Chapter 55B - Professional Corporation Act
§ 55B-1. Title. This Chapter may be cited as "The Professional Corporation Act."
§ 55B-2. Definitions. As used in this Chapter, the following words shall, unless the context requires otherwise, have the following meanings:
As used in this Chapter, the following words shall, unless
the context requires otherwise, have the following meanings:
(1) "Disqualified person" means a
licensed person who for any reason becomes legally disqualified to render the
same professional services which are or were being rendered by the professional
corporation of which such person is an officer, director, shareholder or
employee.
(2) "Licensee" means any natural
person who is duly licensed by the appropriate licensing board to render the
same professional services which will be rendered by the professional
corporation of which he is, or intends to become, an officer, director,
shareholder or employee.
(3) "Licensing board" means a
board which is charged with the licensing and regulating of the profession or
practice in this State in which the professional corporation is organized to
engage.
(4) The term "licensing board," as
the same applies to attorneys at law, shall mean the Council of the North
Carolina State Bar, and it shall include the North Carolina State Board of Law
Examiners only to the extent that the North Carolina Board of Law Examiners is
authorized to issue licenses for the practice of law under the supervision of
the Council of the North Carolina State Bar.
(5) "Professional corporation"
means a corporation which is engaged in rendering the professional services as
herein specified and defined, pursuant to a certificate of registration issued
by the Licensing Board regulating the profession or practice, and which has as
its shareholders only those individuals permitted by G.S. 55B‑6 of this
Chapter to be shareholders and which designates itself as may be required by
this statute, and which is organized under the provisions of this Chapter and
of Chapter 55, the North Carolina Business Corporation Act.
(6) The term "professional
service" means any type of personal or professional service of the public
which requires as a condition precedent to the rendering of such service the
obtaining of a license from a licensing board as herein defined, and pursuant
to the following provisions of the General Statutes: Chapter 83A,
"Architects"; Chapter 84, "Attorneys-at-Law"; Chapter 93,
"Public Accountants"; and the following Articles in Chapter 90:
Article 1, "Practice of Medicine," Article 2, "Dentistry,"
Article 6, "Optometry," Article 7, "Osteopathy," Article 8,
"Chiropractic," Article 9A, "Nursing Practice Act," with
regard to registered nurses, Article 11, "Veterinarians," Article
12A, "Podiatrists," Article 18A, "Practicing Psychologists,"
Article 18C, "Marriage and Family Therapy Licensure," Article 18D,
"Occupational Therapy," and Article 24, "Licensed Professional
Counselors"; Chapter 89C, "Engineering and Land Surveying";
Chapter 89A, "Landscape Architects"; Chapter 90B, "Social Worker
Certification and Licensure Act" with regard to Certified [Licensed]
Clinical Social Workers as defined by G.S. 90B-3; Chapter 89E,
"Geologists"; Chapter 89B, "Foresters"; and Chapter 89F,
"North Carolina Soil Scientist Licensing Act."
§ 55B-3. North Carolina
Business Corporation Act applicable.
(a) Chapter 55 of the General Statutes, the North
Carolina Business Corporation Act, applies to professional corporations,
including their organization, and professional corporations shall enjoy the
powers and privileges and shall be subject to the duties, restrictions and
liabilities of other corporations, except insofar as the same may be limited or
enlarged by this Chapter. If any provision of this Chapter conflicts with the
provisions of Chapter 55 of the General Statutes, the North Carolina Business Corporation
Act, the provisions of this Chapter shall prevail.
(b) A document required or permitted by this
Chapter to be filed by the Secretary of State shall be filed under Chapter 55D
of the General Statutes, Filings, Names, and Registered Agents for Corporations,
Nonprofit Corporations, Limited Liability Companies, Limited Partnerships, and
Limited Partnerships.
§ 55B-4. Formation
of corporation. A professional corporation
under this Chapter may be formed pursuant to the provisions of Chapter 55, the
North Carolina Business Corporation Act, with the following limitations:
(1) At least one incorporator shall be a
"licensee" as hereinabove defined in G.S. 55B‑2(2).
(2) All of the shares of stock of the
corporation shall be owned and held by a licensee, or licensees, as hereinabove
defined in G.S. 55B‑2(2), except as otherwise permitted in G.S. 55B‑6.
(3) At least one director and one officer
shall be a "licensee" as hereinabove defined in G.S. 55B‑2(2).
(4) The articles of incorporation, in
addition to the requirements of Chapter 55, shall designate the personal
services to be rendered by the professional corporation and shall be
accompanied by a certification by the appropriate licensing board that the
ownership of the shares of stock is in compliance with the requirements of G.S.
55B‑4(2) and G.S. 55B‑6.
