The professional corporation or the professional limited liability company are similar to their traditional counterparts, but are organized for the purpose of providing professional services, such as medical, legal, or accounting services. Unlike other states however, California does not provide for the formation of a "professional limited liability company". California only provides for the formation of a "professional corporation". A "professional corporation" is a service corporation that is licensed by the State of California. With an ever increasing prevalence of professionals in California, the professional corporation is becoming more and more prevalent. This article is specifically directed at the California Professional Corporation.
A professional corporation is formed, just as a traditional corporation, by the filing of articles of incorporation with the California Secretary of State. However, unlike traditional corporations, a professional corporation generally has to comply with the rules and regulations of the appropriate licensing body. For instance, a professional corporation for medical doctors must register with the Medical Board of California. Moreover, there are specific requirements regarding who may own shares and who may hold title as an officer and/or director of a professional corporation. Typically, only licensed professionals of like professions may share in the ownership and serve as officers and/or directors.
Shareholder Limitations On Professional Corporations
In California, shares of stock in a professional corporation can only be issued to individuals that hold a license in the professional service which the business provides. Further, a shareholder of a professional corporation is prohibited from entering into a voting trust, proxy, or any other arrangement that would permit a non-shareholder to vote his or her shares of stock. In the event a shareholder is disqualified from rendering professional services or dies, the professional corporation must acquire all of his shares.
Choosing A Name For The Professional Corporation
In California, the name of a professional corporation must end with specific designations such as "a Professional Corporation" or the abbreviation "PC." The name requirements vary from profession to profession. In addition, the name cannot be the same as, or "deceptively similar" to, that of any other professional corporation licensed in California. The California Secretary of State maintains a database of current business names that may be checked to see if the name chosen is available. If a name is available, it can be reserved for up to sixty days by filing a reservation request with the office of the California Secretary of State. It's important to review the particular state licensing board for the requirements of any given profession to ensure compliance.