Professional corporations are a subspecies of the standard corporation. Historically, some licensed professions have not been allowed to practice their profession in a corporate format. The South Carolina Business Corporation Act allows many of these licensed professions to practice in the professional corporation format, whether as a professional corporation (using the limited liability designation “P.C.” or “PC”) or as a professional association (using the limited liability designation “P.A.” or “PA”). The South Carolina Business Corporation Act does not provide an exhaustive list of the licensed professions which can use a corporate format. For example, stock brokers and real estate agents may use the regular corporation format, while attorneys and optometrists must use the professional corporation or association format. Generally, one must look to the state licensing authority for a profession to determine whether or not the professional corporate format can be used. The main advantage of the professional corporation or association is that, unlike a general partnership where each partner is liable for the acts of other partners, shareholders in a professional corporation are not personally liable for the acts of another shareholder.
Generally, professional corporations operate in the same manner as standard corporations. There are several important restrictions on professional corporations which also need to be considered. A professional corporation can only practice one profession, unless the corporation is authorized by the appropriate professional licensing authority to practice in more than one profession. In addition, all shareholders of the corporation must be licensed in the same profession. This means that shares of a professional corporation may only be transferred to an appropriate licensed professional. In addition, the professional corporation has a mandatory obligation to purchase a shareholder’s shares when, for example, a shareholder dies or becomes a disqualified person.
Like standard corporations, a professional corporation can elect to be a statutory close corporation. This allows the professional corporation to operate much like a partnership, while still limiting each shareholder’s personal liability for the acts of other shareholders, should it so chose. It also allows greater freedom from the formalities to which non-statutory close corporations are bound.
It is important to note that the statutory authorization for professional corporations was promulgated before the advent of the limited liability company format. Many issues which cause concern, such as what licensed professions must use the professional corporation format, are simply not issues when the limited liability company format is utilized.
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