Prepared by U.S. Legal Forms, Inc.
Copyright 2016 - U.S. Legal Forms, Inc.
STATE OF MARYLAND
PROFESSIONAL SERVICE CORPORATION
Control Number: MD-00INC2
The contents of this package are as follows:
1. Statutory Reference
2. Introduction and Law Summary
3. Forms List
4. Notes on Downloading the Forms
5. Notes on Completing the Forms
6. Instructions and Steps
7. Accessories
8. Disclaimer
PROFESSIONAL SERVICE CORPORATION
for State-Licensed Professionals
STATE OF MARYLAND
Electronic Version
Statutory References
MARYLAND CODE, Corporations and Associations, Titles 1, 2, and 3
(Maryland General Corporation Law)
MARYLAND CODE, Corporations and Associations, Title 5, Subtitle 1
(Maryland Professional Services Corporation Act)
Introduction and Law Summary
The practice of a profession in the State of Maryland is controlled by the rules and regulations of
the Maryland State governing/examining board for that profession. The practice of a profession
through a professional corporation is likewise subject to these requirements, rules and
regulations, and subject to the statutory requirements of Maryland General Corporation Law and,
more specifically, the Maryland Professional Services Corporation Act.
Neither the Maryland General Corporation Law nor the Maryland Professional Corporation Act
restricts the jurisdiction of the State Board for the profession, or the interpretation or application
of any law pertaining to standards of professional conduct. Further, the provisions of the
Maryland General Corporation Law apply to professional corporations unless the context of the
provisions requires otherwise or specific provisions of the Maryland Professional Corporation
Act governing specific classes of corporations provides otherwise.
The primary differences between a "regular" corporation and a "professional corporation" are:
Organization
Generally, a professional corporation may be organized solely for the purpose of rendering
professional services within a single profession. If a professional corporation is organized to
render professional services in more than one profession, then that combination of professional
services must be authorized by the licensing laws applicable to each profession in the
combination.
Powers
A professional corporation has the same powers as statutorily set out for other corporations
unless restricted by the Professional Services Corporation Act (see discussion below).
A professional corporation may be a promoter, general partner, member, associate, or manager
of a partnership, joint venture, trust, or other entity if the entity is engaged solely in rendering
professional services.
Restrictions on Services
A professional corporation may not render a professional service or engage in an activity other
than the professional service authorized by its articles of incorporation. This restriction does not
prohibit a professional corporation from investing its funds in real estate, mortgages, securities,
or any other type of investment.
A professional corporation may not, through any means, engage or participate in the active
management of any entity, association, or venture whose business purpose is not reasonably
related to the rendering of a professional service authorized by its articles of incorporation.
License Required
A corporation may render professional services in Maryland only through individuals licensed or
otherwise authorized in Maryland to render the professional services. This restriction does not:
1. Require an individual employed by a professional corporation to be licensed to perform
services for the corporation if a license is not otherwise required;
2. Prohibit a licensed individual from rendering professional services in his individual
capacity although he is a stockholder, director, officer, employee, or agent of a
professional corporation; or
3. Prohibit an individual licensed in another state from rendering professional services for a
professional corporation in Maryland if not that individual is not prohibited by her/his
licensing unit in that State with jurisdiction over the professional service.
Corporate Name
The name of a professional must comply with general corporation law. Additionally, the name
must contain the surname of one or more stockholders of the corporation unless :
1. The name of the corporation is approved by the State Board or governing entity for the
profession;
2. A certificate of authorization for use of the corporate name is issued to the corporation or
to its incorporator by State Board or governing entity for the profession; and
3. The certificate of authorization for use of the corporate name issued by the State Board or
governing entity for the profession is attached to the articles of incorporation document in
which the name is used.
Stock, Stock Rights and Options, and Stockholders
A professional corporation may issue stock, rights, and options to purchase stock to:
1. An individual who is authorized by law in this or another state to render a professional
service named in the corporation's articles of incorporation;
2. A general partnership in which all the partners are qualified persons with respect to the
professional corporation and in which at least one partner is authorized by law in
Maryland to render a professional service named in the corporation's articles of
incorporation; and
3. A corporation receiving the stock is organized to perform the same professional service
as the professional corporation issuing the stock.
If the State Board or governing entity for the profession considers it necessary to prevent a
violation of the ethical standards of the profession, the Board may, by regulation, restrict or
condition, or revoke in part, the authority of a professional corporation to issue stock subject to
its jurisdiction.
Stock issued in violation of this restriction or of a regulation adopted by the State Board or
governing entity for the profession is void from the date issued.
