How to Form a Professional Corporation in New York (2024 Guide)

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

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

Forming a professional corporation in New York 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 New York?

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 New York. 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 New York, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in New York

To form a Professional Corporation in New York 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 Biennial report and taxes.

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

In forming a professional corporation in New York, 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 New York

After you have decided to form a professional corporation in New York, 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 New York, 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 60 days. You must file a name reservation application in the New York 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 New York 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 New York 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 New York. Forming a professional corporation for your service will be easier if you have Resident Agent in New York.

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

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Step 4: File the Certificate of Incorporation in New York

After you hire a Resident Agent to form a professional corporation, the next step is to file the New York 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 New York may be done with two methods, online and by mail. The Certificate of Incorporation fee may vary from different state. However, in New York, it costs $125 for filing online, or by mail.. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to Department of State Division of Corporations, State Records and Uniform Commercial Code, One Commerce Plaza, 99 Washington Ave., Albany, NY 12231..

Step 5: Write an Operating Agreement in New York

An operating agreement in New York 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 New York

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

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

Before your professional corporation operates in New York, you must have New York 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 New York 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 New York

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 New York tax classification for the taxes that an LLC in New York 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 New York.

  • 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.
  • New York 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 New York

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 New York

In New York, you must submit a report. The owners’ and Resident 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 (end of anniversary month) in the New York Secretary of State.

