Professional corporations in North Carolina are one of many corporation types that are utilized by professionals. These types of corporations are often formed by lawyers, physicians, dentists, certified public accountants (CPAs), and other professional groups.
The business incorporating structures for professional corporations can be different in each state. Because of this, it is important to have advice from a North Carolina attorney.
Often, creating professional corporations will include filing an articles of corporation with the North Carolina Secretary of State as well as following all applicable corporation laws and professional liability laws.
In North Carolina, What Is the Purpose of a Professional Corporation?
In the State of North Carolina, professionals use professional corporations to shield themselves with limited liability protections. These protections mean, for most legal issues, they cannot be held personally liable for the debts or other liabilities of the professional corporation itself.
Although the members of the professional corporation will have limited liability, it does not mean they will be completely protected from personal liability for their own malpractice or negligence. For example, if a medical professional does not meet the standard of care required of them, they can be sued for malpractice.
Medical malpractice is a legal term that many people have heard before. It happens when some type of medical professional makes a mistake. This can occur when, for example, a surgeon leaves a sponge inside a patient during surgery. Because of this potential personal liability, many professionals will also have malpractice insurance that protects them if they face a lawsuit.
North Carolina lawyers can help individuals and professional corporations alike. If professionals want to create a corporation, a lawyer can help ensure they do so correctly under North Carolina laws. If an individual believes they have a claim against a North Carolina professional, their attorney can evaluate the situation.
How Does Partnership by Estoppel Affect Liability in North Carolina?
Partnership by estoppel can affect liability in North Carolina because individuals who are not actually partners can be held liable as if they were. This may occur when a third party reasonably relies on a representation that someone was in a partnership.
If a court finds that there was a partnership by estoppel, it means that the apparent partner or partners may be held jointly and severally liable for any misconduct or debts of the other partners if the third party suffered harm or loss because they relied on the appearance of a partnership.
Whenever someone has concerns or questions about partnership liability, including partnership by estoppel, it is essential to schedule a North Carolina lawyer consultation.
What Types of Professions Usually File Under Professional Corporation Laws in North Carolina?
There are certain professional groups that are common for corporations under North Carolina’s professional corporation laws. Usually, the members of these professional corporations have state professional licenses.
A North Carolina professional corporation can provide members with tax advantages, liability protections, and help them present a united and professional image. The professionals who often form these types of corporations are discussed below.
Lawyers
It is common for lawyers to form professional corporations in order to limit their personal liability. When an attorney in a professional corporation is professionally negligent, a claim can be made against the negligent attorney and will not apply to the others in the corporation.
There can also be tax benefits, such as income splitting, that can be appealing to member professionals.
Physicians and Dentists
Different categories of healthcare providers commonly form professional corporations because it protects their personal assets from lawsuits based on the liabilities or debts of the professional corporation that do not arise from personal medical malpractice. The members in the healthcare professional corporation can also get tax advantages, for example, the ability to deduct business expenses.
Certified Public Accountants (CPAs)
CPAs will often form professional corporations for similar reasons as healthcare providers. Protection from liability is very important when handling issues involving finances where a single error can result in significant damages.
CPAs can also have a more formal and established image when then for a professional corporation group.
Architects and Engineers
Architects and engineers are often involved in large-scale projects with high risk. Establishing a professional corporation allows them to protect their own personal assets from any claims that are based on contract disputes or general corporation liability.
How Are Professional Corporations Different From Other Types of Corporations?
Even though many different businesses can be called corporations, professional corporations are different because they are designed to be used by licensed professionals. Usually, someone must be a licensed professional in the profession to be a shareholder in a professional corporation.
Protection from Liability
Both regular corporations and professional corporations provide limited liability protections; however, there are differences in the scope of the protections. For example, a C corporation shareholder will have limited liability protections for all corporate obligations.
Professional corporations, in contrast, allow professionals involved to be held personally liable for their malpractice or professional negligence.
Regulatory Compliance
North Carolina professional corporations have to comply with standard corporate laws as well as following the rules and regulations that are provided by the North Carolina state professional licensing board. As an example, all lawyers in a professional corporation will have to adhere to the rules provided by the North Carolina State Bar Association.
Other corporations, such as C Corporations, are not required to adhere to these rules.
Taxation
Professional corporations may choose how they want to be taxed, whether as a C Corporation or as an S Corporation. C Corporations pay their taxes both at the corporate level and on the dividends they receive, resulting in double taxations.
S Corporations, on the other hand, are taxed using pass-through taxation. This means that losses and profits are reported on each individual shareholder’s tax returns. There may also be other North Carolina tax requirements or specific professional regulations that must be followed.
Shareholder Restrictions
A professional corporation only allows members of the profession to be shareholders. This means that only physicians can be in a physician professional corporation, only lawyers in a legal professional corporation, and so on.
In North Carolina, How Does Limited Liability Work With Professional Corporations?
In North Carolina, limited liability associated with professional corporations protects personal assets of shareholders from general liabilities and debts of the professional corporation. This means, when the professional corporation has debts or faces a lawsuit, the personal assets of the shareholder are usually not at risk.
As noted above, however, this limited liability does not protect professionals from their own personal negligence or malpractice. For example, if a lawyer who is a member of a professional corporation engages in legal malpractice, they can be held personally responsible.
Do I Need a North Carolina Corporate Lawyer for Help With Professional Corporation Issues?
If you are considering creating a professional corporation in North Carolina or if you need assistance making a legal claim against one or a member, a North Carolina corporate lawyer can help. The rules governing corporations as well as professional conduct rules can be numerous and complex.
Your lawyer will assist you through the creation of your professional corporation, provide you with advice about your rights and responsibilities, and defend you or your corporation against legal claims. A lawyer can also help file a claim against a professional if you have suffered harm or loss.
LegalMatch offers free attorney matching services that can help you locate a North Carolina lawyer in your area who can help. Completing the submission form only takes about 15 minutes and you will be matched with licensed and prescreened attorneys near you.
