Pennsylvania offers several choices of business entities for professionals such as architects, attorneys, CPAs, chiropractors, dentists, osteopaths, physicians and surgeons. The general rule under Title 15, Section 102 is that a “profession” includes the performance of any type of personal service that requires a license or admission to practice or other legal authorization from a licensing board or commission.
Only professionals may form or own a professional business entity. The law evolved in this way because professionals were initially not allowed to form corporations at all. The idea behind the prohibition was that professionals should not be able to limit their liability when they have done something wrong.
Over time, two choices became available for Pennsylvania professionals — the Professional Corporation and the Professional Association. Both of those choices are still available under Pennsylvania law.
A Pennsylvania Professional Corporation may be formed according to 15 Pa. Cons. Stat. §2903 and must be limited in scope to providing professional services. Formation of a professional corporation must substantially comply with the usual requirements of forming a Pennsylvania corporation. An existing corporation or professional association may elect to become a professional corporation if it meets the legal criteria.
Unlike a Professional Corporation, a Professional Association does not have a non-professional counterpart. A Professional Association may be formed according to Pennsylvania law as set forth in 15 Pa. Cons. Stat. §9301-9319 and may provide a single type of professional service. The Professional Association must elect a board of governors and adopt bylaws for governing the association. Distributions of excess earnings and the transfer and redemption of ownership interest are regulated by law.
Professional Corporations and Professional Associations are the traditional business entity choices for Pennsylvania professionals, but they are not the only options. Under Pennsylvania law, professionals may choose to conduct business as a Limited Liability Company. As we’ve discussed in previous articles, limited liability companies offer the advantage of limited liability for members, along with tax treatment that may be advantageous for some business owners.
If you need guidance deciding which business entity best fits your needs, or any other matter related to managing your business, the attorneys at the Scolieri Law Group, P.C. can help. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you, including the formation of a legal business entity if needed. Contact us today at (412)765-0546 or info@scolierilaw.com.