Most states have adopted statutes permitting attorneys, medical doctors, dentists and other professional persons to incorporate for the purpose of engaging in professional services. The services of a professional corporation must be provided by licensed persons who are employed by the corporation and who have full control of their services to any particular client, patient or customer. Professional corporations are subject to the same legal and ethical standards of conduct as are licensed individuals in the particular profession in which they engage. It is required generally by the various laws authorizing professional corporations that they be owned, controlled and managed by shareholders, directors and officers who are licensed to practice the particular profession, and that only persons licensed in the profession be employed by the corporation to practice the profession. Professional corporations are licensed and regulated by the established licensing and regulatory agency in the profession. Recently, however, the recognition of limited liability partnerships, which are fully discussed in the transaction covering formation and organization of Professional Services Partnerships and Limited Liability Partnerships, has given professionals another alternative for limiting the risks associated with the practice of the specified services.

In many respects, the general corporate law requirements imposed on professional corporations are similar to those which apply to general business corporations; however, given the statutory restrictions relating to membership and management of a professional corporation, it is not surprising that such corporations raise issues which are typically confronted when organizing a closely-held corporation and, in fact, a professional corporation may also elect to operate as a statutory close corporation.

The process of forming and organizing a professional corporation is similar to the procedure which are followed by general business corporations and generally consists of the following steps:

1. Collecting all needed information and reviewing requirements of the business with client;
   
   
2. Preparing and filing articles of incorporation along with appropriate filing and license fees;
   
   
3. Obtaining a corporate minute book, corporate seal, share certificates, and other supplies;
   
   
4. Preparing bylaws or shareholders' agreements setting forth the rules relating to internal governance of the corporation;
   
   
5. Holding an organizational meeting for the corporation; and
   
   
6. Preparing organizational minutes, share certificates, and other approved documents.

The bylaws of the professional corporation generally serve as the internal rules and regulations for the corporation. While some provisions must be contained in the articles of incorporation (e.g., number of shares of authorized share) other provisions may be contained in either the articles or the bylaws. The bylaws are sometimes preferable to the articles of corporation because they are not a matter of public record. As a general rule, the more routine matters involved in governing a corporation should be placed in the bylaws. Matters of particular importance should be placed in the articles of incorporation, since a provision in the articles is takes precedence over a contrary provision in the bylaws. The scope and content of the bylaws will vary depending upon the circumstances, particularly the size of the corporation and the peculiar requirements of applicable statutes.

In addition to, or in lieu of, the provisions normally included in corporate bylaws, consideration should be given to include the following provisions in the bylaws of a professional corporation:

(1) Restriction on the ownership of the shares to persons licensed to render the professional service for which the professional corporation or association was organized.

(2) Restriction on the transfer of the shares to persons licensed to render professional service for which professional corporation or association was organized.

(3) Specification of the number and qualifications of the directors.

(4) Specification of the officers and their qualifications.

(5) Redemption of the shares of a shareholder or of a deceased shareholder by the professional corporation.

(6) Requirement that the professional corporation purchase the shares of a shareholder, officer, or director who becomes legally disqualified to render professional service for which the professional corporation was organized.

(7) Requirement that the professional corporation purchase the shares of a person who is not licensed or authorized to render the professional service for which the corporation was organized, who may have succeeded to an interest in a shareholder's interest

(8) Provision that no member of the association is entitled to dissolve the association by his or her independent act.

The importance of bylaws for a professional corporation depends on a variety of important factors. First, the attorney must determine whether or not the corporation will dispense with formal bylaws and include the rules for governing the corporation in a separate shareholders' agreement. Second, the content and emphasis of the bylaws will be influenced by how management of the corporation will be handled. Accordingly, the bylaws may be drafted to provide for shareholder-management, without provisions relating to a board of directors.

AGREEMENTS, DOCUMENTS & FORMS:

Articles of Incorporation for Professional Corporation
Bylaws of Professional Corporation
General Form of Employment Agreement
Employment Agreement for Professional Law Corporation
Agreement to Organize Professional Law Corporation
Stock Purchase Agreement Among Shareholders of Closely Held Corporation
Employment Agreement Between Professional Medical Corporation and Physician
Comprehensive Stock Purchase or Buy-Sell Agreement
Purpose Clauses for Articles of Incorporation
Employment Agreement for Professional Medical Corporation
Employment Agreement for Professional Dental Corporation
Shareholders' Agreement for Professional Law Corporation
Shareholder Agreement for Professional Corporation