types of business ventures?
Yes, a professional corporation in Kentucky can participate in joint ventures with other professional corporations or non-professional corporations.
Would forming a professional corporation in Kentucky protect my personal assets from lawsuits?
Yes, forming a professional corporation in Kentucky can help protect the personal assets of its shareholders from lawsuits filed against the corporation.
What is the difference between a professional corporation and a regular corporation in Kentucky?
The main difference between a professional corporation and a regular corporation in Kentucky is that professional corporations are designed specifically for licensed professionals to provide services related to their profession.
What is a professional corporation?
A professional corporation is a legal entity specifically designed for professionals in certain fields, which limits some of the legal and financial liabilities of that profession.
Who can form a professional corporation in Kentucky?
Professionals who are licensed or certified by the Kentucky Board of Licensure may form a professional corporation.
Which professions are allowed to form a professional corporation in Kentucky?
Professions such as medicine, law, dentistry, accounting, architecture, engineering, psychology, optometry, and more can form a professional corporation in Kentucky.
Can out-of-state professionals form a professional corporation in Kentucky?
Yes, out-of-state professionals who meet the Kentucky Board of Licensure eligibility requirements may form a professional corporation in Kentucky.
What is the difference between forming a professional corporation and forming a limited liability company in Kentucky?
A professional corporation is a legal entity specifically intended for professional services, while a limited liability company can be created for any business purpose.
Does a professional corporation protect me from personal liability in Kentucky?
A professional corporation provides some level of liability protection in Kentucky, but it cannot protect you from all liabilities.
Are there any license or professional practice requirements for shareholders and directors of a professional corporation in Kentucky?
Yes, all shareholders and directors of a Kentucky professional corporation must have the required licenses or qualifications from the Kentucky Board of Licensure for their profession.
Can non-licensed professionals such as business investors own shares in a professional corporation in Kentucky?
No, only licensed and qualified professionals can own shares in a professional corporation in Kentucky.
How many shareholders can there be in a professional corporation in Kentucky?
There is no limit to the number of shareholders a professional corporation in Kentucky can have.
Can professional corporations in Kentucky offer stock options to employees as compensation?
Yes, professional corporations in Kentucky can offer stock options to employees as long as those employees meet the required qualifications for their profession, and the appropriate restrictions are in place.
How are professional corporations in Kentucky taxed?
Professional corporations in Kentucky are taxed using the corporate tax rate.
Can professional corporations in Kentucky elect to be taxed as an S corporation?
Yes, professional corporations in Kentucky may elect to have their incomes and expenses pass through to their shareholders, which is usually more tax beneficial.
Are there any ongoing filing requirements for professional corporations in Kentucky?
Yes, professional corporations in Kentucky must file an annual report each year with the Kentucky Secretary of State and update any changes to their registered agent or office.
Is it required in Kentucky that a professional corporation must have a professional limited liability functioner (PLLF)?
Yes, Kentucky law requires professional corporations must conform to the regulations applied to PLLFs.
Can a professional corporation merge with another professional corporation in Kentucky?
Yes, a Kentucky professional corporation can merge with another professional corporation subject.
Can professional corporations in Kentucky convert to a different type of entity later?
Yes, a Kentucky professional corporation can convert to a different type of entity at any time by filing appropriate paperwork.
What types of legal structures to most professional corporations in Kentucky form under?
Most professional corporations in Kentucky form under a C-corporation.
Can members of the same profession practice in multiple fields throughout their professional corporation’s formation?
Yes, members of the same profession may practice in multiple fields as long as each member has all the necessary licenses required given on each field.
Can a professional corporation in Kentucky practice in multiple states?
Yes, professional corporations in Kentucky may obtain several licenses allowing them to practice in different states.
Can members of different professions form the same professional corporation in Kentucky?
No, members are required to be licensed in the same profession currently, and for that to stay as is.
Is there a deadline for filing annual reports with the Secretary of State in Kentucky?
Yes, annual reports of a professional corporation must be presented by its anniversary date, so as to prove the given rights to use its corporate name and reduce the reinstatement obligation fees later.
Where can a professional corporation access information about filing an annual report in Kentucky?
The Kentucky Secretary of State offers information online regarding annual report filing requirements and dates.
Can a professional corporation in Kentucky change its registered office or agent after registration?
Yes, a professional corporation in Kentucky can change its registered office or agent by submitting the requisite paperwork.
What happens if a professional corporation in Kentucky fails to submit an annual report on time?
If a professional corporation in Kentucky fails to submit its annual report on time, they will eventually forfeit their legal status and will incur extra fees for re-instatement procedures.
If we own only a small amount of each other’s stock, is that enough to form a professional corporation in Kentucky?
No, Kentucky laws demand all shareholders of legal liability be only professionals for a deeper intended composition of sharers.

Also Read

How to Save Money While Forming Kentucky Professional Corporation

First and foremost, it is essential to have a well-thought-out business plan in place. This preliminary step will help you identify unnecessary costs and streamline your budget. By understanding your business needs and future goals, you can avoid any potential financial hiccups along the way.

Furthermore, conducting thorough research and being well-informed about Kentucky’s legal requirements and obligations for professional corporations is key. Seeking advice from legal professionals in the initial stages will help you navigate the complex paperwork efficiently, saving you time and money in the long run.

Another valuable tip to save money is to opt for a do-it-yourself approach when appropriate. While it may seem tempting to delegate all tasks to specialized firms or consultants, certain aspects of forming a Kentucky professional corporation can be handled independently with minimal expenses. Utilize online resources and educational materials to gain the necessary knowledge and confidence required to undertake these tasks.

Additionally, carefully choose the time of incorporation to save money. Timing can greatly impact the financial aspect, as you may want to take advantage of special offers, promotions, or discounted registration fees offered periodically by the Kentucky Secretary of State. By being aware of these opportunities, you can potentially reduce your initial costs significantly.

Furthermore, outsourcing specific tasks to remote workers or freelancers can be a financially savvy option. Hiring virtual assistants can be a cost-effective solution for administrative tasks such as bookkeeping, document preparation, or mail handling. By collaborating with remote professionals, you can benefit from their expertise and avoid the overhead costs associated with hiring full-time employees.

Another avenue to explore is cloud-based software and digital tools that can assist in managing your professional corporation. These solutions provide efficient document storage, collaboration, and organizational systems that eliminate the need for physical paperwork or large filing cabinets. By investing in such software, you not only save money on storage costs but also ensure smooth operations with easy access to essential information.

Lastly, maintaining a frugal mindset throughout the formation process will undoubtedly contribute to saving money. Seeking cost-effective alternatives for necessary expenditure, such as office supplies or essential services, will help keep your budget intact. Prioritizing needs over wants, especially in the early stages of your professional corporation, can reduce unnecessary expenditures and delay costly investments until you are more established.

In conclusion, forming a professional corporation in Kentucky may seem like a daunting prospect, considering the potential costs involved. However, with careful planning, prudent decision-making, and cost-saving strategies, this process can be made much more affordable. By following the tips outlined here, entrepreneurs and professionals can navigate this path while safeguarding their financial resources and setting the foundation for a successful professional corporation.

Conclusion

In conclusion, forming a professional corporation in Kentucky 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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