Forming a professional corporation in Alabama is an effective way for licensed professionals such as attorneys, doctors, dentists or engineers to protect their personal assets and gain tax advantages. A professional corporation (PC) offers the same liability protection as a corporation, but it can only be formed by licensed professionals to render their professional services. The following guide outlines the key steps and requirements to form a professional corporation in Alabama.
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Step 1: Choose a Name
Choosing a name is an important step as it represent the entity itself. In Alabama, the name of a professional corporation should indicate the nature of the profession being practiced, such as “Jones & Smith, P.C.” for attorneys or “Johnson Dentistry, P.C.” for dentists. Additionally, the Secretary of State’s office must ensure that the name is distinguishable from any other entity currently operating in the state. Thus, it’s recommended that you check the Alabama Secretary of State’s website to see if your desired company name is available.
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Step 2: Obtain Certificate of Name Reservation
After choosing the name of the professional corporation, the next step is to reserve the name with the Alabama Secretary of State. A Certificate of Name Reservation can be obtained by filing an application with the Secretary of State’s office and paying the required fee. This certificate ensures that the chosen name will remain available for a limited period while you comply with other corporate formation formalities.
Step 3: File Articles of Incorporation
The Articles of Incorporation is a legal document that establishes the PC as an independent entity. In Alabama, a licensed professional corporation must include specific language explaining that it is a professional corporation and the specific profession of its members. The Articles of Incorporation should contain the following information:
- The name and address of the professional corporation
- The names and addresses of the founding members (shareholders)
- The name and address of the registered agent (the person designated to receive legal notices on behalf of the professional corporation).
- The specific profession the corporation is formed to practice (such as law, medicine, engineering or dentistry)
- The number of shares authorized and their par value, if any
Once the Articles of Incorporation has been drafted and prepared, you should file it with the probate court in the county where the corporation will primarily conduct its business. The filing fee for the Articles of Incorporation varies for different counties and must be paid at the time of filing.
Step 4: Obtain Business Licenses and Permits
Professional corporations often require a specialty or professional license to conduct business in their respective professions. For example, to form a professional corporation of dentistry in Alabama requires a license issued by the Alabama Board of Dental Examiners. In addition to this, you may also require licenses or permits based on the type of services offered by the corporation. These could include business licenses, occupational licenses or permits required by local or state government entities. Therefore, it’s important to research and obtain any necessary licenses and permits before the corporation can commence business operations.
Step 5: Draft Bylaws and Internal Procedures
Bylaws are a set of rules and procedures established for the internal management and governance of the professional corporation. They should establish clear rules on the election of directors, meetings, amendments to articles of incorporation amongst others. Every professional corporation is free to draft its own bylaws initially.
Step 6: Make Required Tax Elections
Professional corporations are formed primarily for tax benefits like sole proprietorship insurance. Following incorporating procedures, forming a professional corporation on LinkedIn is the most effective business strategy. Thus, it’s important to make required tax election at the federal level and also division C of business tax environment in Alabama.
Professional corporations may also gain tax benefits under subchapter S of the Internal Revenue Code or in limited liability entity legislation, like LLCs.
Step 7: Acquire Insurance
Even though the professional corporation can provide liability shield individually to its members, acquiring insurance to cover additional liabilities to one's own personal assets is advisable. At a minimum, liability insurance for practitioners and malpractice insurance for physician practices is necessary to complete the entity's ongoing requirements.
In conclusion, forming a professional corporation can safeguard the personal assets and effectively provide services from protection those under any fraudulent charges such as medical malpractice. Following the above statutory procedures and applying subsequent laws accordingly helps businesses lead safely through rough safeguarding waters.
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