What Is a Professional Corporation (PC) and Who Needs One?

What is a professional corporation? This type of business—usually abbreviated as PC—is a specific legal entity structure that is designed for licensed professionals. This includes doctors, lawyers, accountants, and engineers, among others. Unlike other more general corporations that may be formed by almost any entrepreneur, a professional corporation is reserved for individuals whose work requires professional accreditation.

Although the concept is frequently associated with the U.S., there are variations of professional corporations that exist globally. Each of these is affected by differing local regulations and professional licensing rules. As a result, the requirements, benefits, and limitations can vary depending on location and profession type.

We’ve created this article to provide practical insights into PCs and how they function. Importantly, as this structure has relevance internationally, we’ve taken a global perspective to provide entrepreneurs with relevant information no matter where they operate.

Defining a Professional Corporation

A professional corporation (PC) is a type of incorporated entity created specifically for individuals working in licensed professions. It shares many similarities with standard corporations, such as the ability to issue shares, continuity of existence beyond the lives of its owners, and structured governance through directors and officers. However, the primary characteristic that sets PCs apart from other types of corporations is that there is a restriction on ownership, with a focus on professional practice.

Typically, most regular corporations can be owned by any individual or group of investors. Ownership of a PC is usually restricted to individuals who are licensed in the profession the corporation is established to serve. For example, a medical PC may only be owned by licensed physicians, while a law PC may only include practicing lawyers as shareholders.

Professional corporations are often compared to other structures like limited liability companies (LLCs) and partnerships. An LLC offers flexible ownership and management rules and is not typically limited to licensed professionals. Indeed, their licensing requirements may be limited to asking, “Do you need a business license to sell online​?” Partnerships, too, can be easier to form but often lack the liability protections of a corporation.

Industries where PCs are common include healthcare (such as doctors, dentists, and optometrists), law, accounting, architecture, and engineering. In essence, most fields where professional standards are enforced by licensing authorities are key users of PCs.

Legal and Structural Characteristics of a PC

There are various common characteristics PC-type entities share globally. These include:

• Ownership rules – The key defining feature of a PC in most jurisdictions is that only licensed professionals in the relevant field may own shares. This ensures that control of the corporation remains with those who are qualified to practice the profession.
• Liability protection – PCs typically provide shareholders with limited liability for business debts and corporate obligations. However, this protection does not usually extend to personal professional malpractice. For example, a physician working under a PC structure is not personally liable for the corporation’s debts, but they are typically personally accountable for their negligence or malpractice within their medical practice.
• Tax implications – In some countries, PCs are taxed as corporations, potentially offering opportunities for tax planning and deferral. In other jurisdictions, PCs may be treated similarly to partnerships or pass-through entities. In general, though, the taxation of PCs is often more complex than for sole proprietorships, and entrepreneurs should perform thorough due diligence in their specific regulatory environment.

Benefits of Forming a Professional Corporation

There are several potential advantages to adopting a PC structure. Some of the common benefits include:

• Credibility and recognition – Operating as a PC can boost the public perception of a professional practice. Clients and patients may view the corporation designation as a sign of legitimacy, strong governance, and compliance with industry standards.
• Tax planning advantages – In certain jurisdictions, PCs may provide tax benefits not available to sole proprietors or partnerships. These can include the ability to retain earnings within the corporation, implement retirement and benefits plans, or take advantage of corporate tax rates.
• Succession planning and continuity – A PC usually provides continuity beyond the life or practice of an individual professional. This makes it easier to transfer ownership or reorganize in the event of retirement, death, or exit of a professional partner.
• Corporate governance – PCs usually benefit from structured governance models that can clarify roles, responsibilities, and decision-making processes. This is especially important in larger practices that involve multiple professionals.

