The Difference Between a Professional and General Corporation
When developing a new business, one of the questions that you must ask is what type of entity your business will be. There are many different types of corporations that can be formed, but not every type is right for every business. It is imperative that you choose right corporate structure for your business. Failure to do so can have a significant impact on the life of the business both financially and contractually. When setting up a corporation, it is imperative that you speak with an experienced business attorney to find out which corporation is best for you.
Two common types of corporations are general corporations and professional corporations. Each has its own requirements and qualifications to determine which is proper for your business. Both types have their advantages and disadvantages that need to be considered in forming a corporation. The following are the main differences between a general and professional corporations.
A general corporation is the most common type of corporate structure. A general corporation is one that is a completely separate legal entity owned by stockholders. There is no limit to the number of the stockholders that are protected from any creditors of the corporation. Instead, the personal liability of a stockholder is usually limited to the amount of investment that was made in the corporation.
There are many benefits to forming a general corporation. The main benefits include personal protection from debt and liabilities of the corporation, the corporation can outlive the life of its owners, and there are certain benefits that are tax-free. Additionally, transfer of ownership can be done through the sale of stock and ownership does not necessarily need to change the management of the corporation.
A professional corporation is one that only performs services in one, single profession. It is a specific type of corporation for professionals like doctors, lawyers, accountants, etc. The professional is able to form a corporation, but the professional remains liable for his or her own actions. However, the professional is shielded from malpractice claims that might be brought against other associates of the corporation. Shareholders are required to hold licenses in the relevant profession of the corporation.
There are many benefits to forming a professional corporation. First and foremost, the professionals are shielded from liability from nonprofessional acts. Second, a professional corporation offers many tax benefits. One of these benefits is the ability to deduct fringe benefit plans, like a group term insurance plan, from their tax documents. Finally, there is also free transferability of interests. These transfers are still subject to statutory or regulatory restrictions.
Knowing which type of corporation to form can be difficult to ascertain. Failure to form the right type of corporation can cost you financially and contractually. The experienced business attorney at the Law Office of Kris Mukherji can help eliminate this confusion and difficulty. You do not want your business to be formed incorrectly and result in trouble. Consult with an attorney early to eliminate mistakes and give your corporation the best chance at success. Contact us today for a consultation