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Professional Corporations

Sometimes after a business you’ll see a “P.C.” for the suffix. The “P.C.” stands for something much different than the typical “LLC,” “LLP,” or “Inc.” The P.C. in Missouri means Professional Corporation. A P.C. is not only governed by the specific statutory provisions by which it was created, but also by the licensing authority regulating the profession it is organized to practice and the regulations issued by that authority. For example, as an attorney, I could register as a P.C.; in such case, I’d be regulated by the general Missouri business laws pertaining to professional corporations as well as the regulations of the Missouri Bar.

Let’s discuss some of the aspects of the P.C. in Missouri.

First, to qualify as a P.C., you must be a professional. The laundry list of the 13 qualified classes of professionals are listed in Missouri Revised Statute Chapter 356.

Like with the LLC and LLP, the most popular characteristic of the P.C. amongst practitioners is its limited liability. Subject to some exceptions — namely, the “piercing the corporate veil” theory — if an individual wants to sue a corporation, they sue the business itself, not the owners.

Tax-wise, the P.C. does afford advantages by allowing flexible planning around profit-sharing plans or pension plans. While more of a subject for another time, the P.C., like with all corporations, does easily allow the implementation of qualified/nonqualified plans of deferred compensation. This can come in handy because these tools are generally used with direct purchases of shareholder interests (often contained in buy/sell agreement: See my earlier post ‘A Glance at “Buy/Sell” Agreements’). In keeping with our tax theme, employees can enjoy certain fringe benefits without experiencing a taxable event. Such fringe benefits are discussed in detail throughout the Internal Revenue Code.

In terms of alienability, Missouri Statutes permit a P.C. to transfer shares to persons, both natural and un-natural (i.e., another business entity). However, it needs to be noted that such transfers need to be made consistent with the professional rules regulating a particular profession. For instance, a law firm cannot be owned in any way by a non-attorney. Thus, a law firm organized as a P.C. can freely transfer ownership interest under Missouri Statutes — but only to other attorneys pursuant to the professional responsibility rules.

As for organization, the P.C. requires the filing of Articles of Incorporation, which must include the type of professional services rendered, the principal place of business and street address, and must fully comply with the requirements of corporations articulated in Missouri Statute Chapter 351. Along with the Articles, there must generally be a certificate attesting to the fact that each incorporator is licensed in MO to practice that particular profession.

The P.C., given its status as a corporation, is loaded with tax maneuvering possibilities. At the same, time it also does afford flexibility in making distributions and structuring stock. As such, it’s important for professionals to weigh these factors when deciding on a choice of a business entity.

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