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

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Forming a Professional Corporation in Ohio

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

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

Form a Professional Corporation in Ohio

What is a Professional Corporation in Ohio?

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 Ohio. 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 Ohio, if you changed your mind.

– WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Ohio

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

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

In forming a professional corporation in Ohio, 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 Ohio

After you have decided to form a professional corporation in Ohio, 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 Ohio, 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 some time. You must file a name reservation application in the Ohio 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 Ohio 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 Ohio Statutory Agent

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

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

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Step 4: File the Articles of Incorporation in Ohio

After you hire a Statutory Agent to form a professional corporation, the next step is to file the Ohio Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Statutory 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 Ohio may be done with three methods that are online, by mail and drop box. The Articles of Incorporation fee may vary from different state. However, in Ohio, it costs $99 for online and by mail filing. 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 or drop it off at Ohio Secretary of State, P.O. Box 670, Columbus, OH 43216.

Step 5: Write an Operating Agreement in Ohio

An operating agreement in Ohio 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 Ohio

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

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

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

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

  • 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.
  • Ohio 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 Ohio

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 Ohio

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

FAQs

What is a professional corporation in Ohio?
A professional corporation in Ohio is a type of incorporation designed specifically for licensed professionals who want to form a business entity.
Who can form a professional corporation in Ohio?
In Ohio, licensed professionals such as doctors, dentists, lawyers, architects, engineers, and some types of mental health practitioners can form a professional corporation.
Do all states allow formation of professional corporations for licensed professionals?
No, not all states allow formation of professional corporations. Different states have different laws regarding professional corporations.
How is a professional corporation different from a regular corporation in Ohio?
A professional corporation offers limited liability to its shareholders and is formed exclusively for licensed professionals, while other corporations do not have the same limitations.
What are the benefits of forming a professional corporation in Ohio?
The benefits of forming a professional corporation in Ohio include limiting personal liability and generally having easier access to liability insurance.
How do I form a professional corporation in Ohio?
You can form a professional corporation in Ohio by filing articles of incorporation with the Secretary of State’s office and obtaining any necessary licenses and permits.
Can a professional corporation be converted to a non-professional corporation in Ohio?
Yes, a professional corporation can be converted to a non-professional corporation based on the regulations of the Ohio state.
Can a professional corporation be converted to a limited liability company (LLC) in Ohio?
Yes, a professional corporation can be converted to an LLC based on the regulations of the Ohio state.
How many shareholders can my Ohio professional corporation have?
Ohio professional corporations may have no more than 50 shareholders under Ohio law.
Can a non-resident be a shareholder in an Ohio professional corporation?
Yes, a non-resident can be a shareholder in an Ohio professional corporation.
Do I need to have a unique name for my Ohio professional corporation?
Yes, Ohio law requires that your professional corporation’s name be unique, and not already taken by another business operating in Ohio.
Can my Ohio professional corporation use abbreviations in its name?
Yes, abbreviations are allowed to be used in the name of an Ohio professional corporation.
How much does it cost to form a professional corporation in Ohio?
The filing fee to form a professional corporation in Ohio is $125, with additional fees for expedited services.
Is there a difference between state and federal taxes for professional corporations in Ohio?
Yes, professional corporations, like any other corporations, are subject to both state and federal taxes in Ohio.
Do I need a lawyer to form a professional corporation in Ohio?
No, but getting advice and assistance from a lawyer specific to Ohio law can be helpful to avoid misunderstandings and mistakes when forming a professional corporation.
How long does it take to form a professional corporation in Ohio?
The process to form a professional corporation in Ohio can take several weeks, depending upon the complexity of your corporation, including review by Ohio authorities.
What licenses do I need to form a professional corporation in Ohio?
The types of licenses needed for a professional corporation in Ohio vary depending on the field of expertise of the licensed professionals involved. Licensing requirements must be acknowledged for the particular profession.
Can I form a foreign professional corporation in Ohio?
Yes, foreign corporations may apply to do business in Ohio if they meet strict Ohio State requirements.
What is Ohio’s standard abbreviation for Professional Corporation?
The standard abbreviation for Professional Corporation in Ohio is “P.C.”
Can a professional corporation offer other services/geographies outside Ohio?
Yes, professional corporations are not something local in Ohio. Your professional corporation can offer its services to customers in other parts of the US and beyond if properly licensed.
How often should I advise my Ohio professional corporation, and what happens if I fail to advise them?
Ohio companies have a regular annual meeting where owners and officers come together to discuss company business. Failing to hold them could lead to corporate penalties in accordance with Ohio’s regulations.
