Do you have a profession that requires state licensing, such as being a lawyer or accountant? A licensed professional needs to incorporate their business as either a professional limited liability company (PLLC) or a professional corporation (PC).
PLLCs and PCs differ a bit from standard LLCs and corporations. These are more specialized entity formations. Incorporating as a PLLC or PC requires proof that the individual is a licensed professional. This includes information about their current occupation and their specific services.
What does it mean to incorporate as a professional LLC or a professional corporation? Let’s take a look at what all is involved in the process.
Forming a Professional LLC
How does a PLLC differ from an LLC?
Much like an LLC, a professional LLC (PLLC) also separates personal and professional assets with limited liability protection. A PLLC also has the ability to limit personal liability for claims that are related to the negligence of partners, including errors or malpractice. This is especially helpful in LLCs that have several partners. Under PLLC legislation, the partner that formed the PLLC is not held personally responsible for the partners’ claims.
Who can form a PLLC?
Licensed professionals across a wide variety of industries may form a PLLC. Here are some examples of professions that require state licenses.
- Doctors. These include nurses, physical therapists, chiropractors, acupuncturists, optometrists, podiatrists, pharmacists, and physician assistants.
- Marriage, family, and child counselors may also form PLLCs.
- Psychologists and social workers.
What should I know about forming a PLLC?
Before you can file as a PLLC, you must first check in with your local Secretary of State to determine if the state has authorized PLLCs. Not every state provides PLLC legislation, so it’s a good idea to check first to see if your state does prior to starting the filing process.
Incorporating as a Professional Corporation
How does a PC differ from a corporation?
A professional corporation is designed to protect licensed professionals and their personal assets. Similar to LLCs and PLLCs, a PC and corporation have limited liability protection in common. This creates a separation between the owner’s professional and personal assets and those assets belonging to the business.
Professional corporations are ideal for businesses that have several partners. A partner that incorporates as a PC is protected from any malpractice that may impact other associates in the practice. Those associates that have not incorporated as a professional corporation do not receive the same type of protection.
Who can form a PC?
This is a fairly similar list to the licensed professionals that may form a PLLC. Occupations that require state licenses in the following fields may form a PC.
- Doctors, physicians, and license professionals in medical services.
- Lawyers, legal services, and legal representation.
- Accountants and other professionals in financial services.
What should I know about forming a PC?
Much like forming a PLLC, you need to check in with your local Secretary of State prior to filing as a PC. This is to ensure that state law has authorized the professional corporation structure.
If your state of formation does authorize PCs, you’ll need to provide relevant proof of your licensed profession. This proof is fairly easy to share. For example, it may include your state license within your present professional occupation. Additionally, you may be asked to provide a certificate of good standing and any other types of proof requested by the Secretary of State. Once you have the proper proof in place, you may file to form a professional corporation.