Sec. 55B-5. Corporate name. The corporate name used by professional corporations under this Chapter, except as limited by the licensing acts of the respective professions, shall be governed by the provisions of Chapter 55D, provided that professional corporations may use the words "Professional Association, P.A.," "Professional Corporation," or "P.C." in lieu of the corporate designations specified in Chapter 55D, and provided further that licensing boards by regulations may make further corporate name requirements or limitations for the respective professions, but such regulations may not prohibit the continued use of any corporate name duly adopted in conformity with the General Statutes and with the pertinent licensing board regulations in effect at the date of such adoption.
(a) Except as provided in subsection (b), a
professional corporation may issue shares of its capital stock only to a
licensee as defined in G.S. 55B‑2, and a shareholder may voluntarily
transfer such shares of stock issued to him only to another such licensee. No
share or shares of any stock of such corporation shall be transferred upon the
books of the corporation unless the corporation has received a certification of
the appropriate licensing board that the transferee of such shares is a
licensee. Provided, it shall be lawful in the case of professional corporations
rendering services as defined in Chapters 83A, 89A, 89C, 89E, and 89F, for non‑licensed
employees of such corporation to own not more than one‑third of the total
issued and outstanding shares of such corporation. Provided further, subject to
any additional conditions that the appropriate licensing board may by rule or
order impose in the public interest, it shall be lawful for individuals who are
not licensees but who perform professional services on behalf of a professional
corporation in another jurisdiction in which the corporation maintains an
office, and who are duly licensed to perform professional services under the
laws of the other jurisdiction, to be shareholders of the corporation so long
as there is at least one shareholder who is a licensee as defined in G.S. 55B‑2,
and the corporation renders its professional services in the State only through
those shareholders that are licensed in North Carolina. Upon the transfer of
any shares of such corporation to a non‑licensed employee of such
corporation, the corporation shall inform the appropriate licensing board of
the name and address of the transferee and the number of shares issued to such
nonprofessional transferee. Any share of stock of such corporation issued or
transferred in violation of this section shall be null and void. No shareholder
of a professional corporation shall enter into a voting trust agreement or any
other type of agreement vesting in another person the authority to exercise the
voting power of any or all of his stock.
(a1) Any person may own up to forty‑nine
percent of the stock of a professional corporation rendering services under
Chapter 93 of the General Statutes as long as:
(1) Licensees continue to own and control
voting stock that represents at least fifty‑one percent (51%) of the
votes entitled to be cast in the election of directors of the professional corporation;
and
(2) All licensees who perform professional
services on behalf of the corporation comply with Chapter 93 of the General
Statutes and the rules adopted thereunder.
(b) A professional corporation formed pursuant to
this Chapter may issue one hundred percent (100%) of its capital stock to
another professional corporation in order for that corporation (the
distributing corporation) to distribute in accordance with section 355 of the
Internal Revenue Code of 1986, as amended (or any succeeding section), the
stock of the controlled corporation to one or more shareholders of the
distributing corporation authorized under this section to hold the shares. The
distributing corporation shall distribute the stock of the controlled
corporation within 30 days after the stock is issued to the distributing
corporation. A share of stock of the controlled corporation that is not
transferred in accordance with this subsection within 30 days after the share
was issued to the distributing corporation is void.
§ 55B‑7. Death
or disqualification of a stockholder or employee.
(a) If any officer, shareholder, agent or employee
of a corporation organized under this Chapter who is a licensee becomes legally
disqualified to render professional services within this State, he shall sever
all employment with, and financial interest in, such corporation forthwith. A
corporation's failure to comply with this provision shall constitute grounds
for the forfeiture of its certificate of incorporation and its dissolution.
When a corporation's failure to comply with this provision is brought to the
attention of the Secretary of State, the Secretary of State shall forthwith
certify that fact to the Attorney General for appropriate action to dissolve
the corporation.
(b) A professional corporation shall report to the
appropriate licensing board the death of any of its shareholders within 30 days
thereafter. Within one year of the date of such death, all of the shares owned
by such deceased shareholder shall be transferred to and acquired by the
professional corporation or persons qualified to own such shares. In the
absence of an agreement which determines the equitable value of the shares,
then the price for such shares shall be the fair market value of the stock, but
not less than the book value as of the end of the month immediately preceding
the death or disqualification. Notwithstanding any other provisions of this
Chapter, the shares of stock owned by such deceased shareholder may be owned
and held by the person or persons who may be legally entitled to receive such
shares for a period of one year after the death of such deceased shareholder,
or in the case of the death of the owner of all the shares of such corporation,
for such period of time as may be necessary to liquidate the corporation.
