How to Form a Professional Corporation in North Carolina (2024 Guide)

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

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

Forming a professional corporation in North Carolina 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 North Carolina?

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 North Carolina. 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 North Carolina, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in North Carolina

To form a Professional Corporation in North Carolina 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 North Carolina, 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 North Carolina

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

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

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Step 4: File the Articles of Incorporation in North Carolina

After you hire a Registered Agent to form a professional corporation, the next step is to file the North Carolina 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 North Carolina may be done with three methods that are online, by mail and in-person. The Articles of Incorporation fee may vary from different state. However, in North Carolina, it costs $125 for filing online, or by mail.. Create a wizard on the SOS site, fill out the online form and submit online. Or download the PDF form, fill it up offline and upload it back to the SOS site. . For offline filing, Send the form by mail or drop it off in person at The Secretary of State, Business Registration Division, P.O. Box 29622, Raleigh, NC 27626..

Step 5: Write an Operating Agreement in North Carolina

An operating agreement in North Carolina 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 North Carolina

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

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

Before your professional corporation operates in North Carolina, you must have North Carolina 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 North Carolina 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 North Carolina

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 North Carolina tax classification for the taxes that an LLC in North Carolina 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 North Carolina.

  • 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.
  • North Carolina 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 North Carolina

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 North Carolina

In North Carolina, 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 (15th April every year) in the North Carolina Secretary of State.

