Form 203 – Certificate of Formation Professional Corporation

Jurisdiction: Country: United States | Province or State: Texas

What is a Form 203 – Certificate of Formation Professional Corporation?

Form 203 is the Texas filing that brings a professional corporation (PC) into legal existence. Once accepted by the Texas Secretary of State, your PC is officially “born,” with a public charter that states its legal name, professional purpose, registered agent and office, share structure, and any supplemental terms. The filing aligns your corporate structure with the licensing rules governing your profession, signaling to the state and the public that a licensed professional entity will render specific services.

Texas authorizes various licensed professions to form PCs, including law, medicine, dentistry, accounting, architecture, and engineering. The common thread is that these fields have licensing boards that regulate who may practice and who may own or control a professional entity. Form 203 captures the essentials so the state can recognize and regulate the entity consistently with those rules.

Who uses Form 203?

Licensed professionals starting a new practice, formalizing an existing practice, or converting from a sole proprietorship or partnership into a corporate structure. Typical goals include limited liability for business obligations, clearer governance and ownership, succession planning, and credibility with landlords, lenders, and insurers.

Key facts conveyed in Form 203

• The precise professional service the entity will provide.
• Ownership and governance restrictions are tied to licensing requirements.
• Corporate name (with PC designation), registered agent, and registered office.
• Authorized shares and any classes.
• Initial directors (if listed) and the organizer.
• Supplemental provisions (e.g., transfer restrictions, indemnification).

A PC limits owner liability for ordinary business debts but does not shield any individual from their own malpractice. The structure supports continuity, growth, and compliance with your profession’s standards.

When Would You Use a Form 203 – Certificate of Formation Professional Corporation?

Use Form 203 when forming a Texas professional corporation rather than a general business corporation or a professional limited liability company. File before the practice begins operating or signing contracts under the new entity name. It’s the right fit when:

• All owners hold the relevant Texas professional license and will practice through a PC.
• Your profession’s rules require or permit a professional corporate structure.
• You plan to take on leases, loans, payroll, or other obligations best housed in an entity.
• You want a share-based framework for governance, ownership, and succession.
• You must reflect licensing rules on who may own and control the practice.

It is not the right form for:

• Non-professional businesses that do not require a license.
• Professions not authorized to incorporate as a PC in Texas.
• Practices that will use another professional entity form (e.g., PLLC).

Common timing triggers include a new office lease, adding a co-owner or associate, tax planning, or insurer/client requirements. If converting an existing practice, time your filing with bank, insurance, and licensing transitions so your operations match the PC’s effective date.

Legal Characteristics of the Form 203 – Certificate of Formation Professional Corporation

Once accepted, your PC becomes a separate legal entity that can own property, contract, sue and be sued, and employ staff. It operates from the effective date in the filing (immediate or delayed), under its certificate of formation, Texas corporate law, and your profession’s licensing rules.

Core characteristics

• Limited liability for business debts: Shareholders generally aren’t personally liable for leases, vendor debts, or other corporate obligations, absent personal guarantees or misconduct.
• No shield for personal malpractice: Each professional remains responsible for their own acts or omissions. Ownership alone does not make one shareholder liable for another’s malpractice.
• Ownership and control limits: Only eligible persons or entities may own shares or serve in certain management roles, consistent with licensing rules. Include transfer restrictions and disqualification remedies in your charter-level provisions.
• Specific professional purpose: State the precise professional service (e.g., “to practice dentistry in Texas”). Avoid mixed or general business purposes.
• Naming rules: Include the professional corporation designation (e.g., “Professional Corporation” or “P.C.”). The name must be distinguishable and non-misleading.
• Registered agent and office: Maintain a consenting registered agent and a Texas street address for service of process. Lapses can cause missed notices or administrative issues.
• Ongoing governance: Bylaws, organizational resolutions, and a share ledger guide operations. Directors oversee corporate affairs; officers manage day-to-day; shareholders exercise ownership rights.

Accuracy and compliance matter. Inaccurate statements or noncompliance with licensing rules can cause rejection, discipline, loss of good standing, or forfeiture. Keep licenses and corporate records current and operate in line with corporate law and professional standards.

Tax is separate. A PC is a corporation under state law, but you may choose federal tax treatment (e.g., S or C corporation) after formation. The certificate doesn’t set tax status; coordinate elections with your compensation and ownership plan.

How to Fill Out a Form 203 – Certificate of Formation Professional Corporation

1) Confirm eligibility.

Verify your profession can form a PC and that each owner meets board rules for ownership and control. If using trusts or entities as shareholders, confirm eligibility and conditions.

