How to Form a Professional Corporation in New York (2023 Guide)

Sun 16 July 2023

*Note: This article is based on the current understanding of forming a professional corporation in New York as of 2023. Please consult with a lawyer or legal professional for up-to-date and specific advice.*

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Forming a professional corporation in New York is an important step for those wanting to establish a professional practice while also enjoying certain liability protections. This guide aims to provide an overview of the necessary steps and considerations involved in forming a professional corporation in New York in 2023.

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What is a Professional Corporation?

A professional corporation (PC) is a specific type of legal entity that professionals such as doctors, lawyers, accountants, and architects can form to establish a formal business structure. Forming a PC offers liability protection, meaning the corporation's owners (shareholders) are generally not personally responsible for the debts and liabilities of the corporation.

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Step 1: Choosing a Name

Selecting an appropriate name for your professional corporation is an important first step. The New York Department of State requires professional corporation names to include specific words like "Professional Corporation," "P.C.," or "PC." Additionally, the name should not be misleading or imply services beyond the professional services the corporation is authorized to provide. Before finalizing your decision, it is advisable to conduct a thorough search to ensure the name is unique and available for use.

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Step 2: Drafting and Filing the Certificate of Incorporation

To formally establish a professional corporation, you need to prepare and file a Certificate of Incorporation with the New York Department of State. This document contains essential information about your corporation, including the name, the purpose of the corporation, the names and addresses of initial shareholders, and the registered agent's name and address.

The Certificate of Incorporation must also state the specific professional services the corporation will provide, as well as any licensed professionals associated with the corporation. It is highly recommended to consult with an attorney well-versed in professional corporations to ensure compliance with the applicable laws and regulations.

Step 3: Obtaining Professional Licenses

Before commencing professional activities, each licensed professional associated with the corporation must obtain the necessary licenses from their respective professional licensing boards. New York requires professionals to individually maintain their licenses to practice within their professions.

Step 4: Establishing Corporate Bylaws and Implementing Corporate Formalities

As a corporation, it is essential to establish bylaws that govern the company's internal affairs. Bylaws serve as the guiding principles of the corporation and outline how the company will conduct its operations. They typically cover matters such as shareholders' rights and responsibilities, officer roles and responsibilities, meeting procedures, voting rights, and stock issuance.

In addition to adopting bylaws, it is crucial to maintain corporate formalities, such as holding regular shareholder and director meetings, keeping accurate financial records, and adhering to necessary reporting requirements. Failure to comply with these formalities could result in the loss of liability protection provided by the corporation.

Step 5: Registering for State and Federal Taxes

Once the corporation is formed, it is necessary to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN is used for tax purposes and is required to open bank accounts and fulfill federal tax obligations.

Furthermore, depending on the type of services provided or the number of employees, the professional corporation may have additional tax obligations at the state and local level. It is advisable to consult with a tax professional to ensure compliance with all tax regulations.

Step 6: Seeking Professional Advice

Establishing a professional corporation involves complex legal and regulatory considerations, making it crucial to seek professional advice throughout the process. Consulting an experienced attorney provides peace of mind, increases the likelihood of compliance, and helps navigate any potential obstacles that may arise.

Conclusion

Forming a professional corporation in New York requires careful planning, adherence to legal and regulatory requirements, and professional advice. By following these steps and seeking appropriate guidance, you can successfully establish your professional corporation in New York in 2023, allowing you to run your practice with liability protection and credibility. Remember to stay updated on the ever-changing legal and regulatory landscape, ensuring ongoing compliance and success for your professional corporation.

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