Are you looking to form a North Carolina professional corporation, but you’re not familiar with the incorporation process?
Professional corporations are those owned and operated by licensed professionals, like doctors, lawyers, and architects. There are quite a few important steps you’ll need to take to create your North Carolina professional corporation and maintain it, so this guide will outline the rules and regulations involved with this process.
To get started, please reference our 11-step guide below or hire a professional online incorporation service like LegalZoom.
How to Form a North Carolina Professional Corporation (in 11 Steps)
Step One) Choose a Name
One of the most important aspects of the incorporation process is naming your business. There are three major elements to consider when choosing a name:
When naming a professional corporation in the state of North Carolina, you will need to include the words “professional service corporation” or the abbreviation “PSC.” Your professional corporation’s name also cannot include any words or abbreviations that indicate other business types, like the phrase “limited liability company” or the initials “LLC.” You also are not allowed to include words that refer to certain types of businesses (like “bank” or “law office”) unless your business fits those descriptions.
In addition to the legal considerations, you might want to identify your line of business or your mission in your company name. For example, you can display any closely held values in your name, like using the word “green” for environmentally friendly businesses.
A Name You’re Proud of
Keep in mind that this is your business, so you should choose a name that you’re proud of, and that you enjoy sharing with potential customers. You should also make sure it sounds good when spoken aloud, and also looks good when written down.
Check Whether Your Preferred Name is Available
Visit the North Carolina Secretary of State’s website to check whether it is already in use. If it’s not unique enough, you may need to tweak it or come up with a new name altogether.
Get Your Company URL
To solidify your brand and to fully embrace the company name, register your URL. You’ll be able to quickly build a company website so that nobody else can use it.
Step Two) Select a Registered Agent
North Carolina professional corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation in step four.
Who can be my registered agent?
A registered agent must have a physical address within the state of North Carolina where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The North Carolina Secretary of State says that,
The registered agent for your corporation can either be an individual or another business corporation, nonprofit corporation or limited liability. If the registered agent for your corporation is an individual, that person must reside in North Carolina. If the registered agent for your corporation is another business corporation, nonprofit corporation or limited liability company, it must be active on the records of the Department. The Registered Agent must have a Registered Office.
The Registered Office is the business address for the Registered Agent. The Registered Office must be located in North Carolina and have a physical address. You have to list both a mailing address and physical (geographic) address for your Registered Office if they are different. You must give a correct street address for your initial Registered Office.”
We recommend hiring a professional service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off the public record. For a list of the top 5 registered agent services, check out our guide.
Step Three) Complete Your Articles of Incorporation
This is THE document that formally registers your professional corporation with the state of North Carolina. In North Carolina, you can submit the Articles of Incorporation by mail, in person, or online through the PDF Upload Portal. You will also need to file a certificate from your profession’s licensing authority stating you meet such licensing authority’s requirements. More information about licensing board requirements can be found on the North Carolina Secretary of State’s website.
Keep in mind that you are acting as the incorporator when you fill out and submit the Articles of Incorporation. You should sign as the incorporator before submitting the document.
|Cost to File||$125|
|Time to Complete Filing||5-7 business days|
|Agency||North Carolina Secretary of State, Business Registration Division|
PO Box 29622,
|Agency contact info for filing questions||919-814-5400|
Step Four) Establish a Corporate Record
Professional corporations are required under North Carolina law to document and keep a permanent record of all important company decisions.
The official corporate record may be kept at the professional corporation’s principal place of business, or stored in a safe location elsewhere. You should take the opportunity to set up a secure digital or physical location for storing company records as soon as possible.
Step Five) Designate a Board of Directors
The incorporator is responsible for selecting initial director(s) of the professional corporation. The incorporator should record initial director appointments in a signed document and file it to the corporate record. This document is known as the “incorporator’s statement.” A sample incorporator’s statement can be found here.
The initial directors will serve until new directors are elected at an annual shareholder meeting, or as otherwise indicated in the bylaws. The incorporator may also serve as an initial director. Keep in mind that your directors must all share the same profession as the one the professional corporation was formed for.
Step Six) Create Corporate Bylaws
Corporate bylaws set out the rules and procedures for how the professional corporation will operate. Some important topics typically covered in the bylaws include:
- How shareholders will conduct votes
- The total number of directors and how each director will be elected
- How often the board of directors will meet
- The types of officer roles that will be appointed
- Procedures for resolving internal disputes
North Carolina requires corporations to adopt bylaws.
Bylaws help your business run smoothly, and are sometimes required by financial institutions for opening business bank accounts or acquiring loans.
Either the incorporator or the initial directors may prepare the company bylaws. The bylaws should be recorded in an internal company document, signed by the incorporator or a director, and filed to the corporate record. The bylaws are not filed with the state of North Carolina.
Popular Strategies for Preparing Bylaws:
- Use a free online template. Northwest Registered Agent has a great free template you can download.
- Hire a lawyer to draft the bylaws. If your business has investors, is already profitable, or has multiple co-owners, we strongly encourage you to hire a lawyer experienced in North Carolina corporate law to help you draft suitable bylaws. Look through Avvo’s directory of KY attorneys you can work with.
