Last Updated on April 4, 2022 by azamqasim
A Professional Limited Liability Company (PLLC) is a form of Limited Liability Company that’s also operated & owned by the individuals who make up the PLLC’s board of directors and officers. These individuals are referred to as members, and they are all members of the same profession, such as attorneys, accountants, or physicians, and they are only permitted to provide services that are connected to their licensed specialty.
A Professional Limited Liability Company (PLLC) is regarded as a legitimate business organization, and one of the features that makes it desirable to professionals is that it may provide tax benefits in addition to the protection of a limited liability company. Despite the fact that a Professional LLC in New York is comparable to a Limited Liability Company (LLC), it cannot give the same level of liability protection as a normal Limited Liability Corporation.
PLCs also do not have the flexibility to provide as numerous services as an LLC and are only permitted to provide a limited number of services inside the same firm.
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WHO IS ELIGIBLE TO FORM A PLLC?
A PLLC can only be formed or managed by a licensed professional. Another way to put it is that if your state needs you to obtain a license in order to perform your profession, you must register a Professional Limited Liability Company (LLC). If you really are providing medical services, including selling medical supplies outside of New York, you must incorporate a distinct, non-professional LLC or company. In general, the LLC can only be run to offer professional services (with several exceptions, most notably in New York).
In order to avoid conflicts of interest between attorneys, dentists, accountants, and others, Texas legislation requires that each organizer hold the appropriate licenses, permits, and/or other types of professional permission required by the state. In spite of the fact that it is common and anticipated for “professionals of the same feather to flock together,” the law allows for a small amount of intermingling under some professional umbrellas, so long as the services are regarded as only ‘ancillary’ to the primary practice.
Physicians, for example, are not obligated to form a group with other doctors who practice in the same profession as they are. Texans will not be prohibited from joining groups of doctors that have comparable practices in the areas of prescription, surgery, therapy, and other services. As an example, architects and engineers could be allowed to band together under the same limited liability company (PLLC). The exception, on the other hand, is limited in scope. Because the professional services provided by a lawyer and a dentist are so dissimilar, they cannot create a PLLC together.
WHAT ARE THE REQUIREMENTS FOR FORMING A PLLC?
Vary from state to state, and a PLLC will be required to demonstrate that the Members, as well as any Managers, are lawfully licensed to practice their respective professions. To incorporate a business in some states, authorization from the appropriate licensing authority must first be sought prior to incorporation. It will also need to have an acceptable name (which would generally include the profession that will be practiced) as well as a corporate indication, such as LLC or PLLC, to be recognized.
WHAT IS THE PROCEDURE FOR FORMING A LIMITED LIABILITY COMPANY?
The method for forming a new PLLC is the same as the procedure for forming a new LLC, with a few additional stages that differ significantly from one state to the next. In every state, a search for the availability of a corporate name, as well as the drafting and filing of articles of formation, are necessary. PLLC filings in some states (such as New Jersey) are as simple as listing the licensed professional’s name, address, and license number on the certificate, whereas a more bureaucratic state (such as New York) requires the certificate of incorporation to be prepared first, then submitted to the State Education Department for license verification (with the payment of a fee, of course), accompanied by a filing with the Secretary of State, then obtaining a certified PLLC filing. Once the Professional LLC in New York is formed, it should establish a proper operating agreement, receive a federal Employer Identification Number (EIN, also known as a federal tax identification number), open a bank account, and begin conducting business as soon as possible.
Besides liability protection, a Professional Limited Liability Company offers a variety of other advantages. If a professional is in a Professional Limited Liability Company with some other fellow professional and that colleague expert is sued for negligence or misbehavior, the former expert will not be held personally liable for his or her fellow professional’s malpractice, as would be the case if the two professionals were all in a partnership, as would be the case if the two professionals were in a partnership.
The parties to the agreement will be individually responsible for the misconduct of their partners if the partnership is owned by a group of professionals.
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