Professional Corporation

[grandmabee]

Can a Professional corporation elect to be an S- Corp ?

[Terry D EA]

Here is an article from the IRS site. If all conditions are met, then yes they can elect to be an S-Corp but there are some timing rules as to when the election can be made.

http://www.irs.gov/businesses/small/article/0,,id=98263,00.html

[grandmabee]

Here is an article from the IRS site. If all conditions are met, then yes they can elect to be an S-Corp but there are some timing rules as to when the election can be made.

http://www.irs.gov/businesses/small/article/0,,id=98263,00.html

thanks, I was thinking there was something different about a PC corporation and when I went to look up I couldn't find anything. I thought they have some exceptions or special rules than an regular S-corp

[Terry D EA]

One thing you might want to do is make sure your clinet throroughly understands that all S-Corp shareholders who actively perform services for the S-Corp are required to be an employee and are subject to the same withholding taxes as the other employees within the corp. I have seen people try various attempts to get around this. Anything but following the law is unethical which you should not be part of. I dumped a client this year because he willingly and knowlingly misclassified employees including himself and refused to do it any other way. I showed him in black and white to ensure that it wasn't my quirky way of doing thngs and he disagreed and my engagment came to an immediate halt.

[ed_accountant]

The wrong answer could create alot of trouble and liability on this question. Professional corps are often required by state laws such as CPAs and Attorneys in California are required to be professional corps if they incorporate. Certain state professional codes dictate the structure.

Here is a link that says a Professional Corporatoin can elect S-corp status for federal purposes. I assumed the answer was "no".

http://corporate-law.lawyers.com/Corporations.html

"Professional Corporations

Professional corporations are formed by doctors, lawyers, accountants, engineers, architects, and other professionals to do business in their respective professions. Under most state laws, only licensed professionals can be shareholders and directors of professional corporations. The same rule usually applies to partnerships, limited liability companies, and other entities formed by professionals to practice their professions. In most states, a professional will not be liable for the negligence or misconduct of other professionals working for the corporation, except those directly supervised by such professional. Of course, professionals will be liable for their own negligence or misconduct.

A professional corporation can be either a "C" corporation or an "S" corporation under the federal Internal Revenue Code. "

[Terry D EA]

The wrong answer could create alot of trouble and liability on this question. Professional corps are often required by state laws such as CPAs and Attorneys in California are required to be professional corps if they incorporate. Certain state professional codes dictate the structure.

Here is a link that says a Professional Corporatoin can elect S-corp status for federal purposes. I assumed the answer was "no".

http://corporate-law.lawyers.com/Corporations.html

"Professional Corporations

Professional corporations are formed by doctors, lawyers, accountants, engineers, architects, and other professionals to do business in their respective professions. Under most state laws, only licensed professionals can be shareholders and directors of professional corporations. The same rule usually applies to partnerships, limited liability companies, and other entities formed by professionals to practice their professions. In most states, a professional will not be liable for the negligence or misconduct of other professionals working for the corporation, except those directly supervised by such professional. Of course, professionals will be liable for their own negligence or misconduct.

A professional corporation can be either a "C" corporation or an "S" corporation under the federal Internal Revenue Code. "

I think what you are saying here is it would be best to check with the Secretary of State of the State where this company is located or incorporated in to see if that State has any special requirements for a Professional Corporation. If so, then I agree BColleen should do this. Under the Federal Code, as you have indicated, a PC can elect S-Corp or C-Corp status.