FAQs

What is a professional corporation in North Carolina?
A professional corporation in North Carolina is a type of business entity that is owned and operated by licensed professionals in a particular field.
Which professions are allowed to form professional corporations in North Carolina?
The professions allowed to form professional corporations in North Carolina include architects, engineers, optometrists, dentists, physicians, attorneys, accountants, and veterinarians.
What are the benefits of forming a professional corporation in North Carolina?
Some of the benefits of forming a professional corporation in North Carolina include limited liability protection, pass-through taxation, and a more professional appearance to potential clients.
What is the process of forming a professional corporation in North Carolina?
The process of forming a professional corporation in North Carolina involves filing articles of incorporation with the North Carolina Secretary of State’s office and paying a filing fee. Professionals must designate themselves as shareholders of the corporation.
Do I need to have more than one shareholder to form a professional corporation in North Carolina?
No, you do not need to have more than one shareholder to form a professional corporation in North Carolina. You can be the sole shareholder of the corporation.
Can a professional corporation in North Carolina have multiple owners from multiple professions?
No, a professional corporation in North Carolina can only have owners from a single profession. In other words, lawyers and accountants cannot co-own a professional corporation.
Can a professional corporation in North Carolina have a non-licensed spouse or family member as an owner?
No, in North Carolina, all owners of a professional corporation must be licensed in the profession practiced by the corporation.
Does North Carolina require a specific amount of authorized stock shares for a professional corporation?
No, North Carolina does not require a specific amount of authorized stock shares for a professional corporation.
Are there any ongoing formalities that a professional corporation in North Carolina must comply with?
Yes, a professional corporation in North Carolina must file an annual report and pay a franchise tax to the Secretary of State’s office.
What taxes does a professional corporation in North Carolina need to pay?
A professional corporation in North Carolina needs to pay state and federal income taxes, as well as potential North Carolina franchise taxes.
Can a professional corporation in North Carolina provide business-related lawsuits and protection to its professionals from judgments or lawsuits outside of the corporation?
Yes, a professional corporation in North Carolina can provide liability protection to its shareholders for claims arising from the corporation’s business activities.
Can a professional corporation in North Carolina elect S-Corp taxation treatment?
Yes, a professional corporation in North Carolina can elect to be taxed as an S-Corporation, as long as certain requirements are met.
Do I need to keep minutes for a professional corporation in North Carolina?
Yes, a professional corporation in North Carolina must keep minutes of its meetings and file annual reports with the Secretary of State.
Can I dissolve/terminate a professional corporation in North Carolina?
Yes, a professional corporation in North Carolina can be dissolved or terminated, although there may be legal and financial requirements to complete the process.
Are there any restrictions on the name I can choose for a professional corporation in North Carolina?
Yes, the name of a professional corporation in North Carolina must include the words “Professional Corporation” or the abbreviation “PC.”
Do I need to register my professional corporation in North Carolina with any state department?
Yes, the professional corporation needs to file the paperwork with the North Carolina Secretary of State, Corporations Division.
What is the North Carolina Secretary of State’s office website for filing paperwork for professional corporation?
The North Carolina Secretary of State’s official website for corporate filings is www.sosnc.gov.
Can I file the paperwork for my professional corporation in North Carolina online?
Yes, you can file the paperwork for your professional corporation in North Carolina online through the Secretary of State’s website.
Can I reserve a name for my professional corporation in North Carolina before filing the articles of incorporation?
Yes, North Carolina allows prospective businesses to reserve available names for 120 days.
How much is the filing fee for forming a professional corporation in North Carolina?
The filing fee to form a professional corporation in North Carolina is $100.
Can I use a registered agent service to form my professional corporation in North Carolina?
Yes, you can use a registered agent service to form a professional corporation in North Carolina.
Are there any limits on how many professional corporations I can own in North Carolina?
North Carolina law does not limit how many professional corporations an individual can own.
Is there an annual/biennial fee to maintain a professional corporation’s license in North Carolina?
A professional corporation in North Carolina must pay an annual report fee to the Secretary of State.
Do I need to obtain a North Carolina business license to start a professional corporation?
The state of North Carolina does not require a separate business license to operate a professional corporation.
Does a professional corporation need to obtain any additional permits or licenses beyond its professional license?
It depends on the specific profession and the nature of the services offered by the professional corporation. Many professionals must obtain additional permits or licenses depending upon their business activities.
Can I operate my professional corporation from outside of North Carolina?
Yes, you can operate your professional corporation from outside of North Carolina if you follow the proper registration and licensing procedures.
How long does it take to form a professional corporation in North Carolina?
It usually takes about 1 to 2 weeks to finalize the formation of a professional corporation in North Carolina after submitting the required paperwork.
What is a professional corporation?
A professional corporation is a type of corporation that is formed by professionals, such as doctors, lawyers, or accountants, to provide services to clients.
How do I form a professional corporation in North Carolina?
To form a professional corporation in North Carolina, you must file articles of incorporation with the North Carolina Secretary of State and obtain a Certificate of Authority from the North Carolina Board of Examiners.
What is the cost to form a professional corporation in North Carolina?
The cost to form a professional corporation in North Carolina varies depending on several factors, including the number of owners and the services provided. In general, you can expect to pay several hundred dollars in fees.
What are the requirements to form a professional corporation in North Carolina?
The requirements to form a professional corporation in North Carolina include having at least one owner who is licensed in the profession or trade the corporation will engage in and obtaining a Certificate of Authority from the North Carolina Board of Examiners.
Can I form a professional corporation with a business name that is not my own?
Yes, you can form a professional corporation with a business name that is not your own in North Carolina. However, you must ensure that the name is not already in use by another business and file a “Doing Business As” (DBA) if needed.
Do I need to hire a lawyer to form a professional corporation in North Carolina?
While it is not required to hire a lawyer to form a professional corporation in North Carolina, it is highly recommended. A lawyer can help ensure that you comply with all legal requirements and advise you on how to make the best decisions for your business.
How many owners can a professional corporation have in North Carolina?
A professional corporation in North Carolina can have as many owners as needed as long as all are licensed in the profession or trade the corporation will engage in.
Is there a residency requirement for owners of a professional corporation in North Carolina?
There is no residency requirement for owners of a professional corporation in North Carolina.
What professions are eligible to form a professional corporation in North Carolina?
Professionals who may form a professional corporation in North Carolina include doctors, lawyers, accountants, dentists, architects, engineers, and many others.
What are the ongoing requirements for a professional corporation in North Carolina?
The ongoing requirements for a professional corporation in North Carolina include yearly filings and renewals, corporate meetings, and adhering to accounting requirements.
Can a professional corporation in North Carolina offer stock to the public?
No, a professional corporation in North Carolina cannot offer stock to the public. Shares can only be sold to licensed professionals in the respective trade or profession.
Does forming a professional corporation in North Carolina protect my personal assets?
Yes, forming a professional corporation in North Carolina can protect your personal assets from company debts and legal actions taken against the business.
Can a professional corporation in North Carolina be sued for malpractice?
Yes, a professional corporation in North Carolina can be sued for malpractice. However, professional liability insurance can help defer some costs of lawsuits.
Can a professional corporation in North Carolina qualify for state and local business taxes?
Yes, a professional corporation in North Carolina may qualify for certain state or local taxes. You should consult with your accountant for more in-depth information about tax obligations.
Do I need to register for federal taxes if I form a professional corporation in North Carolina?
Yes, you need to preregister for income taxes with the IRS. Consult with a tax attorney for best results.
Can I register a trademark for my professional corporation in North Carolina?
Yes, you can register a trademark for your professional Corporation in North Carolina.
What is a tax-exempt professional corporation?
A tax-exempt professional corporation is a corporation that provides a charitable purpose to the community and is recognized by the IRS as exempt from federal income taxes.
Are there accounting-filling requirements for a professional corporation in North Carolina?
Yes, there are accounting-filling requirements for a professional corporation in North Carolina.
What accounting software would you recommend for a North Carolina professional corporation?
There are several top-rated accounting software geared towards businesses of different sizes. But consulting with paperwork professionals will give you a better recommendation based on your business size, workflow, and goals.
Will I need to purchase an adult corporation registration and licensing for my North Carolina professional corporation before I can spread my offerings linguistically?
No, purchasing an adult corporation registration or licensing is not required for a North Carolina professional corporation.
How often should professional shareholders meet?
Professional shareholders officers must meet at least once every year.
What body is in charge of issuing licenses, certificates and all legal formalities related to forming a professional corporation?
The board with the legal obligation to regulate on licenses, certificate and legal formalities related to forming a professional corporation in North Carolina is the North Carolina Board of Examiners.
Is it easy to relocate a professional corporation to another state?
Relocating a professional corporation to another state can be complex; the process may involve restarting from ground zero in terms of startup formalities in the new state.
What penalties exist for operating a professional corporation illegally in North Carolina?
Failure to operate professionally in North Carolina can result in legal penalties, civil suits, misdemeanor, and sanctions.
How often do professional officers have shareholder meetings?
Meetings of members, directors and their professional corporation annually, usually a time and date set by the bylaws. A special event can also be set upon need.