Stock Certificate Restrictive Language
The following statement must appear in conspicuous type on each stock certificate issued by a
professional corporation: "The transfer of stock of a professional corporation is restricted by the
Maryland Professional Corporation Act and is subject to further restriction imposed from time to
time by the licensing unit. Stock of a professional corporation is also subject to a statutory
compulsory repurchase obligation."
Transfer of Stock
A stockholder of a professional corporation may transfer or pledge stock, fractional stock, and
rights or options to purchase stock of the corporation only to a qualified person (an individual,
professional corporation, or general partnership that is eligible to be issued stock by the
professional corporation).
A transfer of stock made in violation of this restriction, except a transfer made by operation of
law or by court judgment, is void.
Death or Disqualification of Stockholder: Stock Acquisition
A disqualified person is an individual or entity that for any reason is or becomes ineligible under
to be issued stock by the professional corporation.
A professional corporation must acquire, or cause to be acquired by a qualified person, the stock
of a stockholder, at a price that represents the fair value of the stock as of the date of death or
disqualification of the stockholder or transfer of the stock if:
1. The stockholder dies;
2. The stockholder becomes a disqualified person; or
3. The stock is transferred by operation of law or court judgment to a disqualified person.
If the price for stock is determinable in accordance with the articles of incorporation or bylaws of
the corporation, or by private agreement, that price controls. If the price is not determinable in
accordance with the articles of incorporation or bylaws of the corporation, or by private
agreement, the corporation must acquire the stock in accordance with the provisions of § 5-114
(see below).
If a disqualified person rejects the corporation's purchase offer, either the disqualified
stockholder or the corporation may commence a judicial to determine the fair value of the stock.
If the disqualification lasts less than 5 months from the date the disqualification or transfer
occurs, then there is no requirement that the stock be purchased.
A professional corporation must pay pension benefits or other deferred compensation to a former
stockholder if otherwise permitted by law.
Death or Disqualification of Stockholder: Stock Acquisition - Procedures
A "disqualified stockholder" includes the personal representative of the estate of a deceased
stockholder or a transferee as described in § 5-113.
If an acquisition of stock is required because of the death or disqualification of a stockholder, the
professional corporation must send, by certified mail, postage prepaid, return receipt requested, a
written notice to the disqualified stockholder, offering to purchase the stock at a price which the
corporation represents to be the fair value of the stock as of the date of death, disqualification, or
transfer. This offer notice must be accompanied by:
1. The corporation's balance sheet for the fiscal year ending not more than 16 months before
the effective date of the offer notice;
2. An income statement for that year;
3. A statement of changes in stockholders' equity for that year; and
4. The latest available interim financial statements, if any.
The disqualified stockholder may send, by certified mail, postage prepaid, return receipt
requested, a written notice to the corporation demanding that the corporation commence a
proceeding to determine the fair value of the stock if:
1. The disqualified stockholder does not receive a written offer within 60 days after the date
of disqualification, transfer, or appointment of the personal representative; or
2. The disqualified stockholder rejects the corporation's offer within 30 days of receipt of
the offer by the disqualified stockholder.
If the corporation fails to commence a proceeding, as requested, to determine the fair value of
stock within 60 days of written notice of demand by a disqualified stockholder, the disqualified
stockholder may commence a proceeding against the corporation to determine the fair value of
the stock.
If the disqualified stockholder accepts the corporation's offer, the corporation must make
payment when the stockholder surrenders the stockholder's stock. Unless a later time is agreed
on, payment by the corporation and surrender of the stock by the stockholder shall occur within
60 days from the effective date of the offer notice.
If the disqualified stockholder fails to respond to the corporation's offer within 30 days after
delivery of the notice, the stockholder shall be deemed to have accepted the offer.
The corporation must cancel on the books of the corporation the stock of a disqualified
stockholder and the disqualified stockholder shall have no further interest as a stockholder in the
corporation other than the right of payment of the fair value of the if the corporation has not
delivered an offer notice and the disqualified stockholder has not demanded that the corporation
commence a proceeding to determine the fair value of the stock within 120 days of:
1. Appointment of a personal representative of a deceased stockholder; or
2. The date an acquisition of stock becomes required.
Judicial Proceedings
A proceeding to determine the fair value of stock must be filed in the circuit court for the county
where the corporation's principal office or registered office is located.
The corporation must make the disqualified stockholder a party to the proceeding as in an action
against the stockholder's stock.
