What Is a Pllc Business

PLLCs and professional enterprises (PCs) are similar in that only professionals can own them. States have similar requirements for both types of business entities, including reviewing business owner licenses and state boundaries to find out what types of professionals can form a PLLC or PC. A professional limited liability company (PLLC) is a corporate structure that provides personal asset protection to business owners in licensed professions such as medicine and law. Only recognized in some states, PLLCs are subject to the same laws as regular LLCs. However, the Licensing Board must review each owner`s professional license and approve the PLLC organization`s bylaws. If you are a licensed professional and plan to open your own office, alone or with other professionals, you will need to determine if your state restricts how you can structure your business. You may find that you need to form a PLLC and not a standard LLC. Your LLC cannot function without a registered representative. Find out what a registered agent does and how to find one for your LLC. When you start a new business, you will need to choose a name that can be used in your state and that does not infringe on another company`s trademark. The most important license for PLLC is the professional license that the state licensing authority issues for your profession. Each owner of the PLLC must be licensed to practice the specific profession that the business will offer.

However, there may be additional business licenses or zoning licenses that you need to apply for before you can work. Cities and counties usually issue business licenses. A limited liability company (LLP) is another business structure available to companies that need licensed professionals. PLLs require at least two members and offer the same liability protection as PLLCs. Unlike PLCs, PLLs are available in all 50 states. As with a regular LLC, PLLC owners are immune from personal liability for business debts and disputes and are not liable for misconduct by their business partners. However, they are personally responsible for all claims made against them for their own misconduct. If a physician makes a medical error, the patient can sue the physician and claim the physician`s personal property. For this reason, it is very important for plLC members to take out professional liability insurance, commonly known as professional misconduct insurance.

Several states recognize PLLC as a special type of LLC for licensed professionals — such as lawyers, accountants, physicians, and architects. Licensed professionals can also create other types of business units. For example, some states allow professionals to form limited liability companies (LLP), and others recognize an entity called a professional corporation (PC). The Secretary of State or the Enterprise Reporting Authority in your state can tell you more about the rules applicable to professional enterprises in your state. For U.S. federal income tax purposes, an LLC is treated as a default transmission entity. [24] If there is only one member in the corporation, the LLC will be treated as an “unaccounted entity” for tax purposes (unless a different tax status is chosen), and an individual owner will report the LLC`s income or loss on Schedule C of their individual tax return. Thus, the LLC`s income is taxed at individual tax rates. The default tax status for multi-member LLCs is that of a partnership that must report income and losses on IRS Form 1065.

As part of the partnership`s tax treatment, as is the case for all partners in a partnership, each member of the LLC receives an annual Form K-1, which specifies the member`s distribution share of the CLL`s income or loss, which is then reported on the member`s individual`s tax return. [25] On the other hand, corporate income is taxed twice: once at the company level and once at distribution to shareholders. Thus, there are often more tax savings when a corporation is founded as an LLC and not as a corporation. [26] Many entrepreneurs create LLCs because this business structure offers limited personal liability to owners. A creditor of the company cannot search for the personal property of an owner. If an owner of an LLC makes a mistake or acts negligently, the other owners cannot be held personally liable. Other advantages of LLCs include control flexibility and relatively low installation costs. If your business operates in an industry that requires a professional license, check with your state to see if a PLLC structure is required for your business. Otherwise, there is very little difference between the formation of a PLLC and an LLC – except for the additional step that PLLCs must take to obtain approval from the licensing authority of the profession.

In states that allow PLLCs, there are also advantages to forming one rather than forming a simple partnership. To form a PLLC, a licensed professional must sign all submission documents, as well as provide their professional license number and a certified copy of their license. It is important to note that they must submit these documents to their State Authorization Committee for approval before submitting them to their State Secretary of State. Some states require licensed professionals to form PLLCs, while others allow them to choose between an LLC or PLLC business structure. Remarkably, some states do not offer PLLC at all. Many professionals form a PLLC because they want to separate their individual responsibility from their responsibility as a member of society or practice. For example, if one doctor is sued for professional misconduct, the other doctors do not want to be sued as well. The formation of a PLLC protects owners from the liability of other owners in the event of misconduct.

Like an LLC, the PLLC creates a separation between the individual owners and the business. But there is a very important distinction. You remain personally responsible for claims of misconduct related to your own actions. For this reason, you need to have a good malpractice insurance policy, even if you form a PLLC. However, a PLLC usually protects you from personal liability for the company`s debts, as well as from the misconduct of other owners within the company. Our small business experts can help you every step of the way. First, we make sure your company needs to file a PLLC in your state. Then we will help you obtain the necessary permits and submit your documents.

In order for a lawyer to form a PLLC, he must file organizational articles with his state`s Department of Economics. It is a basic document that includes the name of its company, its address and the names of its member or owner lawyers. Some states require PLLCs to also establish an operating agreement detailing how finances are managed and interest is allocated, as well as the rights and obligations of each member. Lawyers must also ensure that they are licensed by their state bar and have obtained any other business permits that their state needs. PLLC members are not personally liable for commercial debts and disputes, such as.B. unpaid office rents. An LLC is a hybrid corporation that combines a corporation`s liability shield with the tax benefits of a partnership. However, some states do not allow people with a professional license, such as doctors, lawyers, or engineers, to form an LLC. Instead, these people have to form PLLCs. A LLC has the same legal structure as an LLC. However, the state licensing board must review the licenses of all owners of a PLLC and approve its formation.

After the creation of a PLLC, it is important to maintain limited liability for the owners by treating the company as a separate legal entity. This means getting a separate business bank account, a credit card only for business purposes, and tracking the company`s finances separately from an owner`s personal finances. In most states, professionals have the opportunity to start other types of businesses in addition to a PLLC. Here`s how PLLCs compare to other business units: A handful of states, including California and New York, require LLLs and PLLCs to create an operating agreement. Even if your state doesn`t need one, it`s wise to have one, especially if your PLLC has multiple owners. This document provides a blueprint for the day-to-day operations of your PLLC and summarizes each owner`s contributions to the business and their share of the profits. Without an operating agreement, a PLLC could easily fall victim to disagreements between the owners. If you are a licensed professional, you may have been advised to form a professional limited liability company or PLLC. Before you begin your practice, make sure you understand LLCs and how they differ from LLCs and other business structures.

An LLC also allows the company to choose how it is taxed. A single-member LLC can be taxed either as a sole proprietorship or as a corporation. Similarly, an LLC with two or more members can be taxed either as a partnership or as a corporation. Whichever structure you choose, make sure you understand all the legal requirements before you register your business. A limited liability company (LLC) is a registered business entity that offers owners the limited liability protection of a corporation and the direct taxation of a sole proprietorship or partnership. LLCs give business owners the flexibility to shape the business, its profit allocation, and its tax structure to meet a variety of needs and goals. .