Also Read

How to Save Money While Forming North Carolina Professional Corporation

First and foremost, it is crucial to have a clear understanding of the legal requirements and processes involved. While seeking the assistance of legal professionals is recommended, entrepreneurs should also familiarize themselves with the basics of forming a professional corporation in North Carolina. This includes comprehending the necessary paperwork, the required licenses, and any other regulatory obligations. By educating themselves, individuals can minimize the reliance on legal counsel and reduce associated costs.

Furthermore, careful selection of professional services providers is essential. Whether entrepreneurs choose to hire a law firm or a business consultant, doing thorough research and comparing quotes is key. Oftentimes, multiple providers offer similar services at varying costs. By leveraging this competition, entrepreneurs can negotiate more favorable rates, ultimately reducing their expenses. Moreover, it is important to consider providers who specialize in assisting professional corporations, as they possess industry-specific knowledge and the ability to streamline the formation process.

One area in which aspiring business owners can save a significant amount of money is with the preparation of legal documents. Instead of solely relying on attorney-drafted templates, entrepreneurs can take advantage of the various resources available online. Many websites provide generic legal documents that suit the needs of most professional corporations. By customizing these templates, entrepreneurs can reduce costs while retaining the accuracy and compliance required. However, it is crucial to seek professional advice to ensure all legal requirements are met.

Additionally, entrepreneurs should consider the timing of their professional corporation formation carefully. Avoiding last-minute rushes and undue haste can help minimize costly mistakes. By planning ahead, entrepreneurs can identify potential roadblocks and allocate the necessary resources and budget accordingly. Being prepared ensures a smoother formation process and can prevent unnecessary unplanned expenses or extensions.

It is worth exploring discounted or free resources made available by the state or county government. Government agencies often provide online guides, workshops, and resources that can assist in forming a professional corporation. These resources can alleviate financial burdens significantly by providing entrepreneurs with the necessary knowledge and tools to complete essential steps in the formation process independently.

Finally, networking can offer immense value in forming a professional corporation. By connecting with other business owners, entrepreneurs can gain valuable insights and learn from their experiences. Networking can also provide access to cost-saving opportunities through shared resources or group rates. Building connections within the industry can prove invaluable, both in terms of reducing expenses and potentially attracting clients in the future.

In conclusion, forming a professional corporation in North Carolina can be a costly endeavor, but it is possible to save money with careful planning and efficient decision-making. By educating themselves, researching their options, preparing and customizing legal documents, avoiding unnecessary haste, leveraging government resources, and networking, entrepreneurs can significantly reduce their expenses. Taking these steps will not only result in cost savings during the formation process but also set the foundation for a successful and financially sustainable professional corporation.

Conclusion

In conclusion, forming a professional corporation in North Carolina 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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