In Florida, What Is the Purpose of a Professional Corporation?
The purpose of a professional corporation in Florida is to give limited liability protections to the professionals who are in the corporation. This means that, for most issues, they cannot be held personally liable for liabilities or debts of the professional corporation.
Even though the members do have limited liability, it does not completely absolve a member from being liable for their own negligence or malpractice. If a member professional does not meet the standard of care or makes a mistake, they may be sued for malpractice.
Medical malpractice is a form of malpractice that many people are familiar with. It arises when a medical professional makes a mistake, such as a surgeon leaving a surgical instrument inside a patient.
Although the surgeon is a member of the medical professional corporation, they can be held liable personally for damages that result from their mistake. Because of this, professionals commonly carry malpractice insurance, giving them protections if they face lawsuits.
Florida lawyers will assist their clients with forming their professional corporation, ensure their rights are protected, and help them avoid personal liability. In addition, Florida attorneys can assist those who need to file lawsuits against members of professional corporations.
How Does Partnership by Estoppel Affect Liability in Florida?
Partnership by estoppel in Florida can hold people who are not actually partners liable as though they were. This happens when a third party reasonably relies on the representation that they were in a partnership.
This means that, when a court finds a partnership by estoppel, apparent partners may be held jointly and severally liable for debts and misconduct of other partners when a third party was harmed because they relied on the appearance of a partnership.
If anyone has questions or concerns related to partnership liability, they should schedule a Florida lawyer consultation.
What Types of Professions Usually File Under Professional Corporation Laws in Florida?
There are certain groups of professionals who often file under Florida professional corporation laws. Typically, the members are professionals that have to have state professional licenses.
Florida professional corporations can give members liability protection, tax advantages, and present a professional image. Examples of professions that commonly form professional corporations are discussed below.
Physicians and Dentists
Different types of healthcare providers will often form professional corporations to help protect their personal assets from lawsuits involving the debts or liabilities of the professional corporation that are not related directly to any personal medical malpractice. Members in a professional corporation can also enjoy tax advantages, such as being able to deduct business expenses.
Lawyers
Attorneys will often form professional corporations to limit personal liability for their associates’ conduct. If a lawyer in a professional corporation is professionally negligent, the claim will apply to the negligent lawyer and not the others in the professional corporation.
Tax benefits, such as income splitting, may also be appealing to professionals.
Certified Public Accountants (CPAs)
CPAs use professional corporations for similar reasons as healthcare providers do. In addition, having protection from liability is very important when handling financial issues where one error can lead to significant damages.
By establishing a professional corporation, the CPAs can also present a more formal and established image to potential clients and clients.
Engineers and Architects
Engineers and architects are commonly involved in large-scale projects that carry high risks. Professional corporations can help them protect their own personal assets from claims involving general corporation liability or contract disputes.
How Are Professional Corporations Different From Other Types of Corporations?
Although different businesses can be referred to as corporations, professional corporations are different from other types in several different ways. One main difference is professional corporations are designed for use by licensed professionals.
Typically, to be a shareholder in these corporations, they have to be a licensed professional in that profession. There are also additional differences, discussed below.
Regulatory Compliance
A professional corporation is required to comply with standard corporate laws in addition to following rules and regulations provided by the Florida state professional licensing board. For example, a professional corporation of lawyers will be required to adhere to the rules of the Florida State Bar Association.
In contrast, other types of corporations, such as C Corporations, will not be required to follow these rules.
Liability Protection
A professional corporation and a standard corporation have limited liability protections. The difference is in the scope of those protections.
Shareholders in C Corporations, for example, have limited liability protections for all corporate obligations. In contrast, a professional in a professional corporation can be held personally liable for their own professional negligence or malpractice.
Taxation
A professional corporation can choose to be taxed as a C Corporation or as an S Corporation. A C Corporation is taxed at the corporate level and on received dividends, which results in double taxation.
An S Corporation is taxed by pass-through taxation, where profits and losses are reported on the tax return of each individual shareholder. There may also be other tax requirements under Florida law as well as the regulations of the specific profession.
Shareholder Restrictions
As noted previously, most professional corporations will only allow members of the profession to be shareholders. In other words, only attorneys can be shareholders in law firm professional corporations and only dentists can be members of a dental professional corporation.
In Florida, How Does Limited Liability Work With Professional Corporations?
In the State of Florida, professional corporation limited liability will protect the personal assets of the shareholders from debts or general liabilities of the professional corporation. This means that, when a corporation owes money or is sued, the personal assets of the shareholder are usually not at risk.
However, as previously noted, this limited liability will not protect a professional from their own personal malpractice or negligence. For example, if a doctor who is a member of a professional corporation makes an error, they can be held personally responsible.
Do I Need a Florida Corporate Lawyer for Help With Professional Corporation Issues?
Whether you are looking to create a professional corporation in Florida or you need help with filing a lawsuit against a member of one, it is important to consult with a Florida corporate lawyer. The rules that govern corporations and the professional conduct rules of different professions can make creating and managing professional corporations complex.
Your lawyer will help you with the Florida incorporation process as well as ensure you are in compliance with all applicable regulations and laws. In addition, your lawyer will give you advice about your rights and responsibilities.
If you need help filing a claim against a member of a professional corporation or the corporation, your Florida lawyer can help. They will help you understand whether or not the professional can be held personally liable or will be protected by corporation limited liability.
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