In many states, professionals who want to incorporate their practice must form a special type of corporation called a professional corporation or professional services corporation. These professional corporations are usually similar to regular corporations but have certain special requirements.
In New York, professional service corporations are governed by Article 15 of the New York Business Corporation Law, which authorizes the formation of professional service corporations.
A professional services corporation in New York may only be formed for the purpose of providing services in one professional practice area. However, if it is a single-shareholder corporation and the sole shareholder is licensed in more than one profession, then the corporation can provide services in any profession in which the sole shareholder is licensed. In addition, professional corporations formed to provide professional engineering, architecture, landscape architecture, or land surveying services may provide any of those services through a single corporation, provided there is at least one shareholder licensed and registered to practice in each profession the corporation will provide services in.
The professions which are authorized to form professional services corporations in New York are attorneys and counselors-at-law, licensed physicians, and the occupations designated in Title VIII of the New York Education Law. (See NYSED.gov, Office of the Professions, for a list of professionals.)
In order to form a professional services corporation in New York, you must first obtain a certificate of authority or good standing from the applicable licensing agency. The New York State Education Department is the designated licensing authority for most professions, except attorneys who must obtain a certificate of good standing from the appropriate appellate division. The certification states that each shareholder, director, and officer is licensed and authorized to practice in the profession for which the corporation is being formed. This certification serves as the authorization for the professional services corporation to provide services in the specified practice area.
If the corporation is being formed to engage in more than one professional service, the certificate must state that at least one person is licensed and registered to practice in each profession the corporation will provide services in. To get the certificate of authority or good standing, you must send a fully executed certificate of incorporation (the one you will file later with the New York Department of State (DOS)) and the appropriate filing fee to the New York State Education Department or the applicable licensing agency. They will issue the certificate of authority or good standing, which you will then include with the certificate of incorporation that you file with the state.
Once your corporation is formed, you can only provide the services you are authorized to perform as specified in your certificate of authority. For more information on forming a professional services corporation and obtaining a certificate of authority, see the New York State Education Department website (NYSED.gov), under “Professions,” then “General Information on How to File a Professional Entity.”
A professional service corporation’s name must end with the words "Professional Corporation" or the abbreviation "P.C." In the case of a design professional service corporation, the name must end with the words "design professional corporation" or the abbreviation "D.P.C." Other rules of the governing agency for the profession may apply. For professions regulated by the State Education Department, the requirements of Part 29 of the Rules of the Board of Regents and Part 59 of the Regulations of the Commissioner of Education must be met.
A deceased person’s name cannot be used in the name unless that person’s name was part of the corporate name at the time of the person's death, or the deceased person's name was part of the name of an existing partnership and at least two-thirds of its partners are shareholders of the professional corporation.
The Division of Corporations will deny the use of any name that is not distinguishable from existing names on record with the state. In addition, the name must not be misleading in regard to the professional services corporation’s purpose, cannot be deemed obscene, nor create a false impression that it represents a governmental unit.
To determine whether a name is available for a professional corporation, you must make a name availability inquiry. The DOS Corporation and Business Entity Database online search can be used to check the names of entities already on file with the Department of State. However, this information cannot be relied on as an indication of a name’s availability. To check a name’s availability, you must submit a written request, along with the applicable fee, to the DOS, Division of Corporations. After determining availability, you may reserve a corporation name for 60 days by filing an Application for Reservation of Name. Information on how to submit the form and applicable fees can be found in the Division of Corporations, State Records, and UCC section of the DOS website.
To form your professional service corporation, you must file a certificate of incorporation with the DOS. The certificate of incorporation must include the following information:
A fillable copy of the certificate of incorporation can be found on the DOS website (see the Division of Corporations, State Records & UCC section).
The completed certificate of incorporation, together with the filing fee and any applicable tax on shares, must be filed with the DOS, Division of Corporations. See the DOS website (under Business Corporations Filings) for information on filing fees, how to calculate tax on shares, and the mailing address for sending in your certificate of incorporation. You must include your certificate of authority from the Department of Education (or your certificate of good standing from the appropriate appellate division for attorneys) with your certificate of incorporation and filing fees. It is also recommended that you include a copy of the name availability response with your filing.
Within 30 days after filing your certificate of incorporation with the DOS, you must file a certified copy of your certificate of incorporation with your applicable licensing authority. Check with the Professional Corporations Unit of the State Education Department or the appellate division where you obtained your certificate of good standing for the required filing fee and procedures.
Some businesses need licenses or permits from state or local governments, or both. To inquire about whether your business needs any New York State licenses or permits, you may contact the Business Permits Program. Contact the county clerk and the clerk of the city, town, or village in which the business will operate with questions regarding local licenses or permits. Other agencies with helpful information include the New York State Workers’ Compensation Board and New York State Department of Labor.
Once you have formed your professional corporation, you will need to comply with tax and other regulatory requirements that apply to professional corporations in New York. For more information on the general requirements for forming a corporation in New York (many of which apply to professional corporations), see Nolo’s article How to Form a Corporation in New York.
By Dana Altman, Esq.