How to Form and Operate a PLLC in Michigan

Key Takeaways

• A Michigan PLLC allows licensed professionals to operate under a limited liability company structure with legal protections.
• Only licensed individuals can be members of a Michigan PLLC, and all must be licensed in the same profession unless otherwise permitted.
• Filing Articles of Organization with LARA is required, and certain naming conventions must be followed.
• PLLCs must comply with specific restrictions and may need to register for taxes, obtain an EIN, and meet annual reporting obligations.
• Differences between an LLC and PLLC include the licensing requirements and the scope of permitted business activities.
• A PLLC can still provide liability protection and tax flexibility while complying with professional regulations.

A Michigan PLLC refers to any limited liability company that is formed by founders who intend to provide licensed professional services in the state of Michigan.

Any licensed professional in the state of Michigan can structure their business as a Michigan PLLC. This provides protection from multiple types of liability. Structuring your business as a PLLC may also allow you to enjoy various tax advantages that you wouldn't get if you had developed your business with a different structure.

One advantage of structuring your business as a PLLC is that PLLCs protect the individual owners from claims for most types of personal injuries and financial debts.

Michigan law often uses the terms "professional service limited liability company" and "professional limited liability company" interchangeably. 

In general, any individual that state law requires to have legal authorization in the form of a Michigan license before they are allowed to provide professional services is eligible to create a Michigan PLLC. 

A "licensed person" refers to an individual who is legally authorized or licensed to practice a professional service by a department, court, commission, board, a state agency, or any other jurisdiction. A PLLC can be considered a licensed person if all the managers and members are also licensed persons.

A PLLC is able to invest its funds in mortgages, real estate, bonds, stocks, and other forms of investments. A PLLC can also own personal or real property needed for providing professional services.

A PLLC is able to become a partner for partnerships according to §§ 449.1 to 449.43 of the Compiled Laws of Michigan. If the partnership and the PLLC provide the same professional services, the PLLC is able to become a partner. A PLLC is also able to become a manager or member of another PLLC.

What is a Professional Service?

According to Michigan's LLC Act, the following professionals can perform professional services:

• Chiropractors
• Dentists
• Veterinarians
• Certified public accountants
• Optometrists
• Veterinarians
• Surgeons

The term professional service refers to any form of personal service provided to the public that requires that the professional providing the service obtain a license or another form of legal authorization.

The state of Michigan permits professionals like attorneys, accountants, and physicians to create professional limited liability companies (PLLC).

How Do I Form a Michigan PLLC?

In order to form a Michigan PLLC, every professional member of your company will need to have a state license for rendering professional services.

Refer to the state licensing board that deals with your profession to determine whether prior approval is needed. If prior approval is needed, you will need to obtain a set of documents indicating this approval.

You must file the Articles of Organization with the LARA to form a PLLC in Michigan. The Articles of Organization should include details about the professional services you want your PLLC to provide to customers.

One or more professionals with an appropriate license can organize and become owners of a PLLC.

The Articles of Organization need to state that the company was formed to provide certain professional services.

Articles of Organization for PLLCs

Form CSCL/CD-701 is a blank Articles of Organization form that you can download. This form is intended for PLLCs rather than LLCs. You can find this document on the LARA website.

The format of the form is a fillable PDF in which you can easily type in all of the required information. However, after typing in all of the information, you will need to print the form out to sign it.

The filing fee for the PLLC articles of organization is $50. The articles of organization can be filed by mail or email.

Naming Restrictions

Michigan requires that the name of a PLLC contain an abbreviation of "professional limited liability company" to indicate that the business is a PLLC. Abbreviations can contain periods and other punctuation but it is not a requirement.

Service and Membership Restrictions

Michigan PLLCs are able to provide professional services in several professions as long as the combination of professions is not prohibited by state law. To offer professional services corresponding to more than one profession, there must be one member or manager with a relevant license for each professional service provided.

