Selecting the right business structure is one of the most important early decisions a licensed professional makes when establishing or reorganizing a practice.
In North Carolina, many professionals quickly encounter two specialized structures: the Professional Corporation (PC) and the Professional Limited Liability Company (PLLC). Together, these vehicles are referred to as “professional entities” for the purposes of our article, and they exist to ensure that licensed services are delivered within a regulated, board-approved framework.
While both PCs and PLLCs share the same core purpose — allowing licensed individuals to practice under an entity that offers liability protection for business obligations while maintaining accountability for professional conduct — the question remains: When does forming a professional entity provide meaningful advantages?
This article explores the circumstances where a professional entity, particularly a PC, is beneficial under North Carolina law, and when a different structure might make more sense.
Understanding Professional Entities in North Carolina
Under the North Carolina Professional Corporation Act (Chapter 55B), certain licensed professionals may offer services only through a professional entity. Eligible professions include medicine, dentistry, law, accounting, architecture, engineering, psychology, and other regulated fields.
Although PC and PLLC structures differ in technical governance — PCs operate under traditional corporate rules, while PLLCs generally have more contractual flexibility — they share several defining characteristics:
- Ownership is restricted almost exclusively to licensed professionals.
- The applicable licensing board must approve the formation.
- The entity must provide only the professional services for which its owners are licensed.
- Annual registration or renewal with the licensing board is typically required.
For clients and patients, professional entities offer assurance that the practice is operating under heightened regulatory oversight. For practitioners, these structures provide a measure of separation between personal assets and the business liabilities of the practice — a distinction that becomes more important as the practice grows.
What Professional Entities Do — and What They Don't
A frequent misconception is that forming a professional entity shields an individual from malpractice claims. North Carolina law makes clear that it does not. Each licensee remains personally responsible for their own professional acts. No entity — PC, PLLC, or otherwise — can eliminate personal malpractice liability.
What a professional entity does offer, however, is protection from other types of exposure. Owners are generally not liable for the malpractice of another professional within the practice. Likewise, they are not personally responsible for the entity's ordinary business debts, such as leases, loans, or vendor contracts. For multi-professional practices, this separation is often essential.
Professional entities also introduce structure. They create predictable systems for management, decision-making, succession planning, and ownership transitions. These governance features help practices maintain continuity during events such as retirement, disability, or a change in licensure status — circumstances specifically addressed in Chapter 55B.
The value of these benefits depends greatly on the nature of the practice. For some, the structure is essential. For others, it may be more than what is needed.
When Forming a Professional Entity Makes Sense
Professional entities are particularly advantageous when a practice is expected to grow, incur regular overhead, or involve multiple owners. Below are the most common scenarios where a PC — or, in some cases, a PLLC — aligns well with a professional's operational and strategic needs.
A Growing or Multi-Owner Practice
When two or more licensed individuals join to deliver professional services, operating through a professional entity provides a clear framework for governance. Decisions such as who manages the business, how profits are distributed, and how ownership may be transferred are easier to define and enforce with a formal entity.
While an informal partnership can seem simpler at first, it provides no liability protection for business obligations and very little stability if an owner retires or experiences a licensure issue. A professional entity, by contrast, creates continuity and reinforces good business practices.
A Practice Taking on Significant Business Obligations
Medical, dental, architectural, and similar practices often require meaningful investments in equipment, leased space, staffing, and contractual relationships. In these circumstances, forming a professional entity helps protect personal assets from the practice's financial obligations.
This protection is not limited to large practices. Even solo providers can benefit when the business anticipates regular, ongoing financial commitments. The structure makes it easier to hire employees, sign loans, and enter long-term leases without exposing the practitioner's personal finances to business-level risk.
Regulatory or Licensing Board Requirements
Many North Carolina licensing boards require that licensed services be offered through a professional entity. For example, the North Carolina Medical Board must certify a professional entity before it may render medical services, and annual renewal is mandatory. For certain professions, using a professional entity is not merely advisable — it is essential for compliance.
Long-Term Planning and Succession
Practices with multiple generations of ownership, planned buy-ins, or anticipated changes in leadership often benefit from the continuity and predictability that a professional entity provides. The statutory framework governing professional entities includes provisions addressing death, disability, and loss of licensure — issues that can destabilize an unstructured business.
Even small practices may find that formalizing ownership expectations through a professional entity promotes stability and supports long-term business goals.
When a Professional Entity May Not Be Necessary
A professional entity is not the right choice for everyone.
Solo practitioners with modest overhead and limited business obligations may find the structure more burdensome than beneficial. PCs, in particular, involve annual licensing-board filings and corporate formalities that can feel excessive for a low-risk practice.
Tax considerations may also lead a practitioner toward simpler structures. While professional entities offer tax flexibility, that flexibility becomes more advantageous only when income, expenses, or ownership structures are sufficiently complex. For a small operation, a sole proprietorship or single-member PLLC may be entirely adequate.
Finally, not all licensed professions are eligible to form a professional entity. In those cases, practitioners may need to operate under a different type of structure permitted by their board.
Choosing Between a PC and PLLC
For professionals who determine that a professional entity is appropriate, the next question is which structure to use.
PCs create a more traditional corporate governance environment, which can be helpful for larger or more formalized practices. PLLCs offer more contractual flexibility and fewer maintenance requirements, making them appealing to smaller groups or solo professionals.
Both structures limit personal exposure to business-level liabilities and both preserve individual accountability for professional acts. The choice often comes down to governance preference, tax strategy, and licensing-board requirements.
Conclusion
Forming a professional entity — whether a PC or PLLC — can provide meaningful advantages for licensed professionals in North Carolina, particularly when multiple owners, significant overhead, or long-term business planning are involved. These structures offer protection from business liabilities, promote continuity, and help ensure compliance with licensing requirements.
For some practitioners, however, the administrative burden and ongoing formalities may not justify the benefits. Every practice is unique, and the optimal structure depends on the professional's goals, anticipated growth, regulatory environment, and risk profile.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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