New York PLLC: Everything You Need to Know
Understanding the laws governing a New York PLLC is important if you are forming a professional business in New York. 3 min read
2. New York PLLCs
Updated June 25, 2020:
Understanding the laws governing a New York PLLC is important if you are forming a professional business in New York. A PLLC, or professional limited liability company, is a special kind of limited liability company designed with the needs of various professional occupations in mind. When you are looking to set up a practice in a profession in New York, you should carefully consider whether creating your own PLLC is a good idea for you.
LLCs and PLLCs
A regular limited liability company is a way for a business to gain advantages in liability situations without going to the complication and expense of forming a corporation. An LLC allows the income of its members to “pass through,” counting as personal income from self-employment on their yearly state income taxes, much as a sole proprietorship would. But the LLC also counts as a legal person for liability purposes, and legal actions taken against the company must only take into account the assets of that company.
LLC status is granted state by state, and thus has no effect on federal tax liability; as far as the IRS is concerned, the company will be another kind of company, depending on how it is filed. Some LLCs will elect to file as sole proprietorships or partnerships, while others might want to be taxed as one of the types of corporation.
PLLCs are geared for groupings of people in professions like medicine, architecture, or law. The main difference between an LLC and a PLLC is how the company handles malpractice claims. A PLLC holds each member separately responsible for their own malpractice claims. While a member will not be held liable for the malpractice of another member, they are personally liable for their own malpractice, and their personal assets are on the table in any settlements or penalties involved. Though this seems intimidating, it is generally better than a generic partnership, which might hold all members liable for the deeds of one.
Note that supervisors in a PLLC might be liable for the malpractice of those under their direct supervision.
New York PLLCs
The first thing to note about New York PLLCs is that they are not called PLLCs. Instead, they are called professional service limited liability companies, or PSLLCs. The difference here is mostly cosmetic, though; whatever the state refers to the company type as, the effects are similar enough to the PLLCs of other states to make the comparison accurate. Other factors involved with the New York PSLLC include:
- In New York, people in licensed professions of certain sorts outlined under the Education Law cannot practice together with non-licensed people, making the regular LLC not an acceptable way to organize the company.
- Those filing the PLLC must be licensed to practice the occupation in question, and the company must be managed by those with the proper licensing as well. This licensing will be checked by the state board.
- A New York PSLLC needs to have a certificate of incorporation prepared and submitted for verification at the State Education Department and the Secretary of State, as well as possess articles of formation. There are also fees to pay.
- The company will need a name that meets the naming requirements, including a form of the abbreviation for the company status at the end of the name.
- The PSLLC can form leases and contracts as long as those things are involved in the practice of the company's business.
- A PSLLC cannot engage in business activities beyond the scope of the specific remit of its profession.
- You will need an operating agreement for your PSLLC, and you are required to publish the articles of the company in two newspapers in the area it is based in for six consecutive weeks.
If a business owner does not want to file their professional company in New York as a PSLLC, they will need to instead file as a Professional Corporation (or PC), Design Professional Corporation (or DPC), or a Limited Liability Partnership (or LLP). Each of these types of organizations have their own requirements and advantages, and you'll probably want to at least find out about what those requirements and advantages are before you make your choice.
If you need help with setting up a New York 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.