Texas is known for its vibrant business environment, and professionals in various fields often choose to form professional corporations to provide their services to the public. If you are a licensed professional seeking to establish a professional corporation in Texas, this article will guide you through the process.
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What is a Professional Corporation?
A professional corporation, often abbreviated as PC, is a specific type of business entity that provides liability protection to professionals such as doctors, lawyers, architects, engineers, and accountants. Unlike a regular corporation, a professional corporation has some additional requirements specific to the profession it serves.
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Step 1: Choose a Name and Verify Availability
To begin the process of forming a professional corporation, you need to choose a name for your business. The name must comply with the regulations set by the Texas Secretary of State. It should include a corporate identifier like "Professional Corporation," "PC," or "P.C.".
Before finalizing the name, conduct a thorough search to ensure its availability. You can check the Texas Secretary of State website or use online databases to confirm if the name is already taken by another corporation.
Step 2: File Articles of Incorporation
The next step involves filing the Articles of Incorporation with the Texas Secretary of State. You can complete this process either by mail or online. Ensure that the following information is provided in the documentation:
1. Corporation name
2. Name and address of the registered agent
3. Purpose of the corporation
4. Number and classes of shares issued
5. Name and address of each incorporator
Along with the Articles of Incorporation, you must also include the professional qualifications of each shareholder or officer within the corporation.
Step 3: Obtain Professional License
To establish a professional corporation, each shareholder, director, or officer of the corporation must hold a professional license in the chosen field in Texas. This license should be obtained before filing the Articles of Incorporation. Ensure that all necessary licenses are up to date and comply with the requirements set by the respective professional licensing board.
Step 4: Draft a Shareholders' Agreement
While not legally required, drafting a shareholders' agreement is highly recommended when forming a professional corporation in Texas. This agreement will define the rights, responsibilities, and obligations of each shareholder within the corporation. It will also detail the distribution of profits, decision-making processes, and procedures for dispute resolution.
By putting these terms in writing, you can prevent future conflicts and ensure a smooth operation within the corporation.
Step 5: Obtain Required Permits and Licenses
Depending on the nature of your professional services, you may need to obtain additional permits or licenses to comply with specific regulations. For example, healthcare professionals may need to obtain licenses from relevant state agencies, such as the Texas Medical Board or the Texas State Board of Dental Examiners. Check the requirements of your profession and ensure that all necessary permits and licenses are obtained.
Step 6: Comply with Ongoing Obligations
Once your professional corporation is formed, you will have ongoing obligations to maintain compliance. This includes filing an Annual Report with the Texas Secretary of State and paying the required fees. Failure to fulfill these obligations may lead to penalties or even the dissolution of the professional corporation.
Additionally, you must maintain accurate and up-to-date records of corporate meetings, financial statements, and other important documents. Adhering to good corporate governance practices will benefit your business in the long run.
Conclusion
Forming a professional corporation in Texas requires careful consideration of legal and professional requirements. By following these steps, you can establish a professional corporation and enjoy the liability protection it offers. Always consult with legal and financial professionals to guide you through the process and ensure compliance with Texas laws and regulations.
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