FAQs

What is a professional corporation?
A professional corporation is a corporation formed for the purpose of providing professional services, usually by individuals who hold a professional license in their respective field.
Can professionals in New York form a professional corporation?
Yes, professionals such as doctors, lawyers, accountants, architects, and others in New York can form a professional corporation.
How do I form a professional corporation in New York?
You can form a professional corporation in New York by filing articles of incorporation with the New York State Department of State and complying with other state requirements.
What are the advantages of forming a professional corporation in New York?
The advantages of forming a professional corporation in New York include liability protection for individual professionals, tax benefits, and opportunities for growth and expansion.
Who can own shares in a professional corporation in New York?
The ownership of shares in a professional corporation in New York is restricted to licensed professionals who are active participants in the business.
Can licensed professionals in New York form a limited liability company (LLC) instead of a professional corporation?
Yes, licensed professionals in New York can form an LLC to provide professional services, but these entities are subject to different rules and regulations.
Do professional corporations in New York have to file annual reports?
Yes, professional corporations in New York are required to file annual reports and pay an annual fee to the Department of State.
What is a Certificate of Incorporation in New York?
A Certificate of Incorporation is a legal document that formally creates a corporation in New York.
Do professional corporations in New York have to register with the New York State Board of Regents?
Yes, professional corporations in New York are required to register with the Board of Regents if they provide professional services that are licensed/regulated.
Can I form a professional corporation in New York with just one person?
Yes, you can form a professional corporation in New York with just one licensed professional.
What is the minimum number of shareholders required to form a professional corporation in New York?
In New York, there is no minimum number of shareholders required to form a professional corporation.
What is a shareholder agreement, and is it required for a professional corporation in New York?
A shareholder agreement is a legal document that outlines the rights and responsibilities of shareholders in a corporation. While it is not required for a professional corporation in New York, it may be beneficial to have one in place.
Can a foreign professional corporation conduct business in New York?
Yes, foreign professional corporations can conduct business in New York if they register with the New York State Department of State and meet various other legal requirements.
How long does it take to form a professional corporation in New York?
The time it takes to form a professional corporation in New York varies depending on various factors, such as the complexity of the business and the availability of required documents.
Is it possible to change the name of a professional corporation in New York?
Yes, it is possible to change the name of a professional corporation in New York by filing a Certificate of Amendment with the New York State Department of State.
Are escrow accounts required for professional corporations in New York?
Yes, escrow accounts are often required for professional corporations in New York that offer legal or escrow services.
Are professional corporations in New York taxed differently than regular corporations?
Professional corporations in New York may be taxed differently than regular corporations, but it depends on various factors, such as the structure of the business and the type of services provided.
How is the stock of a professional corporation in New York transferred?
The transfer of stock in a professional corporation in New York is subject to specific legal requirements, such as the consent of certain shareholders and Board of Directors approval.
Can a professional corporation in New York provide non-professional services?
Yes, a professional corporation in New York can provide non-professional services, but it must remain compliant with state laws and regulations.
Can a professional corporation in New York issue preferred stock?
No, professional corporations in New York cannot issue preferred stock because it would compromise the restrictions regarding ownership of shares.
Do professional corporations in New York have to hold annual meetings?
Yes, professional corporations in New York are required to hold annual meetings, but the format these meetings take and other features of this meeting can alternatively be decided upon by utilizing proxies of shareholders.
How are professional corporations in New York different than professional limited liability companies (PLLCs)?
Professional corporations differ from professional limited liability companies (PLLCs) in their structure and regulatory procedures, such as requirements for Board of Directors and shareholder composition.
How are professional corporations in New York different than regular corporations?
Professional corporations in New York are subject to specific laws and regulations requiring licensed professionals’ involvement who currently wish to provide professional services, and example licensure requirements.
Is it possible to convert an LLC into a professional corporation in New York?
Yes, it is possible to convert an LLC into a professional corporation in New York, but this process may involve specific procedural actions that preserved the license/permits for their special status.
What is a Notice of Intent in New York?
A Notice of Intent is a legal notification required of those wishing to form a professional corporation in their licensed professional and publicized cases in New York seek approval from both the New York State Department of State and the particular licensing board governing their current profession to make professional misrepresentation.
Can a professional corporation in New York provide services in multiple states?
With certain restrictions and other requirements met across different types of licensed professions, being able to be set up for multistate operation across the country may be allowed in the professional corporation structure in New York.
Can a professional corporation in New York provide services internationally?
Generally speaking, a professional corporation in New York can provide international services, but regulation compliance approval requirements may vary by jurisdiction.
When is the best time to form a professional corporation in New York?
It the best time to form a professional corporation in New York is when undergoing significant investments and when stepping out from representing solely one’s individual identity as a licensed professional.
Can a professional corporation be formed in New York?
Yes, a professional corporation can be formed in New York.
What professions are eligible for a professional corporation in New York?
Professions eligible for formation of a professional corporation in New York are law, medicine, dentistry, veterinary medicine, podiatry, chiropractic medicine, optometry, psychology, licensed creative arts therapists, licensed clinical social work, licensed master social work, licensed behavioral analyst and audiology.
What is required to form a professional corporation in New York?
To form a professional corporation in New York, you must file the Certificate of Incorporation with the New York Department of State, appoint registered agent and appoint licensed professionals who will form the shareholder.
How many shareholders are required to form a professional corporation in New York?
A minimum of one licensed professional is required to form a professional corporation in New York.
Can a non-licensed individual own shares in a professional corporation in New York?
No, non-licensed individuals cannot own shares in a professional corporation in New York.
Can an out-of-state licensed professional be a shareholder in a professional corporation formed in New York?
Yes, an out-of-state licensed professional can be a shareholder in a professional corporation funded in New York as long as they have met the licensing requirements of the profession in New York.
Can a professional corporation engage in any business, or can it only offer professional services?
A professional corporation formed in New York is only allowed to provide professional services within the profession for which it is licensed.
Is an attorney always required to form a professional corporation in New York?
An attorney is not always required to form a professional corporation in New York, but retaining one may be advisable for guidance through complex legal frameworks.
Does a PC formed in New York need a DBA?
Yes, a professional corporation formed in New York would need a DBA if it pursues business activities under names other than their registered name.
Is the name of my New York professional corporation subject to approval?
Yes, the names of New York professional corporations must meet requirements and cannot use words with disallowed or regulated terms. It goes for obtaining approval.
What is an S Corporation in New York?
An S Corporation is a qualifying corporation that is governed by the same law and regulation as a traditional C corporation — but chooses a different tax structure.
Is a professional corporation always taxed as an S Corporation in New York?
No, a professional corporation is not automatically taxed as an S Corporation in New York and must first qualify.
How do I file as an S Corporation in New York?
Follow federal Internal Revenue Service guidelines to be “checked-the-box” and file S Corporation election with Federal and State.
Are professional corporations in New York taxed more than regular corporations?
No, the tax is the same for both types of corporations.
What is the initial cost of forming a professional corporation in New York?
The initial cost for filing is $125, additional costs could comprise of legal and accounting expenses.
Are there annual fees required for professional corporations in New York?
No, there are no annual fees required for New York professional corporations.
Is there a franchise tax for professional corporations formed in New York?
Yes, there is a lower tax rate for professional corporations wishing to be taxed differently in New York.
Can LLC (Limited Liability Corporation) be formed for licensed professionals in New York?
Yes, limited liability companies (LLCs) may also be available to licensed professionals in New York State, provided that it is legally approved.
Can the shares of a professional corporation in New York be transferred?
The transfer of Professional Corporation shares needs to meet share-distribution regulations for both parties involved.
Are there any securities regulations for professional corporations in New York that must be followed?
Yes, professional corporations in New York might primarily be securities examples, triggering the securities Board’s reading of law during compliance.
How does the public uncovering the ownership structure of a professional corporation work in New York?
Public uncovering about a proprietorship company’s registered name and the officers is accessible in the public record of the Department of State by using a New York Corporation Search.
How long does a professional corporation last in New York?
New York Professional Corporations can potentially last indefinitely for as long as owners control its operational, tax, and legal responsibilities.
Does a professional corporation in New York have to have bylaws?
Yes, a professional corporation formed in New York has to have bylaws.
What should be included in the bylaws of a professional corporation in New York?
The bylaws of a professional corporation in New York should include shareholder meeting procedure, officer responsibilities, and dividend distribution arrangements.
Is a business checking account necessary for Professional Corporations in New York?
Yes, a checking Account is highly recommended in New York for payments routing, invoicing and record keeping.
Are Foreign Professional Law Corporation (FPLC) also allowed in New York to conduct business?
No, the State has forbidden FPLC arrangement for conducting business like PLLC in New York.

