In addition to corporations, limited liability companies, and partnerships, Colorado has a special entity available to certain professionals called the Professional Corporation – P.C. for short.  Currently, accountants, architects, attorneys, chiropractors, dentists, engineers, doctors, podiatrists, optometrists, physical therapists, psychologists, social workers, therapists, counselors, and veterinarians may form professional corporations.  In addition, for each of these professions, there may even be restrictions on the other types of business entities that these professionals can use.

The regulations of most of the businesses owned by the professionals listed above control how the owners can share profits with employees.  For instance, while most of these professional corporations can give bonuses to all employees based on the total volume of business or the years in service of a particular employee, specific fees can usually only be shared with an employee that is practicing in the field of the professional corporation.  For example, a law firm may be able to share fees received by a client with an attorney that brings in that client but may not be able to share the fees if a receptionists brought the client in.  However, the accounting firm may be able to give all employees a 10% bonus at the end of the year because profits were up 25%.

Professional corporations must still abide by any rules placed on the individual professional in the same field.  For example, a doctor cannot create a professional entity to sell painkiller prescriptions without examining a person for extra profit if the medical ethical code states a doctor cannot do that.  In many cases, if an individual in a professional company does break the ethical code of that profession, he or she may be subject to discipline from the regulators of that field.

Professional corporations may be required to keep liability insurance.  Professional corporations may also be required to have a certain number of board members or owners of the professional at issue – or in some cases must have all board members and owners be of that profession.

Over the next few weeks, I will be highlighting some of the specific requirements of various professional organizations.  Should you be a professional in one of these fields needing incorporation advice, please call me.