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

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

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

Forming a professional corporation in Virginia 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 Virginia?

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 Virginia. 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 Virginia, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Virginia

To form a Professional Corporation in Virginia 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 Virginia, 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 Virginia

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

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

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Step 4: File the Articles of Incorporation in Virginia

After you hire a Registered Agent to form a professional corporation, the next step is to file the Virginia 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 Virginia 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 Virginia, it costs $100 for online and by mail filing or in person filing. Get the eForm from the SOS site, login/subscribe to the site, fill up the form, submit online. For offline filing, Send the form by mail to or drop it off in person at State Corporation Commission, Clerk’s Office, P.O. Box 1197, Richmond, VA 23218-1197.

Step 5: Write an Operating Agreement in Virginia

An operating agreement in Virginia 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 Virginia

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

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

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

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

  • 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.
  • Virginia 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 Virginia

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 Virginia

In Virginia, 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 in the Virginia Secretary of State.

FAQs

What is a professional corporation in Virginia?
A professional corporation in Virginia is a type of corporation that is formed by licensed professionals, such as doctors or lawyers, to provide professional services.
How do I form a professional corporation in Virginia?
To form a professional corporation in Virginia, you need to file articles of incorporation with the Virginia State Corporation Commission, and provide certain information about yourselves as shareholders.
Can any profession form a professional corporation in Virginia?
No, only those professions that are licensed to practice by a state agency can form professional corporations in Virginia.
What types of licensed professionals can form a professional corporation in Virginia?
In Virginia, licensed individuals such as attorneys, doctors, dentists, architects, engineers, accountants, and optometrists can form professional corporations.
What is the benefit of forming a professional corporation in Virginia?
Professional corporations in Virginia provide liability protection to the individual shareholders while allowing them to maintain control over their professional practice.
Is a professional corporation in Virginia taxed like a regular corporation?
No, a professional corporation in Virginia is taxed as an S corporation or a traditional corporation, depending on its shareholders’ choice.
Can a professional corporation in Virginia have non-professional shareholders?
No, a professional corporation in Virginia can only have professional shareholders on record.
Can a professional individual file as a sole proprietorship or partnership in Virginia?
No, professional individuals cannot file as a sole proprietorship or partnership in Virginia. This is because they cannot practice their professions in a personally liable capacity.
Can a professional corporation practice different types of professional services in Virginia?
No, a professional corporation in Virginia can only practice the specific professional service for which it was formed and licensed.
Are there any residency requirements for forming a professional corporation in Virginia?
No, there are no specific residency requirements to form a professional corporation in Virginia.
Can a non-Virginia licensed professional form a professional corporation in Virginia?
No, only professionals who were licensed in Virginia or got approval to form a professional corporation in Virginia from a state agency-specific to their profession can form professional corporations in Virginia.
Can an individual form more than one professional corporation in Virginia?
Yes, it is possible for an individual to form and own multiple professional corporations in Virginia, as long as they are licensed to practice more than one profession.
How many shareholders are required to form a professional corporation in Virginia?
A professional corporation in Virginia must have at least one professional shareholder and no more than 75.
Does Virginia State require share capital to be paid at the time of incorporation?
No, the Virginia state does not require share capital to be paid at the time of incorporation.
Can an individual maintain their licensure if practicing in a Virginia professional corporation?
Yes, an individual must maintain their licensure as long as they are practicing through their Virginia professional corporation as an authorized agent.
Does a Virginia professional corporation need to register to open a bank account?
Yes, a Virginia professional corporation needs to register to open a bank account.
How long does it take to form a professional corporation in Virginia?
The time required to form a professional corporation in Virginia varies based on the accuracy of filing documents and other factors and usually takes anywhere from a few weeks to up to 3 months.
Do Virginia professional corporations have perpetual existence?
Yes, Virginia professional corporations have perpetual existence unless the corporation is voluntarily dissolved by the shareholders or the state legally.
Can an LLC formed in Virginia convert to a professional corporation?
Yes, an LLC formed in Virginia can file paperwork to convert to a professional corporation with approvals relevant to architecture and engineering.
Can an individual form a nonprofit in Virginia and practice a profession on behalf of it?
No, If someone is a properly licensed professional then they must form a professional corporation or other eligible legal entity to practice their career for profit.
Can a Virginia professional corporation change its name?
Yes, a Virginia professional corporation can change its name or the name of its shareholders by filing an amendment form with the Department of Virginia State Corporation Commission.
