If you’re starting a business in California, you might want to consider forming a professional corporation (PC). A PC is a type of corporation formed by licensed professionals, such as doctors, lawyers, accountants, and architects, to provide personal services to clients. A PC offers advantages such as limited liability for the owners, tax benefits, and organizational structure that can help a business achieve success in the marketplace. In this article, we will outline the steps involved in forming a PC in California.
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Step 1: Determine Eligibility
To form a PC in California, the owners must be licensed professionals. A PC can consist of only one licensed professional or multiple licensed professionals. A PC cannot include individuals whose professions require them to be licensed in different states or jurisdictions, unless they have obtained a license in California. It is also important to note that the law regarding eligibility for PC varies depending on your profession. Make sure to check with the California State Laws before proceeding ahead.
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Step 2: Choose a Name
Before filing the Articles of Incorporation with the California Secretary of State, you must choose a unique name for your PC. This name must include the words “professional corporation,” “PC” or “P.C.”. It’s important to research the availability of the name beforehand and ensure it conforms to California standards.
Step 3: File the Articles of Incorporation
To formally register your professional corporation, file the Articles of Incorporation with the California Secretary of State. You can access this form online through their website. You will need to provide the following information:
* The proposed name of the corporation
* The purpose of the corporation
* The address of the corporation's initial principal office
* The names and addresses of the corporation’s initial directors
* Whether the corporation will have one or more classes of stock
There is a filing fee of $100 payable at the time of submission of the Articles of incorporation.
Step 4: Draft the Bylaws
The bylaws of your PC outline the internal procedures and governing policies of the corporation. It is essential to create detailed and legally sound bylaws to establish the structure and management of the PC. Bylaws govern everything from decision making, board composition and compensation structure. All directors must tailor the bylaws in a way which maximizes the success of the PC. We recommend hiring a legal professional to help draft your bylaws or ensure that its in line with industry standards and legislation.
Step 5: Obtain Required Licenses and Permits
**This is the make or break step for a professional corporation.**
Each profession has different state licensing requirements Before initiating operations, all board members, advisors, contractors and consultants should obtain necessary licenses, permits, insurance as required by the State of California for the profession.
Step 6: Conduct the First Board Meeting
It is essential for the success of the corporation to hold your first board meeting following your incorporation. Board meetings should be issued clear agendas with regulated start and end times for the meeting. As per California Corporate Laws, the key transactions during the inaugural meeting are:
* Initiation appointment of designation and selection of officers
* Adoption and engender a license performance plan
* Deployment of seal and adoption of relevant financial statements
* Stipulation of any organizational necessities not dealt with in the Articles of Incorporation
Step 7: Fill Out the Form RRF-1 to Obtain Sales Tax Identification Number
California requires a state sales tax identification number, so all corporations, including professional corporations, that plan to sell tangible goods in the state must submit Form RRF-1.
Conclusion
With its allowance of limited liability for shareholders, tax savings options, and attractiveness to investors, an owner-operated professional corporation can provide the keys to a comfortable lifestyle. While launching any corporation can pose a challenge, with established professionals, a well-structured plan, and a clear road-map, the creation of a PC can be successfully planned and executed. We recommend you do not rush and consider taking legal advice to "begin on a firm foundation" so you can safely scale higher.
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