When to Choose a PLLC Over an LLC in Michigan

A PLLC is typically required when your profession is regulated by a Michigan licensing board and you plan to provide services directly to the public. Consider forming a PLLC if:

• Your profession requires a state license (e.g., attorney, physician, architect).
• You want to limit liability related to your business while maintaining professional responsibility.
• You are forming a business with other licensed professionals.

If your business does not require licensing or involves general services or products, a traditional LLC may be more suitable due to fewer restrictions and more flexibility.

Common Mistakes to Avoid When Forming a PLLC in Michigan

When creating a Michigan PLLC, be sure to avoid these common pitfalls:

• Improper Naming: Failing to include the proper designation like "PLLC" or using a name that implies unlicensed services can result in rejection by LARA.
• Omitting Licensing Information: Not verifying that all members hold current licenses in their professions can invalidate the business structure.
• Incorrect Filing Forms: Using a standard LLC form rather than the professional Articles of Organization (Form CSCL/CD-701) can delay approval.
• Ignoring Annual Filings: Missing the annual statement filing deadline could cause your PLLC to fall out of good standing or be administratively dissolved.
• Overlooking Local Requirements: Even if your PLLC is registered with the state, your city or county may require a business license or zoning approval.

Advantages of a PLLC in Michigan

There are several benefits to forming a PLLC in Michigan:

• Limited Liability Protection: Like a standard LLC, a PLLC protects individual members’ personal assets from business debts and claims.
• Malpractice Protection Among Members: While a PLLC doesn’t shield members from personal malpractice, it does prevent liability for malpractice committed by other members.
• Tax Flexibility: PLLCs can choose to be taxed as a sole proprietorship, partnership, or corporation, offering planning opportunities based on income and business size.
• Credibility: Clients may perceive a PLLC as more professional and established, especially in fields like healthcare, law, or financial services.
• Investment and Property Ownership: A Michigan PLLC can own property, make investments, and even partner with other entities, provided it stays within the scope of its professional services.

PLLC vs. LLC in Michigan: Key Differences

While both PLLCs and LLCs offer liability protection and flexible tax options, the key distinctions lie in eligibility and permitted activities:

In Michigan, professionals such as doctors, lawyers, accountants, and engineers must use a PLLC if they want an LLC-style structure for their licensed services.

Taxation and Regulatory Requirements for Michigan PLLCs

After forming your PLLC in Michigan, additional compliance steps are necessary to operate legally:

• EIN (Employer Identification Number): Most PLLCs must obtain an EIN from the IRS, even if they don’t have employees, especially if the PLLC will have more than one member or needs to open a business bank account.
• State Tax Registration: Depending on your services and business structure, you may need to register for Michigan business taxes such as sales tax, use tax, or withholding tax.
• Annual Statement Filing: Michigan PLLCs must file an annual statement with the Department of Licensing and Regulatory Affairs (LARA). This filing is due by February 15 each year and includes a $25 fee.
• Business Licenses or Permits: In addition to professional licensure, your PLLC may need local or state business licenses or permits, especially if you have a physical office or specific industry requirements.

Maintaining compliance with these ongoing obligations is crucial to keeping your PLLC in good standing.

Frequently Asked Questions

1. What professions require a PLLC in Michigan?
   Professions like law, medicine, accounting, and engineering typically require forming a PLLC if the business will offer licensed services.
2. Can I form a Michigan PLLC with professionals from different fields?
   Only if Michigan law allows it and the PLLC has at least one member licensed in each field being practiced.
3. Does a Michigan PLLC protect me from malpractice claims?
   You are protected from the malpractice of other members, but not from claims related to your own professional actions.
4. How much does it cost to form a Michigan PLLC?
   The filing fee for Articles of Organization is $50. Other costs may include licensing fees, business permits, and annual reporting fees.
5. Can a Michigan PLLC be taxed as an S Corporation?
   Yes. A PLLC can elect to be taxed as an S Corp by filing IRS Form 2553, provided it meets all eligibility requirements.

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