§ 55B-8. Rendition of
professional services. A professional
service corporation may render professional services only through its officers,
employees and agents who are duly licensed to render such professional
services; provided, however, this provision shall not be interpreted to include
in the term "employee," as used herein, clerks, secretaries,
bookkeepers, technicians and other assistants who are not considered by law to
be rendering professional services to the public.
Sec. 55B-9. Professional relationship and liability.
(a) Relationship. – Nothing in this Chapter shall
be interpreted to abolish, modify, restrict, limit or alter the law in this
State applicable to the professional relationship and liabilities between the
licensee furnishing the professional services and the person receiving such
professional service, or the standards of professional conduct applicable to
the rendering therein of such services.
(b) Liability. – A shareholder, a director, or an
officer of a professional corporation is not individually liable, directly or
indirectly, including by indemnification, contribution, assessment, or
otherwise, for the debts, obligations, and liabilities of, or chargeable to,
the professional corporation that arise from errors, omissions, negligence,
malpractice, incompetence, or malfeasance committed by another shareholder,
director, or officer or by a representative of the professional corporation;
provided, however, nothing in this Chapter shall affect the liability of a
shareholder, director, or officer of a professional corporation for his or her
own errors, omissions, negligence, malpractice, incompetence, or malfeasance
committed in the rendering of professional services.
§ 55B-10. Registration with licensing board. No professional corporation shall open, operate, or maintain an establishment for any of the purposes set forth in this Chapter without first having obtained a certificate of registration from the licensing board or boards. Applications for such registration shall be made to the licensing board or boards in writing and shall contain the name and address of the corporation and such other information as may be required by the licensing board or boards. If the board finds that no disciplinary action is pending before the board against any of the licensed incorporators, officers, directors, shareholders or employees of such corporation, and if it appears that such corporation will be conducted in compliance with the law and the regulations of the board, the board shall issue, upon the payment of a registration fee, not to exceed fifty dollars ($50.00), a certificate of registration which shall remain effective until January 1 following the date of such registration or until such other expiration or renewal date as may be established by law or by the regulations of the licensing board.
Sec. 55B-11. Renewal of
certificate of registration. Upon written application of the holder, accompanied by a fee not to
exceed the sum of twenty‑five dollars ($25.00), the licensing board shall
renew the certificate of registration of a professional corporation as required
by law or the regulations of the licensing board if the board finds that the
corporation has complied with its regulations and the provisions of this
section. If the corporation does not apply for renewal of its certificate of
registration within 30 days after the date of the expiration of such
certificate, the certificate of registration shall be automatically suspended
and may be reinstated within the calendar year upon the payment of the required
renewal fee plus a penalty of ten dollars ($10.00), if such corporation is then
otherwise qualified and entitled to a renewal of its certificate of
registration.
§ 55B-12.
Application of regulations of licensing boards. A professional corporation shall be subject to the applicable rules and
regulations adopted by, and all the disciplinary powers of, the licensing board
as herein defined. Nothing in this Chapter shall impair the disciplinary powers
of any licensing board applicable to a licensee as herein defined. No
professional corporation may do any act which its shareholders as licensees are
prohibited from doing.
§ 55B-13.
Suspension or revocation of certificate of registration. A licensing board may suspend or revoke a certificate of
registration issued by it to a domestic or foreign professional corporation for
any of the following reasons:
(1) Upon the failure of such corporation to
promptly remove or discharge an officer, director, shareholder or employee who
becomes disqualified by reason of the revocation or suspension of his license
to practice; or
(2) Upon a finding by the licensing board
that the professional corporation has failed to comply with the provisions of
this Chapter or the regulations of the licensing board.
Upon
the suspension or revocation of a certificate of registration issued to a
professional corporation, such corporation shall cease forthwith to render
professional services, and the Secretary of State shall be notified to the end that
the corporation may be removed from active status and remain as such until
reinstatement.
§ 55B-14.
Types of professional services.
(a) A professional corporation shall render only
one specific type professional service, and such services as may be ancillary
thereto, and shall not engage in any other business or profession; provided,
however, such corporation may own real and personal property necessary or
appropriate for rendering the type of professional services it was organized to
render and it may invest in real estate, mortgages, stocks, bonds, and any
other type of investments.
(b) Notwithstanding
subsection (a) of this section, in the case of architectural, landscape
architectural, engineering or land surveying, geological, and soil science services,
as defined in Chapters 83A, 89A, 89C, 89E, and 89F respectively, one
corporation may be authorized to provide such of these services where such
corporation, and at least one corporate officer who is a stockholder thereof,
is duly licensed by the licensing board of each such profession.
§ 55B-15. Applicability of Chapter.