Is carrying enough insurance to protect against potential liabilities mandatory for an Ohio professional corporation?
While the obtainment of insurance usually isn’t obligatory by Ohio State, buying appropriate insurance is important so that you’re always safeguarded against professional liabilities.
What happens if my Ohio professional corporation faces legal action?
It would have the support of its professional indemnity insurance policy and of the approved attorney group members identified by the corporation’s board.
Are Ohio professional corporations subject to an annual franchise tax?
No, as professional corporations pay at the state and federal tax levels like common corporations.
Can an Ohio professional corporation allow additional owners who aren’t licensed business associates?
In general, ownership tends to be limited to licensed owner personnel only in professional corporations.
Are Ohio professional corporation shareholders responsible for company debts?
No, shareholders in an Ohio professional corporation typically are not liable for corporate debt-based claims, although certain circumstances are always applicable.
What takes after the name of an Ohio dentistry corporation?
Depending upon the specific example, various abbreviations can come right after the corporation’s name, such as PLLC, PLC, or P.C.
Do I need to have a professional license to form a professional corporation in Ohio?
Yes, Ohio law requires all shareholders, officers, and directors of a professional corporation to hold the appropriate professional licenses in their field.
How is an Ohio professional corporation taxed?
An Ohio professional corporation is taxed as a C corporation, with the profits and losses reported on the corporation’s tax returns.
Can I form a professional corporation with someone who doesn’t have an Ohio license?
No, all shareholders, officers, and directors of an Ohio professional corporation must hold the appropriate professional licenses in their field.
How do I form an Ohio professional corporation?
To form an Ohio professional corporation, you must file articles of incorporation with the Ohio Secretary of State and comply with all state regulations.
What is the filing fee for forming an Ohio professional corporation?
The filing fee for forming an Ohio professional corporation is $125 as of 2021.
Do I need to file a separate certificate of authorization to practice with the Ohio Secretary of State?
Yes, all Ohio professional corporations must file a certificate of authorization to practice with the Ohio Secretary of State.
Are there any formalities or formal organizational meetings that must be held when forming an Ohio professional corporation?
Yes, Ohio law requires that a professional corporation hold an organizational meeting within 90 days of incorporation to adopt bylaws and elect officers.
Can a professional corporation in Ohio be owned by a non-professional?
No, Ohio law prohibits non-professionals from owning any part of a professional corporation.
Can an Ohio professional corporation provide services in a field outside of its shareholders’ licensed profession?
No, an Ohio professional corporation may only provide services within the field in which its shareholders are licensed professionals.
Do Ohio professional corporations have perpetual existence?
Yes, an Ohio professional corporation has perpetual existence unless dissolved by its shareholders or ordered by a court.
Are Ohio professional corporations required to have a registered agent in the state?
Yes, all Ohio professional corporations are required to have a registered agent with a physical address in Ohio.
Can shareholders of an Ohio professional corporation separate and form individual corporations?
Yes, shareholders of an Ohio professional corporation can separate and form individual corporations once all state regulations have been followed.
What happens if an Ohio professional corporation’s shareholders die or retire?
Ohio law requires that the shares of any deceased or retired shareholder of a professional corporation be purchased and distributed according to the corporation’s bylaws.
Can an Ohio professional corporation elect S corporation status for tax purposes?
Yes, an Ohio professional corporation can elect S corporation status if it qualifies under the IRS regulations and Ohio law.
Can an Ohio professional corporation invest in other businesses?
Yes, but the investments must be related to the corporation’s core business and comply with all state and federal regulations.
How is liability divided among shareholders in an Ohio professional corporation?
In general, shareholders of an Ohio professional corporation are only liable for the corporation’s debts and obligations up to the amount of their investment in the corporation.
Are Ohio professional corporations required to have minimum capital or bonding requirements?
No, Ohio does not have any minimum capital or bonding requirements for professional corporations.
Are Ohio professional corporations required to file annual reports?
Yes, all Ohio professional corporations must file annual reports with the Ohio Secretary of State.
Can Ohio professional corporations issue shares of stock?
Yes, Ohio professional corporations can issue shares of stock to their shareholders and sell them to raise capital.
What are the requirements for a shareholder of an Ohio professional corporation?
All shareholders of an Ohio professional corporation must hold the appropriate professional licenses in their field and meet any other qualifications outlined in the corporation’s bylaws.
Can an Ohio professional corporation have more than one license?
Yes, an Ohio professional corporation can hold multiple licenses if all shareholders hold the appropriate licenses for each individual field.
How are the officers of an Ohio professional corporation chosen?
The officers of an Ohio professional corporation are chosen by the shareholders in accordance with the corporation’s bylaws.
Can an Ohio professional corporation issue non-voting shares?
Yes, an Ohio professional corporation can issue non-voting shares to investors or employees.
Is an Ohio professional corporation required to purchase insurance?
Ohio law does not require Ohio professional corporations to purchase insurance, but it is recommended to protect the corporation from liability.
Can I form a single-shareholder Ohio professional corporation?
Yes, Ohio law allows for single-shareholder professional corporations in most cases.
Can a single shareholder in an Ohio professional corporation be an entity rather than an individual?
Yes, a single shareholder in an Ohio professional corporation can be an entity, such as a trust or another corporation.
Does an Ohio professional corporation have to have a board of directors?
Ohio law requires an Ohio professional corporation to have a board of directors, according to the corporation’s bylaws.

