Who can form a Professional Corporation and why licensure matters for lawyers and accountants

Who can form a Professional Corporation? A simple answer—and a helpful one—often surprises people: it’s not just anyone who can do this. A Professional Corporation, or PC, is a specific kind of business entity built for licensed professionals who provide services that demand specialized knowledge and credentials. If you’re a lawyer, a CPA, a physician, or another licensed expert, a PC might be a smart way to organize your firm. If you’re not licensed in a profession, a PC isn’t typically an option.

Let’s unwrap what a PC is, who can form one, and why it matters in the real world. Think of this as a practical guide you can use whether you’re just exploring your options or helping a team decide on a structure.

What a Professional Corporation is, in plain terms

First, a Professional Corporation isn’t just a fancy name. It’s a formal corporate structure intended for professionals who must hold licenses to practice in their field. The essence is simple: the entity provides a business framework—ownership, governance, taxation, and liability protection—while the professionals themselves must meet and maintain regulatory standards.

Two big ideas shape PCs:

• The ongoing requirement to be licensed in the relevant profession. The founders and owners usually need to be professionals who hold the appropriate licenses.

• The “professional” angle stays front and center in how the entity operates. The corporation is a vehicle for delivering professional services, not a casual investment vehicle.

Who can form a PC? The licensed pros you might already know

Here’s the core rule in plain terms: licensed professionals, such as lawyers and accountants, form and own the PC. But the list isn’t limited to those two fields. In many places, you’ll find PCs tied to a range of professions where the public relies on specialized expertise and professional ethics. Common examples include:

• Lawyers

• Certified public accountants (CPAs)

• Physicians and surgeons

• Dentists

• Chiropractors

• Architects

• Engineers

• Optometrists

• Veterinarians

In practice, the exact mix of professionals who can be owners or directors varies by state. Some states require all owners to be licensed in the same profession—for example, all owners must be lawyers if the PC provides legal services. Others allow a single professional in one field to form the PC, with other licensed professionals from the same field joining as owners over time. And yes, some jurisdictions permit a broader set of licensed professionals to participate, so long as the core requirement—that each owner is licensed in a profession the PC provides—remains satisfied.

This nuance is more than trivia. It’s about accountability, public trust, and the professional standards baked into the structure. In many states, the professional license is what legitimizes the entity’s ability to offer specialized services to the public. The idea is simple: who you are matters as much as what you do.

Why form a PC? The practical reasons behind the choice

There are several practical pull-versus-pull points that firms weigh when considering a PC. Here are the main factors many professionals weigh in real life:

• Liability framework and professional ethics. A PC provides a formal corporate layer for the business side—think governance, share ownership, and corporate protections for business debts. But personal liability for professional malpractice typically remains tied to the individual practitioner. In other words, you’re protected from business debts, but malpractice exposure still requires careful coverage (like professional liability insurance) and strict adherence to professional ethics.

• Tax treatment and compensation planning. A PC is a corporate entity, so it can be taxed as a C corporation or, in some cases, make a qualified S corporation election where allowed. That choice affects how profits are taxed and how owners are compensated. Many professional firms use a mix of salary and dividends to manage taxes and benefits—something a good tax advisor can help optimize.

• Perceived credibility and client confidence. There’s a certain weight that comes with a formal professional entity. Clients and lenders often view a PC as a sign of commitment to professional standards, ongoing compliance, and a stable governance structure.

• Regulatory compatibility and licensing. Because PCs are built around licensed work, they align with the oversight that regulators expect. This alignment can simplify compliance and peer review processes, at least at the level of how the business and the professionals within it are governed.

How a PC differs from other corporate forms

If you’ve looked at other business structures, you’ll notice some overlaps but also clear differences:

• Regular corporations (C corps or S corps) can be owned by a wide mix of individuals, including non-licensed investors. A PC, by contrast, usually restricts ownership to licensed professionals in the relevant field or fields.

• A PLLC (Professional Limited Liability Company) is a close cousin in some states. A PLLC preserves the professional nature while offering limited liability protection in a way that mirrors an LLC. The choice between a PC and a PLLC often hinges on state rules, tax preferences, and how the owners want to organize governance and distribution of profits.

• The corporate practice of medicine and similar doctrines in some states place limits on how non-professionals can participate in ownership or control medical or dental practices. That’s a real-world example of why the exact rules matter: the local regulatory landscape can shape what’s allowed for any PC in a given field.

A quick note on real-world constraints

Regulatory environments aren’t one-size-fits-all. In a few states, professional entities must be owned or controlled by members of the same profession, and some niches—like medicine—have additional rules about who may own or manage the business. The aim of these rules is to protect the public by ensuring that the people providing the service are qualified and accountable. It’s not a hurdle to trip over; it’s a guardrail that helps keep trust intact.