Can the shareholders of a Virginia professional corporation limit directors’ power?
Yes, shareholders of a Virginia professional corporation can limit directors’ powers over specific matters based on articles of incorporation and common corporate bylaws.
How often are Virginia professional corporations required to update the state?
Virginia Professional corporations have to submitbiennial reports to the Corporation Commission every two years.
Can non-Virginia professional corporation conduct business in Virginia?
Yes, Professional corporations outside Virginia can practice in Virginia under limited circumstances and jurisdiction approvals, leastwise from the Virginia State Bar.
Can a Virginia professional corporation hire employees?
Yes, a Virginia professional corporation can hire employees and expand to R&D, experimentation, and electronic filing services.
Who will govern the Virginia professional corporation?
The firm attorney, along with founding shareholders, govern the Virginia professional corporation collectively.
What is an annual fee that Virginia Professional Corporations have to pay?
To keep their business status, Virginia Professional Corporations need to pay a $50-$100 annual fee towards the Virginia State Corporation Commission.
Does Virginia require registered agents for professional corporations?
Yes, a professional corporation in Virginia requires a Registered Agent for incorporating services, all-day communication exchanging service.
Are Virginia professional citations available to the public?
The information on Virginia professional corporations may be easily accessed through its websites or bought by subscription with professional consultancy companies.
What is a professional corporation?
A professional corporation is a type of business entity that limits the personal liability of its owners for business debts and liabilities.
Can I form a professional corporation in Virginia?
Yes, you can form a professional corporation in Virginia.
What types of professionals can form a professional corporation in Virginia?
In Virginia, professionals such as lawyers, accountants, architects, engineers, and certain healthcare professionals can form a professional corporation.
Can a professional corporation provide professional services in multiple states if it was formed in Virginia?
A professional corporation formed in Virginia can provide professional services in other states if it meets those states’ requirements for foreign entities.
How many shareholders can a professional corporation have in Virginia?
A professional corporation in Virginia can have at least one and no more than 250 shareholders.
Can a Virginia professional corporation be owned by non-licensed individuals?
No, a Virginia professional corporation can only be owned by licensed individuals.
Can a professional corporation in Virginia be a partnership instead of a corporation?
No, in Virginia, a professional corporation can only be formed as a corporation.
What are the benefits of forming a professional corporation in Virginia?
Some benefits of forming a professional corporation in Virginia include limited liability, tax advantages, and the ability to raise capital.
How does the taxation of a Virginia professional corporation work?
A professional corporation in Virginia is subject to corporate income tax and may be subject to personal income tax on the shareholders’ dividends or salary.
Do I need to have a registered agent in Virginia to form a professional corporation?
Yes, you must have a registered agent with a physical location in Virginia to form a professional corporation.
Can a professional corporation in Virginia have a DBA (Doing Business As)?
Yes, a professional corporation in Virginia can have a DBA as long as it registers the DBA with the Virginia State Corporation Commission.
Are there any annual filing requirements for a Virginia professional corporation?
Yes, Virginia professional corporations must file an annual report with the Virginia State Corporation Commission.
Can a Virginia professional corporation protect me from personal legal liability?
Yes, a Virginia professional corporation can protect you from personal legal liability for business debts and liabilities.
Can a professional corporation in Virginia be owned by a trust or foundation?
A professional corporation in Virginia cannot be owned by a trust or foundation, only licensed individuals.
Can I incorporate my practice and still operate as a sole proprietor in Virginia?
No, if you form a professional corporation in Virginia, you must operate under the corporation and not as a sole proprietor.
What are the costs associated with forming a professional corporation in Virginia?
The state filing fee for forming a professional corporation in Virginia is $75.
Do I need a special kind of insurance for my Virginia professional corporation?
Yes, Virginia requires certain professionals to carry professional liability insurance for their corporation.
Can I convert my existing business into a professional corporation in Virginia?
Yes, you can convert your existing business into a professional corporation in Virginia if it is eligible.
Does Virginia require a certain amount of cash to be invested to form a professional corporation?
No, Virginia does not require a certain amount of cash to be invested to form a professional corporation.
Can I choose any name for my professional corporation in Virginia?
No, the name you choose for your professional corporation in Virginia must be distinguishable from other existing business names in the state.
Do I need to register my professional corporation in any counties in Virginia?
No, you do not need to register your professional corporation in any counties in Virginia.
Can a foreign entity form a professional corporation in Virginia?
Yes, a foreign entity can form a professional corporation in Virginia, but it must meet certain requirements.
Do I need to renew my professional corporation’s filing with the Virginia State Corporation Commission?
Yes, you must renew your professional corporation filing with the Virginia State Corporation Commission every year.
Can a Virginia professional corporation have a board of directors?
Yes, a Virginia professional corporation can have a board of directors.
Can I dissolve my Virginia professional corporation at any time?
Yes, you can dissolve your Virginia professional corporation at any time by following the state’s dissolution process.
Do I need to obtain any special licenses to operate my professional corporation in Virginia?
You may need to obtain specific licenses or certifications to operate your professional corporation in Virginia, depending on your profession.
Can I change the name of my Virginia professional corporation after I form it?
Yes, you can change the name of your Virginia professional corporation after it is formed by filing certain paperwork with the state.

