How to Form a Professional Corporation is one of the first things you should learn if you have been thinking about starting a new business. A professional corporation is essentially an authorized corporate entity whose directors are legally permitted to render professional corporate services. If you are part of an occupation, such as being a teacher or lawyer, then you probably already are accustomed to dealing with much more government regulation than your typical private business. It stands to reason that if you wish to do business in a particular jurisdiction, it pays to do your research and understand how the business law there operates.
This is especially important if you are thinking about doing some sort of Internet-based business, like starting a home-based business or an online advertising agency. In the early days of the Internet, it was difficult for many business people to set up and maintain professional corporations. Today, however, most Internet vendors need to register themselves as professional corporations to be able to offer regular corporations’ services on their websites. There are a number of reasons why this is necessary, including the differences between state and country corporate laws, and the need to comply with certain rules and regulations regarding Internet business.
Another benefit of having a professional corporation on your business cards is that it gives you a shield and an identity distinct from your own private interests. You will be seen as someone who is separate and distinct from your own interests. When you are dealing with regular corporations, this is not always the case. For instance, if you run a blog in your spare time, then chances are that somebody else could be using your personal blog to promote his or her own products or services, which might cause you to run into problems with the competition.
One of the other major differences between regular corporations and professional corporations relates to how the latter pays out its employees’ personal income tax. Professional services will normally deduct their clients’ income taxes straight from their client’s monthly or annual paycheck, whereas regular businesses will usually treat this income as a business expense and therefore withhold it from their clients’ paychecks. This means that when you have a job, you will have to pay more income tax than you would if you had been working for a different company.
The advantages of personal service corporations are not just highlighted by the need to pay less income tax. By forming a professional corporation, you can be guaranteed against any potential lawsuits being filed against your company, as they cannot be held personally liable for the actions of their clients. This alone can significantly reduce the amount of money that you have to fork out every month towards their fees.
Apart from having a lower rate of income tax, another one of the main benefits of owning a professional corporation comes from the issue stock option. Issue stock means that your corporation will be able to issue shares to its shareholders. These are the people who will actually own your business in the long term. These issue stock shares will represent the future value of your business, and if the corporation ever experiences financial problems, the shareholders will still be protected because they will have secured ownership rights in the company.
Another important advantage of professional corporations comes from their ability to overcome personal liability issues. In addition to the aforementioned personal liability issues, many individuals will choose to circumvent the law by forming LLCs (Limited Liability Corporation). This allows them to pretend to be someone they’re not, or to structure their assets in ways that would make them personally liable for huge amounts of damages. With professional corporations, however, the owners can be held personally liable for only the third party’s negligence. This is a huge advantage over LLCs, which allow virtually anyone to set up a corporation in their name and make purchases and sales in their name.
Forming a professional corporation could give you many advantages that other types of business entities may not provide. Not only could it give you the security of being financially protected, but it could also provide you with the ability to protect your assets and your finances from being exploited by other individuals. If you find that you’re the victim of personal injury, malpractice, or other fraud, you could use your new professional status as a shield from these things.
Suggested Resource: Building dynamic capacity and to outperform peers forms an essential part of professional corporations embracing the 4th industrial revolution. Many entrepreneurs choose to form corporations, as this business type has long been one of the most popular options for American companies. Learn how to form a professional corporation here.
This is a Sponsored Feature