Directors and Officers
A majority of the directors and all of the officers of a professional corporation, except the
secretary and treasurer, must be qualified persons with respect to the corporation.
The number of directors in a professional corporation may be less than 3.
The officers of a professional corporation may be limited to president, treasurer, and secretary
and an individual may hold more than one office.
Notwithstanding any other provision of law, an individual who holds more than one office in a
professional corporation may act in more than one capacity to execute, acknowledge, or verify
any instrument required to be executed, acknowledged, or verified by more than one officer.
Proxies and Trusts
Only a qualified person may be appointed a proxy to vote stock of a professional corporation.
A voting trust with respect to stock of a professional corporation is not valid unless all of the
trustees of the trust are stockholders of the professional corporation.
Stock in a professional corporation may not be transferred into a trust, unless:
1. All settlors of the trust remain stockholders of the professional corporation for the duration of
the trust; and
2. All trustees of the trust are individuals licensed in Maryland to render the professional
service named in the professional corporation's articles of incorporation.
If a settlor of stock in a professional corporation in a trust ceases to be a stockholder in the
corporation, the settlor shall be deemed to be a disqualified stockholder and the corporation must
acquire the stock held by the trust. The stock will be acquired as set out above concerning the
death or disqualification of a stockholder.
Professional Relationships
The relationship between an individual rendering professional services as an employee of a
professional corporation and the client or patient of the individual is the same as if the individual
were rendering the services as a sole practitioner.
The relationship between a professional corporation and the client or patient for whom an
employee of the corporation is rendering professional services is the same as that between the
client or patient and the employee.
Privileged Communications
A privilege applicable to communications between an individual rendering professional services
and the person receiving the services recognized under the law of Maryland is not affected
because one of the parties is a professional corporation. This privilege applies to a professional
corporation and to its employees in all situations in which it applies to communications between
an individual rendering professional services on behalf of the corporation and the person
receiving the services.
Liability
An individual who renders a professional service in Maryland as an employee of professional
corporation is liable for a negligent or wrongful act or omission in which the individual
personally participated to the same extent as if the individual rendered the service as a sole
practitioner.
An employee of a professional corporation is not liable for a negligent or wrongful act or
omission of another employee of the corporation unless the employee is negligent in appointing,
supervising, or cooperating with the other employee.
A professional corporation whose employees perform professional services within the scope of
their employment or within the scope of the employees' apparent authority to act for the
corporation is liable to the same extent as its employees.
The personal liability of a stockholder of a professional corporation is no greater in any respect
than the liability of a stockholder of a corporation incorporated under the Maryland General
Corporation Law.
PRIOR TO FILING THE APPLICATION FOR RESERVATION OF NAME AND/OR
THE ARTICLES OF INCORPORATION FORMING A PROFESSIONAL SERVICE
CORPORATION WHOSE PURPOSE IS TO ENGAGE IN THE PRACTICE OF A
STATE-LICENSED PROFESSION, YOU MUST CONTACT THE MARYLAND STATE
BOARD/GOVERNING ENTITY FOR YOUR PROFESSION FOR CORPORATE NAME
APPROVAL (SEE ABOVE) AND TO CONFIRM THAT YOU ARE IN COMPLIANCE
WITH ALL OF THE BOARD'S RULES AND REGULATIONS.
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Forms List
The following forms are available for download with this package.
MD-NAMERESV: Application for Reservation of Entity Name
MD-00INCP: Articles of Incorporation
MD-PC-TL: Sample Transmittal Letter
MD-PC-OM: Sample Organizational Minutes
MD-PC-BL: Sample Bylaws
US-IRS-SS-4 : Application for Federal Tax Identification Number & Instructions
US-IRS-2553 : Election of “S” Corporation Status & Instructions
MD-PC-AM : Sample Annual Minutes
MD-PC-CR : Sample Corporate Notices of Meetings, Resolutions, Simple Stock
Ledger & Certificate
Instructions on using the forms are either included with the forms and/or found in the Steps to
Incorporate section, below.
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Notes on Downloading the Forms
In order that we can provide you with the most up to date forms at all times, all forms are located
on our servers for you to down load, complete and print. Downloading instructions are provided
and we will assist if you have any problems.
From the download page, the easiest procedure to download the forms is to right click on the
form links and select “save target as” to save each form to your hard drive.
You will have six days during which you can return to the forms download page to download the
forms again if needed. You are advised to save the forms to your computer as soon as possible
to avoid any problem with the six day limit.
* * *
Notes on Completing the Forms
The forms in this package may be available in Adobe Acrobat (“.pdf”) and/or Microsoft Word
(“.doc”) format.