Also Read

How to Save Money While Forming Virginia Professional Corporation

One fundamental aspect often overlooked by professionals is thorough research and planning. By investing their time in gathering knowledge about the legal, financial, and administrative requirements of forming a professional corporation, entrepreneurs can minimize unnecessary expenses. Diving into the process without this essential groundwork might lead to costly mistakes or even retakes of several steps along the way. Therefore, focusing on understanding the intricacies before proceeding is crucial.

Engaging professional expertise while forming a Virginia professional corporation can seem inevitable. However, seeking advice from renowned law firms or seasoned professionals may involve significant costs. Instead, individuals can opt for affordable alternatives, such as online legal services. These platforms provide the necessary legal documents and guidance at a fraction of the cost. While this may not cover specialized situations or complicated cases, it can be a viable option for those with standard professional corporation requirements.

Minimizing overhead expenses is another effective avenue to save money during the formation process. Leasing fancy office spaces or purchasing expensive equipment and furniture can create a strain on individuals’ financial resources. Opting for a virtual office space or utilizing shared co-working spaces, which offer professional amenities at affordable prices, can be beneficial. By making economical choices and cutting unnecessary costs, entrepreneurs can divert the saved funds to essential aspects like registrations, licenses, or marketing efforts.

Financial expertise forms the cornerstone of successful businesses. Thus, understanding the importance of sound financial planning early on in the process of forming a professional corporation is critical. Utilizing various accounting software or outsourcing accounting tasks to freelancers or external agencies can be cost-effective alternatives to hiring a full-time in-house accountant. These solutions not only help track financials but also provide valuable insights into optimizing expenses and making informed decisions.

Notably, entrepreneurs should also proactively explore potential grants, incentives, or reduced fees available for startups or professional corporations. Local or state programs may offer financial assistance or tax waivers to promote business growth and regeneration in the region. Through dedicated research and seeking out relevant local authorities, entrepreneurs may uncover hidden financial aids or programs specifically designed to support small businesses or startups in Virginia.

Finally, networking and collaborating with other professionals can be a cost-effective strategy to leverage shared resources or acquire new clients. Building partnerships or participating in professional associations opens doors to collaborative ventures, reduced marketing costs, and shared knowledge. These synergistic relationships can significantly contribute to the growth of professional corporations while keeping expenses in check.

In conclusion, the process of forming a Virginia professional corporation can indeed appear daunting when financial considerations come into play. Nevertheless, by investing in thorough research, seeking alternative legal services, minimizing overhead expenses, emphasizing sound financial planning, exploring potential grants, and actively networking with other professionals, aspiring entrepreneurs can effectively save money along this journey. Implementing these strategies holds immense potential for shaping a successful and thriving professional corporation while mitigating unnecessary financial burdens.

Conclusion

In conclusion, forming a professional corporation in Virginia 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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