Limited liability corporations (LLCs) benefit from limited liability protection since they are structured as distinct legal entities from their owners. They are a suitable solution for liability and tax reasons when launching a firm or operating a small business.
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What Is the Difference Between an LLC and a PLLC?
A professional LLC (PLLC) is a form of LLC for licenced professionals that solely provide services in their field, such as attorneys, architects, or medical care practitioners. Except for a few additional procedures in the Articles of Organization filing process, a PLLC is almost identical to an LLC.
A licenced professional must sign all filing paperwork and submit their professional licence number and a certified copy of their licence in order to create a PLLC. Importantly, businesses must first submit these papers to their state licencing board for approval before submitting them with their state’s secretary of state. Some states compel licenced professionals to create PLLCs, while others allow them to choose between an LLC and a PLLC. Notably, some states do not permit the use of PLLCs at all.
While PLLCs provide limited liability protection, they do not provide malpractice protection for professionals.
PLLC State Requirements
While each state has its own set of rules for PLLCs, the following are some basic requirements for most, if not all, states:
Qualifying Professions: Licensed professionals in the following professions may form a PLLC in states allowing PLLCs: lawyers, engineers, doctors, dentists, accountants, architects, clinical social workers, psychologists, acupuncturists, chiropractors, marriage and family therapists, nurses, optometrists, physical therapists, and veterinarians. Some states may permit PLLCs for other professions, so check with your state first.
Proof of Licensing: You’ll often need to demonstrate that you and the other members of your PLLC have a valid professional licence.
Industry Rules: Your PLLC may also be required to follow industry regulations. Doctors and dentists, for example, should verify with their state licencing board.
Company Name: If your state permits PLLCs, your company’s name must normally contain “PLLC”, “P.L.L.C.”, “PLC”, or “P.L.C.” Different states may permit different acronyms, so verify with your state.
Articles of Organization: Before you may create a PLLC, the state licencing body for your profession must approve your Articles of Organization. Once your Articles of Organization have been approved by the licencing board, you may submit them with your state’s secretary of state.
Members: Not all states need all PLLC members to be licenced professionals. Some merely need the organising member of the PLLC to be a licenced professional.
Check your state’s criteria first, including which professions may create a PLLC in your state and if your state mandates a PLLC structure for enterprises in your field. Following that, you’ll need to get and complete all of the necessary documents in order to submit your Articles of Organization with your state’s secretary of state. You must collect information confirming that you and the other members of your PLLC are qualified professionals before submitting those forms with the secretary of state.
As previously said, not all states need all members to be professionals; thus, verify with your state. Your state licencing board must then approve your Articles of Organization. You may submit all of the paperwork with the secretary of state after the state licencing board has authorised them.
Liability Separation from Your Company and Coworkers
PLLCs, like LLCs, benefit from limited liability protection as well as debt protection. While PLLCs do not shield members from their own mistakes, they do protect them from the mistakes of their employees and other members.
What Is the Difference Between a Partnership and a Limited Liability Company?
Partnerships and PLLCs are comparable in many respects, with multi-member PLLCs being taxed similarly to partnerships. However, there are several significant differences:
The most significant distinction between a partnership and a PLLC is liability protection. While PLLC owners have limited liability protection, partners in a partnership are individually accountable for the partnership’s obligations as well as the activities of other partners.
Limited Liability Partnership: Limited Liability Partnerships are permitted in several states. Because of this corporate structure, all partners are accountable for the company’s debts but not necessarily for the activities of other partners.
Forming a Partnership or a PLLC is as simple as submitting Articles of Organization with your state’s secretary of state. A partnership may also be formed via less formal methods, such as a verbal agreement.
Because not all partnerships are created with the state, there are fewer formalities and requirements governing record-keeping for non-state partnerships.
Taxation through Pass-Through
PLLCs, like LLCs, benefit from pass-through taxes. This implies that any revenue or loss is not taxed at the corporate level, but rather “passes through” to individual members and is taxed at their personal tax rate.
Summary
Whether your firm works in an industry that needs a professional licence, check with your state to determine if a PLLC structure is required. If not, the only difference between creating a PLLC and an LLC is the additional step PLLCs must take to get permission from the profession’s state licencing body. There are benefits to joining a PLLC rather than a normal partnership in states that allow them.