California PLLC: Everything You Need to Know
A California PLLC is one of several ways that you can set up a new enterprise in the state. 4 min read
2. What Is a California PLLC?
3. How Is a PLLC Formed?
4. California PLLCs and Liabilities
5. Other Similarities Between PLLCs and LLCs
6. PLLCs Versus PCs
7. PLLCs and S Corporations in California
A California PLLC is one of several ways that you can set up a new enterprise in the state. PLLC stands for professional limited liability company, and this structure offers the same liability protections and tax benefits as an LLC. Highlighted below are details about forming a PLLC in the state and other requirements for establishing this type of business.
What Type of Entity Should You Form?
Entrepreneurs have many options when setting up a new company. Even among LLCs and corporations, there are several choices, including:
- A traditional corporation (Inc.)
- A professional company (P.C.)
- A limited liability company (LLC)
- A professional limited liability company (PLLC)
- A limited partnership (L.P.)
- A general partnership (G.P.)
- A limited liability partnership (L.L.P.)
- A limited liability limited partnership (L.L.L.P.)
In addition to these choices, you'll find several other ways to create a business entity depending on the industry you're in.
You must pick one of these types for your business, but this choice is extremely important. Every business type must comply with a unique set of tax rules and legal obligations. This means that every business structure has its own pros and cons and that thorough research is required to ensure you pick the best entity type for your commercial goals and the size of your enterprise.
An attorney who specializes in setting up a business can help you pick the right structure for your company. Consider consulting with one of these professionals if you need help creating your company.
What Is a California PLLC?
A PLLC is a type of LLC. This business structure offers the same benefits and drawbacks as a general LLC.
LLCs in California can't provide professional services. Instead, these companies must be registered as PLLCs. Certified public accountants, attorneys, and architects, for example, require licenses to run their own businesses and must establish their operations as PLLCs.
California law regulates how PLLCs in the state can be set up and how they must operate. Check these rules to determine whether your business can form an LLC, whether it must form a PLLC, and what other requirements your enterprise must meet to open its doors in California.
How Is a PLLC Formed?
File your business's Articles of Organization with the state to form a PLLC in California. After confirming your license status, the state will approve your application if it meets all other requirements. You'll also need to register a name for your company that ends with “PLLC.”
California PLLCs and Liabilities
PLLCs offer the same liability protections as LLCs.
For a PLLC that has several licensed members, each individual specialist is protected from the liability of the other members. This means that if one physician is sued for malpractice, the other physicians in the PLLC are protected. Also, if the company is sued or declares bankruptcy, the individual members' assets are protected.
There are some exceptions, however, when the individual members may be held liable for the business's operations. A consultant or PLLC attorney can answer any questions you have about liability and help you determine whether this business structure is right for you.
Other Similarities Between PLLCs and LLCs
PLLCs and LLCs share the liability protections mentioned above. These business structures in California have some other qualities in common as well.
For instance, the individual members must draft and agree to an operating agreement. This document clarifies the responsibilities of each member and how the company will proceed in certain circumstances, such as dissolution, adding more members, or converting to another business type.
LLCs and PLLCs also share some tax perks. For both entity types, only the individual members need to file an annual report based on their adjusted gross income. Unlike a corporation, the business itself isn't taxed based on its total profits and expenses.
PLLCs Versus PCs
Only licensed professionals who want to offer services in California can establish a PLLC or PC. However, a PC is taxed as a corporation, whereas a PLLC is taxed like an LLC.
PLLCs and S Corporations in California
Entrepreneurs can take advantage of some of the perks of a corporation while still enjoying the liability protections of a PLLC by forming an S corporation. Only certain states allow a business to form an S corporation. This offers excellent protections and more options for attracting investors. Unfortunately, PLLCs in California can't form an S corporation.
If you need help setting up a California PLLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.