Limitations and Compliance Requirements

Alongside the potential benefits, PC-type organizations also present some challenges and obligations. These include: 

• Professional licensing requirements – In most jurisdictions, all shareholders and directors of a PC must be licensed in the relevant profession. This restricts external investment and can limit access to capital.
• Regulatory oversight – PCs are subject to oversight not only by corporate regulators but also by professional licensing boards. This double layer of compliance requirement tends to mean stricter reporting, auditing, and disciplinary procedures.
• Ownership restrictions – Unlike general corporations, PCs cannot issue shares to outside investors or other parties unless they are also licensed professionals in the same field.
• Administrative burden – PCs often face higher compliance costs and greater administrative complexity than sole proprietorships or partnerships. This might not be appropriate for small or low-risk practices.

Who Needs a Professional Corporation?

A PC is most relevant for professionals in regulated industries where licensing is mandatory. Examples include:

Industry/Profession	Requirements or Benefits
Medical doctors, dentists, and other healthcare providers	A PC can usually provide professionals with both liability protections for business operations and recognition by healthcare regulators
Lawyers and law firms	Incorporation can provide governance advantages while still supporting accountability requirements for professional conduct
Accountants, auditors, and financial advisors	Can benefit from the credibility and continuity of PCs while remaining bound by professional liability rules
Architects and engineers	PCs provide credibility and liability protections, particularly in jurisdictions where their work carries significant liability exposure

It’s important to also remember that the requirements or benefits of forming a PC depend on jurisdiction. In some regions, incorporation may be mandatory for certain professionals, while in others it remains optional but advantageous.

Alternatives to a Professional Corporation

In some situations, a PC is not necessarily the most appropriate structure. Some professionals opt for alternatives, including:

• PLLCs (Professional Limited Liability Companies) – These are similar to PCs, but have greater flexibility in management and taxation.
• LLPs (Limited Liability Partnerships) – Often used by law and accounting firms. They allow professionals to operate together with some liability protection but typically without the formalities of a corporation.
• General corporations – In some cases, professionals may simply form a standard corporation. This may be possible for those looking into the question, “Should I use my home address for my business?” Yet, this may not always be recognized by licensing boards or may lack tailored compliance features.

Entrepreneurs need to weigh various elements when choosing what structure is most appropriate for their needs. These aspects include liability, taxation, compliance, and industry-specific requirements.

Steps to Forming a Professional Corporation

Step 1 – Jurisdiction selection

Determine the country or region where the PC will be incorporated. Consider both local licensing and corporate regulations.

Step 2 – Document filing

Draft and submit articles of incorporation or equivalent documents to specify that the entity is a professional corporation.

Step 3 – Fulfil licensing requirements

Ensure that all shareholders and directors are appropriately licensed. Arrange for evidence to be filed with relevant authorities.

Step 4 – Register with regulators

Alongside corporate registration, businesses must usually obtain approval from professional licensing boards.

Step 5 – Implement governance and compliance

Establish bylaws, elect directors, and appoint officers to oversee the corporation.

Furthermore, international and cross-border PC setups can be more legally complex. Collaborating with an independent business formation consultant can provide access to expert guidance in forming and operating PCs in different jurisdictions.

FAQs

What is a professional corporation?

It’s a type of incorporated entity reserved for licensed professionals.

Who can form a professional corporation?

Typically, only licensed professionals such as doctors, lawyers, accountants, and engineers can establish and own shares in a PC.

How does a professional corporation differ from an LLC or partnership?

A PC provides corporate governance and certain tax planning advantages but is restricted to licensed professionals. Unlike an LLC or partnership, ownership and management are more tightly regulated.

What professions commonly require a PC?

Fields such as medicine, dentistry, law, accounting, architecture, and engineering are most likely to require or benefit from the PC structure.

Does every country recognize professional corporations?

No. While the concept exists in many jurisdictions, not every country formally recognizes PCs. Alternatives may be used where PCs are not available.

References

Michigan Licensing and Regulatory Affairs. (2025). Professional Service Limited Liability Company. State of Michigan. https://www.michigan.gov/lara/bureau-list/cscl/corps/limited-liability-co/types/professional-service-limited-liability-company

California Society of Anesthesiologists. (2025). Should I Incorporate? Pros and Cons of a Personal Medical Corporation. CSA. https://csahq.org/resources/should-i-incorporate-pros-and-cons-of-a-personal-medical-corporation