Who Can Own A Professional Corporation in North Carolina?
A professional corporation versus a regular corporation – yes, there is a difference. Our law firm represents a number of professional practices including physicians, dentists, accountants, engineers and other professionals. These clients are often unaware of the different rules that apply to ownership issues for professional practices. These rules are important to consider when starting a practice, adding an owner or during succession planning.
Chapter 55B of the North Carolina General Statutes provides for professional corporations. While professional corporations are very similar to regular corporations, they differ in that professional corporations do not provide protection for professional liability, they require licensing board approval before creation, and they limit some or all of the ownership and/or management of the company to licensed professionals. For a company to provide professional services it must be a professional corporation.
The intent of these limitations is to preserve the sanctity of professional rules for each profession by limiting ownership to those who know and are bound by the profession’s rules and ethical standards. Multi-disciplinary practices cause some difficulty under the rules as the statutes are very specific as to who may own an interest in each type of professional corporation. The general rule under N.C.G.S. §55B-6 is that all stock must be owned by a licensed professional.
Certain professions allow for narrow exceptions to this rule. Specifically, Architects (N.C.G.S. §83A), Landscape Architects (N.C.G.S. §89A), Engineers and Land Surveyors (N.C.G.S. §89C), Geologists (N.C.G.S. §89E) and Soil Scientists (N.C.G.S. §89F) may allow up to 1/3 of their outstanding shares to be owned by non-licensed employees of the corporation. Accountants (N.C.G.S. §93) may have any person own up to 49% of share in their professional corporation as long as licensed accountants own the other 51% and continue to maintain 51% of the vote regarding the election of directors of the corporation.
Due to the restrictions imposed by the Professional Corporations Act, special care must be taken when setting up a multi-disciplinary practice. These restrictions must also be considered if a professional wants to issue stock to employees and in estate planning. Upon the death of a professional shareholder, a professional corporation has only one year to come in compliance with these rules. If you have any questions about the ownership of your professional practice or how your ownership interest is handled in your estate plan, please feel free to contact Hull & Chandler, P.A. for more information.