Also Read

How to Save Money While Forming New York Professional Corporation

First and foremost, one way to cut down on expenses when establishing a Professional Corporation is to carefully plan and research beforehand. It is essential to have a clear understanding of the legal requirements and how to meet them efficiently. This means familiarizing yourself with the necessary documents, fees, and processes involved in forming the corporation. By doing thorough research, you can avoid mistakes that could lead to unnecessary expenses or delays.

Another crucial aspect to consider is legal assistance. While it might seem counterintuitive in our efforts to save money, it could actually save you from financial headaches down the line. Hiring an experienced attorney who specializes in corporate law will ensure that all the legal considerations of forming a Professional Corporation are handled properly. This will help avoid potential legal issues that may require expensive legal remedies in the future. While there will certainly be a cost associated with hiring an attorney, their expertise will undoubtedly prove invaluable in the long run.

Moreover, taking advantage of online resources and DIY options can be a great way to minimize expenses when forming a Professional Corporation. Numerous websites offer step-by-step guides and document templates designed specifically for entrepreneurs looking to establish their corporation. While navigating the legal intricacies of forming a Professional Corporation might still require a level of expertise, these resources can be a more affordable alternative to hiring an attorney for every aspect of the process. However, it is crucial to approach these resources with caution, ensuring their reliability and credibility before committing to any service or advice.

Alongside legal concerns, cutting costs related to operational overheads is equally significant. For example, it may be wise to consider remote working options for employees, which can effectively reduce expenses related to workspace and other associated costs such as utilities and maintenance. Embracing technology to foster effective communication and collaboration in virtual environments can often yield considerable savings.

In addition, avoiding unnecessary spending on marketing and advertising in the early stages can help keep costs down. Effective utilization of social media platforms and word-of-mouth publicity can be highly beneficial, as they often require little to no monetary investment. By focusing on building a strong network and establishing credibility within the industry, the Professional Corporation can grow organically while squeezing the most out of the tight budget.

In conclusion, forming a New York Professional Corporation can undoubtedly be a costly endeavor, but vigilance and smart decision-making can help minimize expenses. Proper planning, seeking professional counsel when necessary, using online resources, and cutting unnecessary expenses will assist any aspiring entrepreneur in this process. By adopting these measures, you can save money and make establishing a Professional Corporation a more feasible prospect without compromising the quality or integrity of your business.

Conclusion

In conclusion, forming a professional corporation in New York 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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