Professional Partnership (P.C.) offers greater liability protection than a partnership. For example, in the event of a three party professional partnership formation, and one of its members commits malpractice, the assets of the PC will be at risk and only the personal assets of the offending member as well, not the two innocent partners.
Also, shareholders are generally not personally liable for the debts of the organization, such as leases or bank loans. There are some limitations to Professional Corporations; all partners/shareholders must to belong to the same profession, and valued employees are not permitted to own stock. The formation and legal technicalities of P.C’s can be expensive and time-consuming.
Tax issues can become complicated, as they are separate entities, like any corporation, and must pay taxes on profits, and then shareholders must also pay taxes on their dividends, double taxation. A loop hole is to pay out profits as salary, however all remaining profits are taxable. PCs must be careful to calculate profits accurately and pay them before year’s end. This chore can be tedious, and any errors may cause unnecessary tax liability.