The Professional Corporation—Has the Death Knell Been Sounded?

The favorable tax reasons for incorporating a professional practice have been substantially reduced by the Tax Equity and Fiscal Responsibility Act. The retirement benefits of the professional corporation have effectively been eliminated by TEFRA. In addition, the new allocation of income powers provided by TEFRA may have eliminated the tax incentive for forming a professional corporation. The professional's decision whether to incorporate his practice will now rest with his desires as to how he wishes to carry out that practice.

This article discusses the changes that TEFRA has wrought, and its impact on the professionals' decision to incorporate.