Also Read

How to Save Money While Forming Ohio Professional Corporation

First and foremost, one of the key ways to save money when forming an Ohio professional corporation is to do thorough research and planning. By taking the time to educate yourself on the legal requirements and steps involved in setting up a professional corporation, you can avoid unnecessary fees and expedite the process. Understanding all the necessary documentation and filings that are required will ensure that you are not caught off guard by unexpected expenses along the way.

Another important cost-saving measure when forming a professional corporation is to consider the different business structures available and choose the one that best fits your needs. In Ohio, professional corporations offer liability protection for its owners while also allowing for certain tax advantages. By carefully evaluating your business needs and consulting with legal and financial experts, you can ensure that you are selecting the most cost-effective business structure for your professional corporation.

Additionally, when it comes to registering your professional corporation with the state of Ohio, it is essential to be meticulous in completing all required paperwork accurately and in a timely manner. Any mistakes or delays in the registration process can result in additional fees or penalties, so being diligent in this step can save you money in the long run. It may also be beneficial to consider hiring a professional service provider to assist with the registration process, as they can help ensure everything is completed correctly the first time.

Furthermore, when it comes to maintaining your professional corporation, being proactive and organized can help save you money in the long term. Keeping detailed records, staying on top of compliance requirements, and regularly reviewing your business expenses can all help you identify areas where you can cut costs and optimize your finances. Being strategic with your spending and regularly reviewing your financials can also help you make informed decisions about where to allocate your resources.

In addition, networking and forming partnerships with other professionals in your industry can provide opportunities for cost-saving collaborations. By sharing resources, expertise, and potentially even office space with other professionals, you can maximize efficiency and reduce overhead costs. Building these relationships early on in the formation of your professional corporation can also open doors to new clients and business opportunities, further contributing to your long-term financial success.

In conclusion, while forming an Ohio professional corporation may require a certain level of financial investment, there are plenty of ways to save money throughout the process. By doing your research, carefully selecting your business structure, and staying organized and proactive in your business operations, you can effectively minimize costs and set your professional corporation up for success. By being mindful of your expenses and always looking for ways to optimize your financial resources, you can ensure that your professional corporation is financially sustainable and positioned for growth.

Conclusion

In conclusion, forming a professional corporation in Ohio 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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