Professional Corporation - Iowa Code chapter 496C

A professional corporation is a business organization which allows "professionals" to practice in an association of individuals which offers many of the benefits of a for profit corporation. A professional corporation must be organized for the sole purpose of rendering professional services and may only be formed by the eligible professionals identified in Iowa Code section 496C.2(4). All shareholders in the corporation are required to be licensed to render the specific professional service of the corporation. For example, in a medical professional corporation, all the shareholders must be licensed physicians.

Unless the articles of organization specify otherwise, the liability of shareholders in a professional corporation is limited in the same manner and to the same extent as that of a for profit corporation. The Professional Corporation Act does not modify the duty of care owed to a person receiving services from a professional practicing in a professional corporation. In other words, professionals practicing in a professional corporation remain liable for their own malpractice.

The Iowa business corporation Act, Iowa Code chapter 490, is construed to be part of the Professional Corporations Act according to Iowa Code section 496C.3.

CHOOSING AN APPROPRIATE FORM OF BUSINESS REQUIRES CAREFUL CONSIDERATION OF ISSUES COVERED IN THIS GUIDE AS WELL AS OTHERS NOT DISCUSSED. THIS GUIDE ONLY PROVIDES BASIC INFORMATION ON SOME OF THE LEGAL AND PRACTICAL ISSUES TO CONSIDER WHEN SETTING UP A BUSINESS. IT IS MERELY DESIGNED TO ASSIST PROSPECTIVE ENTREPRENEURS IN THE EARLIEST STAGES OF BUSINESS DEVELOPMENT. THE GUIDE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. PERSONS CONTEMPLATING STARTING A BUSINESS ARE STRONGLY ENCOURAGED TO CONSULT LEGAL, FINANCIAL AND TAX ADVISORS. FIND AN ATTORNEY THROUGH THE IOWA STATE BAR ASSOCIATION'S ATTORNEY REFERRAL SERVICE.

Professional Corporation - Points to Consider

• There is a significant limitation on personal liability in a professional corporation.
• While the corporation cannot protect a professional against their own negligence, it does protect them against the negligence of an associate.
• Professional corporation is a useful back-up to malpractice insurance.
• More expensive to create than a partnership or sole proprietorship.
• Paperwork can become burdensome to owners.
• All incorporators must belong to the same profession.

Professional Corporation - Procedural Aspects

• Formation - Because the Iowa business corporation Act is construed to be a part of the Professional Corporation Act, many of the provisions for forming a professional corporation are the same as for a for profit corporation.
  • Chose a proper name for the professional corporation. The name must meet the requirements of I.C. § 496C.5. The corporate name must be distinguishable as required by IC § 490.401(2). This means the name may not already be in use by another business entity on record with the Secretary of State. A professional corporation may reserve a corporate name according to IC§ 490.402 by completing an Application for Reservation of Name. A previously reserved corporate name may also be transferred by completing a Notice for Transfer of Corporate Name.
  • Deliver Articles of Incorporation to Secretary of State. Articles of incorporation must set forth all information required in IC § 490.202, IC § 496C.4, and executed as required in IC § 490.120(6). View the minimum requirements.
  • IC § 496C.17 requires the board of directors of a professional corporation to establish an initial set of bylaws.
  • A corporation may amend its Articles of Incorporation according to IC §§ 490.1001-1005. Any amendments made to the Articles of Incorporation must be filed with the Secretary of State according to IC § 490.1006.
  • A corporation's board of directors may restate its Articles of Incorporation according to IC §490.1007. Restated Articles of Incorporation must be filed with the Secretary of State according to IC §490.1007.
• Biennial Report - Each professional corporation, and each foreign professional corporation authorized to transact business in this state, shall deliver to the secretary of state for filing, a biennial report according to IC § 490.1622 and IC § 496C.21. The first biennial report shall be delivered to the secretary of state for filing between January 1 and April 1 of the first even-numbered year following the calendar year in which a professional corporation was incorporated or a foreign professional corporation was authorized to transact business. Subsequent biennial reports must be delivered to the secretary of state between January 1 and April 1 of the following even-numbered calendar years.
• Dissolution - A professional corporation may be dissolved according to IC § 496C.19. (See also I.C. § 490.1403).
• Merger - Professional corporations are not allowed to merge or consolidate with any business organization other than another professional corporations according to IC § 496C.18.
• Foreign Professional Corporation - A foreign professional corporation may practice a profession in Iowa so long as it complies with IC § 496C.20. (See also I.C. § 490.1503). View the Application for Certificate of Authority.
• Fees - View fees associated with professional corporations:

  Domestic Professional

  Foreign Professional

Professional Corporation - Key Attributes

• Creation (minimum requirements) - File articles of incorporation with Secretary of State according to IC § 496C.3 See IC § 490.202. Make sure name is distinguishable according to IC § 490.401 and complies with IC § 496C.5.
• Profits / Losses / Distributions - By articles of incorporation and according to IC § 496C.3.
• Liability - By articles of incorporation and according to IC §496C.9.
• Capital / Financing - By articles of incorporation and according to IC § 496C.10
• Duration - Can be perpetual but may be dissolved according to IC §§ 496C.19, & .3
• Transfer of Ownership - By articles of incorporation and according to IC §496C.11.
• Management and Control - According to IC § 496C.16.
• Taxation -
  State: call Iowa Revenue and Finance at 515-281-3114.
  Federal: call Internal Revenue Service at 800-829-1040.
• Reporting Requirements - Biennial report due according to IC § 496C.21.
• Fees - View the Schedule of Fees.

  Domestic Professional

  Foreign Professional