1. What Is An LLC?
2. PPLCs vs LLCs

A PLLC lawyer is a legal professional who is a part of an organization that allows them to work with others while maintaining liability protection from the deeds of others. A PLLC, or a professional limited liability company, is a highly-specialized version of the regular limited liability company, or LLC. But unlike a normal LLC, the laws governing a PLLC function in ways specifically designed for how liability affects people working in professions like medicine or law. By joining up with or starting a PLLC, a lawyer can set themselves up for professional success.

What Is An LLC?

There are many ways to set up a business. The simplest is the sole proprietorship or partnership, in which the business is owned wholly by one person or a small group. These companies have a serious problem when it comes to liability, because the business is treated as an extension of the owners, leaving the owners' assets as fair game when legal penalties are assessed against the business.

A corporation, on the other hand, is owned by a group of people, called shareholders, who hold certificates entitling them to a certain ownership percentage. A corporation counts as a legal person, and as such has to be sued separately from the shareholders, but pays a separate corporate tax and is unduly complicated for certain business types.

Limited liability companies are a state level company organization status wherein the company gets some of the liability protection of a corporation without having to file as one. The LLC is its own legal person, but allows its income to “pass through” to the owners, thus evading the corporate tax and double taxation. Since the LLC is a local status, the company will need to file separately for the IRS for federal purposes, as a sole proprietorship, partnership, or a kind of corporation. LLC laws also vary a bit from state to state; some states may be more advantageous to file some kinds of LLCs in than others.

PPLCs vs LLCs

As mentioned above, a PLLC is a specific form of an LLC tailored to the needs of professional groups like an architecture company or a law firm. Such companies have some significant differences from a standard LLC, especially around the practice of law.

  • A PLLC's liability limitation is far more specific, protecting members of the PLLC from liability for the actions of another in the company but offering no liability shield for the malpractice of the member. In essence, each PLLC member is liable for their own actions and not those of others in the company — unless, of course, a particular case involves the actions of several members at once. This contrasts with partnerships, in which all partners are liable for the malpractice of all other partners. As a result, members of PLLCs will probably need to carry malpractice insurance to make sure they can meet their legal obligations.
  • Some states require that professionals, often defined as those in occupations requiring professional licensing, form PLLCs to create certain kinds of businesses, like law firms. This varies from state to state, so if you are looking to set up a firm somewhere, you will want to find out what the local requirements are.
  • Some states disallow the formation of regular LLCs by people in professional occupations, forcing those who want some form of LLC benefits to form PLLCs instead.
  • California requires professionals to form registered limited liability partnerships (or RLLPs) instead of LLCs or PLLCs.
  • All PLLC members need whatever licensing the practice of their profession in that state would normally require. Upon formation, the state board in charge of such things will examine and verify this licensing.

PLLCs are also very similar to LLCs in many key ways. For instance, they allow the “pass though” taxation of an LLC, where income is counted as personal income of the owners on their yearly taxes. Moreover, both LLCs and PLLCs are persistent, meaning they continue to exist until dissolved, which allows members to leave the company without a problem. This ensures a smooth transfer of power and responsibility should something happen to one member.

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