The Veterans Business Law Group

Professional Entities

Professionally Licensed Businesses

Professional licensed businesses require a specialized kind of entity, often needed for certain professionals such as engineers, attorneys, doctors, accountants, and more. These professionals require specialized services because they can’t form normal corporations or certain other kinds of businesses – there are very specific legal restrictions and requirements that must be met. Failure to prepare the right kind of business can result in jeopardizing the professional’s license. This is why it is best to work with a legal firm with related experience, such as the Veterans Business Law Group.

Our team offers extensive experience and the specialized skill set you need for the formation of a professionally licensed business, which most commonly is the professional corporation. Contact us for information about the available services.

Local Legal Requirements

When establishing a professional corporation, it is necessary to consider the state laws where the corporation is formed. In most states, there are limitations to the types of people who can create a professional corporation. Additionally, the corporation itself may also need to hold the appropriate licensure in the state. The purpose of the corporation should be for providing professional services.

california outline with state bear

California, for example, has extensive limitations regarding who are permitted directors, officers, and shareholders in the corporation. For example, all shareholders must be in the same profession and must carry the license according to the specific services the corporation will be offering. The purpose is to ensure that shareholders are service providers, instead of investors. As an example, only attorneys can be shareholders of a law firm – someone cannot be an investing partner if they aren’t a licensed attorney where the corporation will be providing legal services. This is also similar for medical practices, dental offices, and accounting firms. However, the rules may vary from profession to profession, so it is crucial to consult with a law firm with extensive experience working with professionally licensed businesses to avoid major complications after the business has been formed.

How to Create a Professional Corporation

Specific documents need to be drafted for the formation of a professional corporation. These are the general guidelines that need to be followed, along with state-specific requirements:

  • Articles of Incorporation: A clear statement that says the corporation intends to provide professional services.
  • Company Name: Certain language needs to be used in the name, such as professional corporation, service corporation, or professional association. This term can be added at the end of the name in the form of abbreviations if desired. However, there are extensive rules and regulations for each profession as to what name is permitted and how the business must be structured to allow the desired name to be used.
  • Defining Purpose: Information about the purpose of the corporation. For example, a professional corporation of doctors would list the purpose of the corporation as an offering of medical services.
  • Licensing Board Approval: Finally, the documentation needs to be provided to a local licensing approval board. Attorneys, for example, must have their law corporation approved of by the State Bar. It is crucial that this step is not overlooked, failure to do this will jeopardize the business owner’s license and could result in a variety of other significant issues resulting as well.

Other Considerations

A variety of other factors need to be considered with the formation of a professional corporation, such as handling stock shares, taxation, partnership changes, and more. An experienced legal team, such as the VBLG, can offer ongoing support and advice to ensure compliance with your corporation. For information about the available legal services, call us at (951) 594-9456.