2) Choose the name.

Include “Professional Corporation” or “P.C.” and ensure distinguishability in Texas. Avoid terms implying unlicensed services. You can adopt an assumed name post-formation if desired.

3) Set duration.

Perpetual duration is standard. Choose a limited term only if your practice has a defined end date.

4) Identify the registered agent.

Appoint a consenting Texas resident or qualified company with reliable procedures for forwarding legal notices.

5) List the registered office.

Provide a Texas street address (no P.O. Boxes). Ensure it matches the agent’s records.

6) State the professional purpose.

Use precise language (e.g., “to practice medicine in Texas”). Avoid broad or unrelated business purposes.

7) Add ancillary purposes if allowed.

Include only supportive, clearly permitted activities directly tied to your professional service.

8) Name initial directors (optional).

If listed, include names and addresses. Many boards expect directors with active licenses. You may alternatively record directors in organizational resolutions.

9) Define authorized shares.

Set the total shares the PC can issue. Choose par or no-par shares to fit your capitalization and accounting approach.

10) Set share classes if needed.

If different rights are required (e.g., voting vs. non-voting), describe each class and its limitations. Ensure alignment with professional ownership rules.

11) Add ownership limits.

Restrict issuance and transfers to eligible owners, with mandatory transfer/redemption on disqualification (suspension, loss of license, death).

12) Include management protections.

Add indemnification and director liability limitations as permitted by Texas law and your board’s rules. Mirror details in the bylaws.

13) Identify the organizer.

Provide the organizer’s name and address. The organizer signs the filing; governance shifts to directors and officers after formation.

14) Choose the effective date.

Immediate effectiveness is common; use a delayed date (up to 90 days from signing) to align with leases, insurance, or payroll.

15) Confirm agent consent.

The form includes a consent statement. Keep separate written or electronic consent in your records.

16) Sign and date.

The organizer signs; no notary required. Follow any electronic signature rules if filing online.

17) Attach schedules.

Use the supplemental provisions to include transfer restrictions, class rights, redemption terms, indemnification, or other governance details.

18) File and pay the fee.

Submit Form 203 with the $300 fee by mail, in person, or online. Retain confirmation and tracking.

19) Keep evidence of filing.

Obtain a file-stamped or certified copy, note the file number and effective date, and store it in your corporate records.

20) Complete post-filing steps.

Get an EIN, adopt bylaws, hold the organizational meeting, issue shares, update banking and insurance, make any tax elections, and register with your licensing board if required.

Legal Terms You Might Encounter (Form 203 – Certificate of Formation Professional Corporation)

• Professional corporation (PC): A corporation formed to render licensed professional services, governed by Texas law and board rules.
• Certificate of formation: The public charter stating name, purpose, agent/office, share structure, and core governance terms.
• Organizer: The filer who prepares and signs Form 203; their role ends after formation.
• Registered agent: A consenting Texas resident or qualified company designated to receive legal notices.
• Registered office: The Texas street address where the agent accepts service of process during business hours.
• Professional purpose: The precise licensed service your PC will provide (e.g., “to practice law in Texas”).
• Authorized shares: The maximum number of shares the PC may issue without amendment.
• Par value vs. no-par: Par value is a stated nominal amount; no-par shares have no stated par.
• Share classes: Stock types with differing rights (e.g., voting vs. non-voting), subject to professional ownership limits.
• Share transfer restrictions: Charter-level limits keeping shares with eligible, licensed owners and addressing disqualification events.
• Indemnification: Permission for the PC to cover certain claims/expenses for directors and officers, as allowed by law.
• Limitation of liability: A charter provision limiting certain director liability within statutory bounds.
• Bylaws: Internal governance rules for meetings, officers, and procedures; must align with the certificate.
• Share ledger: The internal record of shareholders, share issuances/transfers, and restrictions/legends.
• Effective date: The date/time the PC legally exists (upon filing or delayed).
• Organizational meeting: The initial meeting to adopt bylaws, appoint officers, authorize shares, and approve initial actions.

 FAQs (Form 203 – Certificate of Formation Professional Corporation)

Do you have to be licensed to own PC shares?

Generally, yes, subject to your board’s ownership rules.

Must all owners be listed in Form 203?

No. Ownership is recorded internally in the share ledger.

Does the registered agent need to consent?

Yes. Keep written or electronic consent with your records.

Do you need par value?

No. You may authorize par or no-par shares; choose what fits your plan.

How detailed should the purpose be?

Concise and specific to your licensed service; avoid broad purposes.

Are the bylaws filed with Form 203?

