In many states, licensed professionals are not permitted to operate as regular corporations. However, a professional corporation may be able to opt for S corp status. Most states allow professionals to opt for an S corporation, professional corporation (PC), or limited liability company (LLC).
How are professional associations taxed?
From a tax perspective, a professional corporation is treated just like a C Corp; they are both taxpayers under Subchapter C of the federal tax code, meaning that the PC is taxed—per the corporate tax rate—as an entity separate from its owners, and owners are taxed once again on their personal income.
Is the professional association the same as a professional corporation?
For the majority of states, the phrase “professional association” is simply another way to reference a professional corporation. Thus, most “professional associations” are, in-fact, merely professional corporations. So what’s a professional corporation?
Do you have to pay taxes on professional association?
S Corps are pass-through entities, meaning that owners need not pay corporate taxes, and instead can claim business profits/losses on their individual tax returns. The bottom line: it’s important to know how your state uses the professional association designation.
Can a professional corporation be an S Corp?
Depending on the state, this is the required business entity for physicians, attorneys, engineers, and other professionals. However, a professional corporation may be able to opt for S corp status.
Can a professional corporation be a limited liability company?
However, a professional corporation may be able to opt for S corp status. Most states allow professionals to opt for an S corporation, professional corporation (PC), or limited liability company (LLC). The best choice for your entity depends on the individual circumstances of your business.
