If you work in a job like being a lawyer, doctor, or engineer in California, you might need to start a special kind of business called a “professional corporation.” This is different from a regular business and has some extra rules. Let’s break it down step by step!
What Is a Professional Corporation?
A professional corporation is a type of company for people who do jobs that need special licenses, like doctors, accountants, or architects. In California, you can’t use an LLC (a different kind of business) for these jobs—you must create a professional corporation.
Who Needs a Professional Corporation?
If your job requires a license, certification, or registration (like being a lawyer or dentist), you’ll need a professional corporation to start your business. Some jobs, like social workers or architects, don’t always need extra paperwork.
What Are the Rules for Professional Corporations in California?
One Profession Only
- A professional corporation can only offer services in one profession (e.g., only legal services or only medical care).
- Everyone working in the company must have the right license for that profession.
Who Can Own the Company?
- Only people with licenses in that profession can own the company (called shareholders).
- In some cases, professionals from similar jobs can own part of the company, but they can’t own more than 49% of it.
Who Runs the Company?
- If there’s only one owner, that person can also be the president, treasurer, and director.
- If there are two owners, they can share all the important roles (like president, secretary, and treasurer).
- If there are more than two owners, you’ll need at least three directors to help manage the company.
Business Name
- Your business name must follow the rules for your profession and can’t copy other businesses.
- You can check if your business name is available by sending a request to the California Secretary of State.
Steps to Create Your Professional Corporation
Step 1: File Articles of Incorporation
- This is the document that officially creates your corporation.
- Include details like your company’s name, address, the name of your registered agent (the person who receives legal papers), and the number of shares your company will have.
- You can file it online or mail it. The fee is $100.
Step 2: File a Statement of Information
- Within 90 days of starting your corporation, you must file a form called a “Statement of Information.”
- This form includes details about your company, like:
- The names and addresses of your officers and directors.
- Your business address and type of service.
- Your registered agent’s name and address.
- The fee for this is $25, and you need to file it every year.
Other Things to Know
- Once your business is set up, you’ll need to follow tax and licensing rules for your profession.
- You should create a set of rules for how your business will run (called bylaws).
Need Help?
Setting up a professional corporation can be tricky! You can contact a lawyer who knows about California business laws to help you with the paperwork and rules.