No. Adopt bylaws after formation and keep them with your records.

Should you delay the effective date?

Only if coordinating leases, insurance, payroll, or launch timing.

Who signs Form 203?

The organizer. Shareholders need not sign, and no notary is required.

Can one person own and manage a PC?

Yes, if licensed and consistent with board rules.

Can a PC offer multiple professional services?

Only as authorized by your board, usually a single profession.

May a trust or entity own shares?

Only if permitted by your board and subject to restrictions.

What if a shareholder loses their license?

Transfer/redemption provisions should require timely disposition.

Are share certificates required?

No. Texas allows certificated or uncertificated shares with proper notices.

How do you change the registered agent/office?

File a change with the Secretary of State after consent.

Are there ongoing reporting/tax obligations?

Yes. Calendar state filings and tax deadlines.

Can a PC elect S corporation tax status?

If eligible, yes—make the federal election after formation.

How long does filing take?

It varies. Consider expedited service if you have a firm launch date.

Is publication required?

No. Focus on acceptance and any board-related registrations.

Checklist: Before, During, and After the Form 203 – Certificate of Formation Professional Corporation

Before signing:

• Confirm eligibility and any board pre-approvals or name requirements.
• Lock the legal name with the correct PC suffix; prepare a precise purpose.
• Obtain registered agent consent and confirm a Texas street address.
• Decide on directors to list (if any) and set authorized shares and classes.
• Draft transfer restrictions, disqualification remedies, and any indemnification/liability language.
• Choose the effective date and align with leases, insurance, and payroll.
• Outline capitalization, bylaws, officer roles, and any planned tax election.

During signing:

• Verify name, purpose, agent, office, and share terms for consistency.
• Include ownership limits and transfer/redemption mechanics.
• Reference and attach all supplemental schedules properly.
• Confirm signatures, dates, and filing fee/payment method.

After signing:

• File Form 203 and retain confirmations.
• Obtain a file-stamped/certified copy; record file number and effective date.
• Hold the organizational meeting; adopt bylaws; appoint officers; issue shares.
• Create and maintain a records set: charter, agent consent, resolutions, bylaws, and ledger.
• Secure EIN, banking, insurance; update vendors and counterparties.
• Register with your licensing board if required; update individual license records.
• Calendar ongoing state, tax, and license renewals; finalize any shareholder/buy-sell agreement.

Common Mistakes to Avoid Form 203 – Certificate of Formation Professional Corporation

• Omitting the required PC designation in the name.
• Using an overly broad or mixed business purpose.
• Failing to include licensed-owner transfer restrictions.
• Listing a P.O. Box for the registered office.
• Inconsistencies in share counts, par/no-par, or class rights.
• Filing without registered agent consent.
• Misaligning the effective date with contract or insurance start dates.
• Skipping indemnification/liability provisions where appropriate.
• Not addressing loss-of-license or other disqualification events.
• Mixing professional and non-professional activities in one entity.
• Neglecting organizational steps and corporate records post-filing.
• Using share classes to evade ownership/control rules.

What to Do After Filling Out the Form 203 – Certificate of Formation Professional Corporation

1. File promptly: Submit the signed Form 203 with the fee. If you chose a delayed effective date, avoid acting as the PC before that date.
2. Track acceptance: Record the file number, file-stamped date, and effective date. Save certified/file-stamped copies.
3. Align internal documents: Adopt bylaws and organizational resolutions that mirror the charter’s restrictions and governance.
4. Inform stakeholders: Share the filed certificate and resolutions with owners, directors, and your agent. Update landlords, lenders, insurers, payroll, and vendors.
5. Correct if needed: File corrections or amendments for errors or changes (agent, office, share structure), and update internal records accordingly.
6. Build compliance rhythms: Calendar state filings, franchise/tax deadlines, license renewals, and insurance renewals. Set procedures for preclearing ownership transfers for eligibility.
7. Operationalize: Obtain an EIN; open bank and merchant accounts; set up payroll; enroll benefits; update tax profiles; file assumed name certificates if applicable.
8. Issue shares: Authorize issuances, collect consideration, record in the ledger, and deliver certificates with legends or required written notices for uncertificated shares.
9. Coordinate with your licensing board: Complete any entity registration or approval. Keep name/structure approvals with corporate records.
10. Plan governance and succession: Finalize a shareholder or buy-sell agreement addressing deadlock, valuation, and disqualification triggers, consistent with the charter and bylaws.
11. Review insurance: Ensure professional liability names the PC as appropriate; align general, cyber, EPLI, and other coverages with your effective date.