If available in .pdf format, the forms will contain “fillable” blanks which you can type directly
into, and print. However, you can still print the form and fill in with a typewriter or by hand if
you desire.
If available in .doc format, the forms may contain “form fields” created using Microsoft Word.
“Form fields” facilitate completion of the forms using your computer. They do not limit you
ability to print the form “in blank” and complete with a typewriter or by hand. To complete the
forms click on the gray shaded areas and type the information. For the separation agreement
complete the gray shaded areas and also make any other changes or additions to resolve all
issues.
If you do not see the gray shaded form fields, go the View menu, click on Toolbars, and then
select Forms. This will open the forms toolbar. Look for the button on the forms toolbar that
resembles a shaded letter “a”. Click in this button and the form fields, if present, will become
visible. If there are no form fields, just type into the document, underlining if necessary, to
complete the form.
Some forms may be “locked” which means that the content of the forms cannot be changed
unless the form is unlocked. You can only fill in the information in the fields. If you need to
make any changes in the body of the form, it is necessary for you “unlock” or “unprotect” the
form. IF YOU INTEND TO MAKE CHANGES TO THE CONTENT, DO SO BEFORE YOU
BEGIN TO FILL IN THE FIELDS. IF YOU UNLOCK THE DOCUMENT AFTER YOU
HAVE BEGUN TO COMPLETE THE FIELDS, WHEN YOU RELOCK, ALL
INFORMATION YOU ENTERED WILL BE LOST. To unlock click on “Tools” in the Menu
bar and then selecting “unprotect document”. You may then be prompted to enter a password. If
so, the password is “uslf”. That is uslf in lower case letters without the quotation marks. After
you make the changes relock the document before you begin to complete the fields. After any
required changes relock the form, then click on the first form field and enter the required
information. You will be able to navigate through the document from form field to form field
using your tab key. Tab to a form field and insert your data.
If you experience problems, please let us know.
* * *
Steps to Incorporate
The practice of a state-licensed profession in the State of Maryland is controlled,
generally, by the statutory mandates set out in the statutes noted above, in statutes
applicable to your profession, and by the rules and regulations established by the
Maryland Board or other governing entity for your profession. You should check
with your governing entity to determine if there are any additional rules or
regulations promulgated with which you must comply, any certificate of
compliance or licensure you must obtain, etc.
Step 1: See FORM: MD-NAMERESV
APPLICATION FOR RESERVATION OF ENTITY NAME
Confirm with the State Board or governing entity for the profession the
acceptability of the corporate name you wish to use.
It is recommended that you reserve a corporate name in order to assure that your
Articles of Incorporation are not rejected because the name you have selected is
not available.
You may skip this step and go to Step 2, but if the corporate name you have
selected is not available, the Articles of Incorporation will be rejected and
returned to you.
You must type or machine-print the Application for Reservation of Name.
The name of a corporation must include one of the following words or an
abbreviation of one of the following words:
(1) "Company", if it is not preceded by the word "and" or a symbol for the
word "and";
(2) "Corporation";
(3) "Incorporated"; or
(4) "Limited."
(5) A professional corporation name must contain the surname of one or
more of the stockholders and a certificate approving the name must be
obtained from the State Board or governing entity for the profession
(but see Corporation Name section in Introductory Notes, above).
An entity name may not contain language stating or implying that the entity is
organized for a purpose other than that allowed by the entity's Articles of
Incorporation.
An entity name must be distinguishable upon the records of the State
Department of Assessments and Taxation from:
(1) The entity name of an entity organized or authorized to transact
business in the State of Maryland;
(2) An entity name reserved or registered under this subtitle; and
(3) The disclosed assumed name adopted by a foreign entity authorized to
transact business in the State of Maryland.
A name is reserved for 30 days.
The filing fee is $25.00. The expedite fee (if desired) is $20.00 more.
You may call (410) 767-1330 for a non-binding check for name availability .
This is a preliminary check and does not guarantee that the name will be
available at the time of filing.
Mail the original and one copy of your APPLICATION FOR RESERVATION
OF NAME, a certificate approving the name from the State Board or governing
entity for the profession (if applicable), the $25.00 filing fee and, if applicable, the
$20.00 expedite fee (Make check payable to the Maryland State Department of
Assessments and Taxation) , to:
State Department of Assessments and Taxation
301 West Preston Street
Baltimore, Maryland 21201
Telephone: (410) 767-1184
Step 2: INSTRUCTIONS FOR FILING ARTICLES OF INCORPORATION
See FORM: MD-00INCP
ARTICLES OF INCORPORATION
This form MUST be typed - handwritten forms will not be accepted.
