Creation of a Texas Professional Corporation

A Professional Corporation is a corporation organized for the sole purpose of a professional service. The general category of the PC or PSC can be as S-corporation or C-corporation. The professional service referred to by the law is any personal service that requires a license in Texas. Classic examples of “professional service” providers are architects, attorneys, CPAs, dentists, physicians, and veterinarians. Except for the obligation that directors and officers of a PC must be licensed professionals, the rules regarding the governance of a PC are much like those that apply to non-professional corporations. The corporate form usually insulates its owner from liability. But a professional corporation does not protect its owners from liability for malpractice.

Tax Implications for a Professional Corporation

The federal income tax law provides a unique problem for some PCs. If the IRS determines that a PC is a “personal services corporation,” it is taxed differently than other corporations. The income tax rate for a PC determined to be a personal services corporation is a flat 35 percent, which is less favorable than the graduated tax rates generally applied to corporations. The possibility of having this tax rate applied makes forming a PC undesirable for most licensed professionals.

Forming a Professional Corporation in Texas

If you are evaluating what entities for your practice, contact an experienced Waco business lawyer at 254-753-6437 to discuss forming a professional corporation.