Choose a Business Structure Professional Entities
The North Carolina General Assembly created the Professional Corporations Act in 1969. The Act provides for corporations (55B-4) and limited liability companies (57D-02-02) to engage in rendering professional services and are subject to conditions and limitations imposed by Chapter 55B, applicable licensing statutes, and the Administrative Code.
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The two professional entities registered through Chapter 55B are the Professional Corporation or Professional Association and the Professional LLC.
- Creation and Organizational Documents: Created by filing Articles of Incorporation in compliance with the North Carolina Business Corporation Act. North Carolina Professional Corporations must comply with G.S. 55B-4 by, among other things, having officers, directors, and shareholders who comply with the applicable professional licensing board requirements. A letter from the licensing board must accompany the Articles of Incorporation submitted to the Secretary of State’s Office.
- Management: A Corporation is owned by its shareholders and managed by a board of directors (including the required professional “licensees”) elected and acting under authority of the Articles of Incorporation and Bylaws of the corporation.
- Limited Liability Characteristics: Professional licensees are personally liable for malpractice in providing professional services. A shareholder, director, or officer of a professional corporation is not individually liable for the malpractice of another shareholder, director, or officer unless the services are provided under his or her supervision or direction or direct involvement.
- Tax Characteristics: The corporation is taxed on its income. Shareholders are taxed on dividends and other distributions received from the corporation (double taxation).
- Termination: Corporations are unaffected by the death or withdrawal of a shareholder (so long as licensing requirements continue to be met). G.S. 55B-7 Corporations are dissolved by compliance with the Business Corporation Act, either voluntarily, administratively, or judicially.
- Creation and Organizational Documents: Created by filing Articles of Organization in compliance with the North Carolina Limited Liability Company Act. Professional LLCs must comply with the provisions of Chapter 55B as well and Chapter 55 of the NC General Statutes.
- Management: Professional LLCs are managed by their managers.
- Limited Liability Characteristics: Professional licensees are personally liable for malpractice in providing professional services. Members or manager of the Professional Limited Liability Company are not individually liable for the malpractice of another manager, member or licensee unless the services are provided under his or her supervision, direction, or direct involvement.
- Tax Characteristics: The Professional Limited Liability Company is NOT taxed on its income. Members are taxed on the income of the PLLC.
- Termination: May dissolve upon the death of withdrawal of a member and under other circumstances as determined by the Articles of Organization or Written Agreement.