A few common misconceptions, cleared up

• Misconception: PCs are only for large firms. Reality: PCs often work well for small to mid-sized professional firms too. A PC can bring governance clarity, protect business assets, and enable more flexible compensation planning, regardless of firm size.

• Misconception: You can form a PC without licenses. Reality: You need to be licensed in your field. The profession is the entry ticket.

• Misconception: Anyone can own a PC. Reality: Ownership is typically reserved for licensed professionals in the relevant field, with rules varying by state.

Practical steps to form a PC (the how-to, in plain language)

If you’re part of a licensed firm or a team of professionals thinking about structure, here’s a sensible path to explore:

• Check your state’s rules. Start with the Secretary of State’s office and the state board or licensing authority for your field. Look for the exact language about who can form and own a PC and whether a PLLC or another structure is more suitable.

• Confirm license status and eligibility. Gather proof that each prospective owner holds an active license in the relevant field. Some states require ongoing license maintenance as a condition of ownership.

• Decide on the governing framework. Will you use articles of incorporation plus bylaws, or will a professional partnership or PLLC form be better? Decide how many directors or managers will oversee the entity and how profits and dividends will flow.

• Choose a name and comply with branding rules. Many states require “Professional Corporation” or “P.C.” in the name. There are also restrictions around certain words and misrepresentations that could confuse the public about the professional services offered.

• Draft the foundational documents. Articles of incorporation, corporate bylaws, and any professional service agreements should reflect both business and professional standards. You’ll want clear rules about ownership transfers, admission of new professionals, and how ethical considerations are enforced within the firm.

• File with the state and pay fees. This is the moment where the paperwork becomes a legal entity. Expect to submit documentation, pay filing fees, and designate a registered agent.

• Put regulatory and insurance plans in place. Think professional liability insurance, malpractice coverage if applicable, and a plan for ongoing compliance with licensing and ethical standards.

• Establish an internal governance regime. Decide who runs the show, how decisions get made, and how compensation and profit sharing work. Clear governance reduces friction down the road.

• Plan for ongoing compliance. Regular board or member meetings, record-keeping, and periodic licensing renewals are part of the rhythm of a PC.

A small note on the human side

Forming a PC isn’t just a legal checkbox. It’s about shaping a professional identity and a shared standard of care. A well-structured PC can make collaboration smoother, clarify responsibility, and support the kind of peer accountability that many licensed fields rely on. It’s not all numbers and forms; there’s a real cultural aspect to building a trustworthy professional enterprise.

Digressions that connect to the bigger picture

Some fields face unique constraints worth mentioning in passing. The corporate practice of medicine, for example, is a doctrine in several states that limits ownership of medical practices by non-physicians. It’s not a trap but a careful boundary designed to preserve clinical independence and patient welfare. A similar logic shows up in other professions—dentistry, law, architecture, and engineering—where professional ethics, client protection, and licensing regimes shape how a PC can be used. When you’re weighing the decision, you’ll want to map these regulatory realities to your business goals and client expectations.

What this means for you, in practical terms

If you’re a licensed professional or part of a group of licensed professionals, forming a PC can offer a sturdy framework for running a firm while keeping the professional standards front and center. It’s about balance: the corporate structure gives you governance, tax options, and liability protection for the business side, while each professional remains answerable for their own licensure, ethics, and malpractice coverage.

If you’re at a crossroads, a few questions can steer the conversation:

• Do all owners hold active licenses in the same profession, or will multiple licensed professions be involved? How will that affect ownership and governance?

• Is the preferred route a PC, a PLLC, or another professional entity in your state? What tax and staffing implications follow?

• How will you handle ongoing compliance, license renewal, and professional ethics oversight within the firm?

• What insurance coverage do you need to complement the liability protections the structure provides?

These aren’t merely legal chores. They’re part of building a durable professional firm that clients can trust and partners can rely on.

A practical takeaway

For licensed professionals, a Professional Corporation can be a logical, well-structured home for a specialized services firm. It’s not a universal fit, and it requires careful alignment with licensing rules, ethics standards, and state law. But with thoughtful planning and the right counsel, a PC can offer a clear path to orderly governance, prudent tax planning, and solid professional credibility.

If you’re considering this route, start by talking to a corporate attorney or a CPA who understands your field and your state’s rules. They can help you map out the eligibility, the precise ownership rules, and the best way to set up the entity so it serves both your business aims and your professional obligations. After all, the right structure isn’t just about the present—it’s about sustaining a firm that clients trust and colleagues respect for years to come.