Step Seven) Hold First Board Meeting
After designating a board of directors and preparing bylaws, the new professional corporation should call for an initial board meeting. The incorporator often arranges and attends this first meeting. During the first board meeting, the initial directors should plan to cover the following topics:
- Review and approve corporate bylaws
- Designate officers to manage day-to-day business affairs
- Choose a bank
- Approve issuance of stock certificates
- Determine whether the company should elect to be taxed as a C corporation or S corporation (see step nine for more details)
Recording Meeting Minutes: a detailed record of all key discussions and decisions during the board meeting should be prepared and distributed to all board members for their review and approval. This record is known as the “minutes.” A copy of the minutes should be sent to each director for review and filed in the company record.
Step Eight) Handle Tax Obligations
You’ll need a federal tax ID number (EIN) to operate a professional corporation in North Carolina. You can obtain your EIN from the IRS for free, and it’s a fairly painless and simple process. An EIN enables your professional corporation to hire employees, file corporate taxes, open business bank accounts, and more.
A major decision for any professional corporation is determining whether to be taxed as a C corporation or an S corporation. Take a look at how these two formats differ:
- C Corp: The majority of professional corporations are C corporations, as they are subject to far fewer restrictions than S corps. With a C corp, profits are taxed at the corporate level, and again on the personal tax returns of the shareholders, resulting in what’s commonly referred to as double taxation.
- S Corp: This is only an option if your professional corporation has fewer than 100 shareholders, only issues one class of stock, is not owned by another business entity, and does not have any foreign shareholders. If your corporation meets these requirements, you can select the S corp’s pass-through taxation which eliminates the double taxation issue of C corps. S corp dividends are not taxable.
Businesses in North Carolina may be subject to a number of state-level taxes, such as corporate income and franchise tax, withholding tax, and sales and use tax. Your professional corporation’s specific tax obligations will depend on its tax election status and the nature of its business. Generally, however, professional corporations are at least subject to corporate income and franchise tax.
You can find a list of North Carolina business taxes and the related forms on the North Carolina Department of Revenue’s website. Filing and payment information is also available on the Department of Taxation’s website.
Many municipalities in North Carolina impose local taxes in addition to the state taxes described above. You should be sure to confirm whether your city and/or county will impose any additional taxes on your professional corporation. You can find business resources for the four largest cities in North Carolina on their websites:
Step Nine) Obtain Business Licenses and Permits
A general business license is not required to do business in North Carolina. However, your professional corporation may need to obtain one or more of the over 700 regulatory, state-issued, and occupational licenses and permits that are required for certain businesses in the state. The Business Link North Carolina, an economic development partnership with the North Carolina Department of Commerce, can help you determine the requirements for your business, including any industry- or profession-specific licenses.
When determining your licensing requirements, you should also check to see if the city or county in which your professional corporation does business requires any additional permits, licenses, or registrations.
Step Ten) Acquire Insurance
North Carolina, subject to limited exceptions, requires workers’ compensation insurance for all businesses with three or more employees. This requirement can be satisfied by obtaining an insurance policy or by obtaining authorization to self-insure. If you plan to hire employees, you can learn more about workers’ compensation in North Carolina on the North Carolina Industrial Commission’s website.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance. Because professional corporations are specialized businesses, you will most likely require insurance policies based on your occupation.
Step Eleven) Open a Business Bank Account
To operate a professional corporation and receive the limited liability protection that comes with it, you have to keep your personal assets entirely separate from your business assets. Due to this requirement, it’s strongly advised that you acquire a business bank account for your corporation.
Get Help Forming a Professional Corporation
The process of forming a professional corporation in any state can be a lengthy one. If you run into any trouble along the way, remember that there are plenty of organizations that can help you navigate the incorporation process.
Online Incorporation Services
If you would like to hire an affordable business incorporation service to create your professional corporation for you, services like LegalZoom and MyCorporation can help you out. These service providers can handle most of the formation process, while still charging much lower rates than a business attorney’s fees.
There isn’t the same level of personalization that a lawyer can provide, but online incorporation services can still be a tremendous help. The only major issue with these service providers is the fact that they can’t provide any actual legal advice, so you need to know what you want ahead of time.
North Carolina Business Attorney
There are some situations where hiring a business lawyer is a preferable route to using an online incorporation service. The professional corporation as a business structure can be highly complicated and specialized, and if you want to have the peace of mind that every single step was taken care of by a true expert, hiring a business attorney to form your North Carolina professional corporation is the way to go.
If you would like to pursue this route, there are some convenient services that can help you choose the right lawyer for your business. We like to use Avvo, which has extensive reviews and ratings for hundreds of North Carolina business lawyers, which can make it much easier to select an attorney who has your best interests in mind, and also has the expertise to get the job done right.
North Carolina SBDC
If you need additional one-on-one assistance, the North Carolina Small Business and Technology Development Center, or SBDTC, operates 10 regional service centers in 15 total offices where you can get help with a wide variety of business topics, such as financial assistance, financial analysis, marketing assistance, and research. The SBDTC also offers online training, online business resources, workshops, events, and more.
The North Carolina District Office of the U.S. Small Business Administration is another great resource for small businesses in the state. See their website for information about programs, news, and events relating to small businesses in North Carolina.