Professional corporations or professional service corporation (abbreviated as PC or PSC) are those corporate entities for which many
corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
statutes make special provision, regulating the use of the corporate form by licensed professionals such as
attorneys,
architect
An architect is a person who plans, designs and oversees the construction of buildings. To practice architecture means to provide services in connection with the design of buildings and the space within the site surrounding the buildings that h ...
s,
engineer
Engineers, as practitioners of engineering, are professionals who invent, design, analyze, build and test machines, complex systems, structures, gadgets and materials to fulfill functional objectives and requirements while considering the limit ...
s, public
accountants and
physician
A physician (American English), medical practitioner (Commonwealth English), medical doctor, or simply doctor, is a health professional who practices medicine, which is concerned with promoting, maintaining or restoring health through th ...
s. The general category of the PC or PSC can be as
S-corporation,
C-corporation, or
LLC, but with subcategorization as a PC or PSC. Legal regulations applying to professional corporations typically differ in important ways from those applying to other corporations.
Unlike a traditional
corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
, operation as a professional corporation does not insulate a professional for personal liability for her own
negligence
Negligence (Lat. ''negligentia'') is a failure to exercise appropriate and/or ethical ruled care expected to be exercised amongst specified circumstances. The area of tort law known as ''negligence'' involves harm caused by failing to act as a ...
or
malpractice
In the law of torts, malpractice, also known as professional negligence, is an "instance of negligence or incompetence on the part of a professional".Malpractice definition,
Professionals who may become the subject of malpractice actions inc ...
. The principal reason why groups of professions choose to organize as a professional corporation is that, unlike a
general partnership, an owner is not personally liable for the negligence or malpractice of other owners. In some states a
limited liability partnership
A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not ...
offer the same benefit and thus should be considered as a possible business entity by professionals who are forming a business.
Professional corporations may have a single director or multiple directors. They do not usually afford directors the same degree of limitation of liability as ordinary business corporations (
cf.
The abbreviation ''cf.'' (short for the la, confer/conferatur, both meaning "compare") is used in writing to refer the reader to other material to make a comparison with the topic being discussed. Style guides recommend that ''cf.'' be used onl ...
LLP). Such corporations must identify themselves as professional corporations by including "PC" or "P.C." after the firm's name.
Professional corporations may exist as part of a larger, more complicated, legal entity; for example, a
law firm or
medical practice
Medicine is the science and practice of caring for a patient, managing the diagnosis, prognosis, prevention, treatment, palliation of their injury or disease, and promoting their health. Medicine encompasses a variety of health care practic ...
might be organized as a partnership of several or many professional corporations.
Legal effect
United States
In
U.S. federal subject matter jurisdiction
Subject-matter jurisdiction (also called jurisdiction ''ratione materiae')'' is the authority of a court to hear cases of a particular type or cases relating to a specific subject matter. For instance, bankruptcy court only has the authority ...
, professional corporations have two citizenships for purposes of
diversity
Diversity, diversify, or diverse may refer to:
Business
*Diversity (business), the inclusion of people of different identities (ethnicity, gender, age) in the workforce
*Diversity marketing, marketing communication targeting diverse customers
* ...
, just like ordinary
corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...
s, namely that they are citizens of (1) the state in which they are incorporated and (2) the state in which they have their principal place of business. This is unlike other, similar organizations that are not technically "corporations," such as
trade association
A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific industry. An industry trade association partic ...
s,
labor unions,
partnership
A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments ...
s (including
limited partnerships and
limited liability partnership
A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not ...
s), and
limited liability companies
A limited liability company (LLC for short) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a ...
, for which citizenship is based on the
domicile of each member.
[28 U.S.C. § 1332(c)(1)] This has the effect of expanding diversity jurisdiction in suits to which the professional corporation is a party compared to these alternate forms of business organization, thereby expanding the professional corporation's access to the federal courts, which may be advantageous to the firm. Specific requirements of corporations vary significantly from state to state.
See also
*
Profession#Autonomy
References
{{Authority control
Legal entities
Types of business entity
Corporations
United States corporate law
Corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...