FIRST: Provide the name and address of the incorporator(s).
SECOND: Provide the corporate name you have reserved.
THIRD: There is nothing to add to this section.
FOURTH: Insert the address of the principal place of business of the
corporation.
This must be a specific address in Maryland and must include street, city and
zip code. DO NOT USE A POST OFFICE BOX ADDRESS.
FIFTH: Provide the name and address of the initial registered agent for the
corporation. The registered agent MUST be either an adult citizen of
Maryland or another existing Maryland corporation. The address must include
the street, city and zip code. The address must be in Maryland and cannot be
a post office box. NOTE: The registered agent must sign the articles of
incorporation.
SIXTH: Insert the number of shares of stock the corporation will be
authorized to issue and the par value of each share. NOTE: If the aggregate
par value (number of shares multiplied by the par value) exceeds $100,000, or
if over 5,000 shares of stock without par value is used, the filing fee will
increase. If stock without par value is used insert "$0" as the par value per
share.
SEVENTH: Insert the number of directors and the names of those persons
who will be directors. These individuals do not have to be residents of
Maryland, but a majority of the directors must be licensed to practice the
profession in the State of Maryland. NOTE: A professional corporation is not
required to have three directors. However, general corporation law requires a
corporation to have three (3) directors UNLESS there are less than three (3)
stockholders, then the number of directors may be less than three (3) but not
less than the number of stockholders. The director(s) named here will act
until the first meeting or until their successors are duly chosen and qualified.
SIGNATURE(S) OF INCORPORATOR(S): Have the Incorporator(s) sign
and date the Articles of Incorporation.
SIGNATURE OF RESIDENT AGENT: The person listed as the initial
resident agent MUST sign here.
RETURN TO: Provide the address where the receipt, certified copies,
certificates of status and the original articles are to be sent.
FEES: The fee system is complex in Maryland. Call 410-767-1340 for help
determining the total filing fee. The ballpark figure totals approximately
$120.00 (plus expedite fee if desired), but you must call to confirm.
Step 3: Mail the original and one copy of the ARTICLES OF INCORPORATION with
the filing fee (make check payable to ‘Maryland Secretary of State’), to:
State Department of Assessments and Taxation
301 West Preston Street
Baltimore, Maryland 21201
Telephone: (410) 767-1340
A cover letter to send with ARTICLES OF INCORPORATION is included.
See FORM: MD-PC-TL
SAMPLE TRANSMITTAL LETTER
Step 4: Upon return of the Articles of Incorporation, conduct an Initial meeting at which
time directors and officers are elected, by-laws are adopted, and other action is
taken.
See FORM: MD-PC-OM
SAMPLE ORGANIZATIONAL MINUTES
See FORM: MD-PC-BL
SAMPLE BY-LAWS
Step 5: Apply for a Federal Tax Identification Number. This is done with form IRS-SS-
4. Mail to your regional IRS office.
See Supplemental Form: US-IRS-SS-4
APPLICATION FOR FEDERAL TAX ID & INSTRUCTIONS
Step 6: If you elect Subchapter S status so that the corporation income and losses will
pass to the shareholders, complete and file form 2553 with the Internal Revenue
Service. It is important that this form be filed timely or the corporation will have
to pay the C Corporation tax rate.
See Supplemental Form: US-IRS-2553
ELECTION OF S-CORPORATION STATUS & INSTRUCTIONS
Step 7: Open a Corporate bank account and conduct business.
Step 8: Hold an annual meeting of the directors and shareholders at least once a year to
elect directors and officers for the upcoming year and to take action as needed.
See FORM: MD-PC-AM
General: For your convenience, additional forms are included such as Sample Corporate
Notices of Meetings, Resolutions, Simple Stock Ledger & Certificate.
See Supplemental Form: MD-PC-CR
* * *
Accessories
U. S. Legal Forms, Inc. offers the following corporate accessories:
Corporate Seal:
If you would like to order a corporate seal call U.S. Legal Forms, Inc. at
(601) 825-0382. Engraved with your name: $24.95 plus shipping, or see
http://www.uslegalbookstore.com/officeproducts/
Corporate Books:
See http://www.uslegalbookstore.com/officeproducts/
Imprinted (or blank) Lithographed Stock Certificates:
Preview: http://www.uslegalforms.com/images/cert2.gif
Order for your state: http://www.uslegalforms.com/stock-certificates.htm
* * *
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