(a) This Chapter shall not apply to the following:
(1) A corporation which prior to June 5,
1969, was permitted by law to render professional services or the corporate
successor of that corporation by merger or otherwise by operation of law,
provided there is no substantial change in the direct or indirect beneficial
ownership of the shares of that corporation as the result of the merger or
other transaction. For purposes of this subdivision, a change of twenty percent
(20%) or less shall not be considered substantial.
(2) A corporation authorized in this State
to render primary services governed by Articles 1, 2, 4, or 5 of Chapter 87 of
the General Statutes, if the corporation renders services as defined in Chapter
89C of the General Statutes, that are reasonably necessary and connected with
the primary services performed by individuals regularly employed in the
ordinary course of business by the corporation. The professional services may
not be offered, performed, or rendered independently from the primary services
rendered by the corporation. This subdivision does not restrict, limit, or
modify the requirement that professional services must be provided by
individuals regularly employed in the ordinary course of business by the
corporation and duly licensed to render these professional services in this
State. Nothing in this subdivision shall be interpreted to abolish, modify,
restrict, limit, or alter the law in this State applicable to the professional
relationship and liabilities between licensees furnishing the professional
service and the person receiving the professional service, or the standards of
professional conduct applicable to the rendering of the professional service.
(b) A corporation or its successor exempt under
subsection (a) of this section may be brought within the provisions of this
Chapter by the filing of an amendment to its articles of incorporation
declaring that its shareholders have elected to bring the corporation within
the provisions of this Chapter and to make the same conform to all of the
provisions of this Chapter.
§ 55B-16. Foreign professional corporations.
(a) A foreign professional corporation may apply
for a certificate of authority to transact business in this State pursuant to
the provisions of this Chapter and Chapter 55 of the General Statutes provided
that:
(1) The corporation obtains a certificate of
registration from the appropriate licensing board or boards in this State;
(2) With respect to each professional
service practiced through the corporation in this State, at least one director
and one officer shall be a licensee of the licensing board which regulates the
profession in this State;
(3) Each officer, employee, and agent of the
corporation who will provide professional services to persons in this State
shall be a licensee of the appropriate licensing board in this State;
(4) The corporation shall be subject to the
applicable rules and regulations adopted by, and all the disciplinary powers
of, the appropriate licensing board or boards in this State;
(5) The corporation's activities in this
State shall be limited as provided by G.S. 55B‑14; and
(6) The application for certificate of
authority, in addition to the requirements of G.S. 55‑15‑03, shall
set forth the personal services to be rendered by the foreign professional
corporation and the individual or individuals who will satisfy the requirements
of G.S. 55B‑16(a)(2) and shall be accompanied by a certification by the
appropriate licensing board that each individual is a "licensee" as
defined in G.S. 55B‑2(2) and by additional certifications as may be
required to establish that the corporation is a "foreign professional
corporation" as defined in G.S. 55B‑16(b).
(b) For purposes of this section, "foreign
professional corporation" means a corporation for profit that:
(1) Is incorporated under a law other than
the law of this State;
(2) Is incorporated for the purpose of
rendering professional services of the type that if rendered in this State
would require the obtaining of a license from a licensing board pursuant to the
statutory provisions referred to in G.S. 55B‑2(6); and
(3) Has as its shareholders only individuals
who:
a. Qualify to hold shares of a corporation
organized under this Chapter;
b. Are licensed to provide professional
services as defined in G.S. 55B‑2(6) in a state in which the corporation
is incorporated or is authorized to transact business, provided that such
professional services are the same as the professional service rendered by the
corporation;
c. Are nonlicensed
employees of a corporation rendering services of the type defined in Chapters
83A, 89A, 89C, and 89E of the General Statutes, provided that all such nonlicensed employees own no more than one‑third of
the total issued and outstanding shares of such corporation in the aggregate;
or
d. With respect to a professional
corporation rendering services under Chapter 93 of the General Statutes, are
persons who own not more than forty‑nine percent (49%) of the stock in
the professional corporation as long as:
1. Individuals who meet the requirements
of sub‑subdivision a. or b. of this subdivision own and control voting
stock that represents at least fifty‑one percent (51%) of the votes
entitled to be cast in the election of directors of the professional
corporation; and
2. All licensees who perform professional
services on behalf of the corporation in this State comply with Chapter 93 of
the General Statutes and the rules adopted thereunder.
(c) A foreign professional corporation with a
valid certificate of authority has the same but no greater rights and
privileges as, and is subject to the same duties, restrictions, penalties, and
liabilities now or later imposed on, a domestic professional corporation of
like character, except that the provisions of G.S. 55B‑6 and G.S. 55B‑7
do not apply.
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