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A Professional Corporation , or a PC, is a corporation where the owners provide professional services, such as doctors, accountants, consultants, and architects. Professionals are treated as small businesses under the tax code. Most operating as sole proprietorship or partnerships, and are subject to the same tax rules as other similar businesses. Simply, in a professional corporation, the owners perform services for the business as employees.
Professional Corporations benefit the owners by branding them as professional. PCs provide the same limited liability protection as other entities, except for professional malpractice. Professionals are held personally liable for their professional actions.
Professional Corporations are taxed like regular C-Corps. Any income retained is subject to the corporate tax rate, while any salaries paid to employees are considered tax-deductible expenses. However, Professional Corporations frequently pay out all business income to shareholders in the form of salaries, bonuses, and fringe benefits, reducing corporate taxable income to zero. Shareholders and employees must still pay personal income tax on any income they have received.
