When a group of people from the same profession work together frequently, they often choose to form a professional corporation. Consisting of people who are licensed in the same profession, the professionals must file a certificate of formation with the Texas Secretary of State via SOSDirect. Tex. Bus. Org. Code Ann. §§ 3.001(a), 3.005(a), 3.007.
Management structure, the type of professional service offered, and the type of professional corporation are all defined within the certificate of formation. Tex. Bus. Org. Code Ann. §§ 3014. Like a general corporation, a professional corporation limits personal liability for debt and business claims. A professional corporation is also like a general corporation in that it can function as an S Corporation to avoid double taxation, a term for being taxed for both business income and personal income from the corporation.
In Texas, professional corporations are comprised of groups such as architects, attorneys, certified public accountants, dentists, and veterinarians. All professionals within a professional corporation must be properly certified or licensed by the state in which they incorporate. Tex. Bus. Org. Code Ann. § 301.003(3), (8). Medical doctors and other health professionals in Texas form professional associations instead of professional corporations in order to regulate medical services.
In a professional corporation, the corporation, as opposed to shareholders, officers, or directors, is held liable for debt and business claims. However, individuals within the professional corporation are still liable for malpractice, negligence, professional error, or fraud, whether intentional or not.
While professionals are able to use on-line forms and information to create a professional corporation, the Texas Business Organization Code is complex and stringent. Seeking advice from an attorney familiar with business law is the best way to create a strong professional corporation which fully meets the needs of all involved.
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