PLLC vs LLP New York: Everything You Need to Know
The difference between a PLLC vs an LLP New York is important to know when starting a business entity in the state of New York.3 min read
Updated November 11, 2020:
The difference between a PLLC vs an LLP New York is important to know when starting a business entity in the state of New York. A limited liability company is an organization containing one or more members. The entity is unincorporated, and each member enjoys protection from liability of business debts. '
A limited liability partnership, or LLP, is an entity that is comprised of partners that provides professional services under the laws of New York or other jurisdiction.
Tax treatment of LLCs and LLPs
Both LLCs and LLPs are treated as partnerships in regard to taxation at both the federal level and for New York state taxes. For federal taxes, both will be treated the same as an s corporation and as a c corporation for New York state taxes. They both have the option to be taxed as an s corporation if they make the election after forming.
If the LLC is a single-member LLC, then it will be treated as a disregarded tax entity at both the federal and state tax level. In the event that an SMLLC is considered disregarded, the member will be treated as an individual, and it will be taxed in the same way that a sole proprietorship will be. If the SMLLC is a single-member disregarded entity but is a c corporation or an s corporation, it will be considered a division of the corporation to the state of New York. In the event the disregarded SMLLC has a single member that is a partnership, it will be considered a division of the partnership.
To understand more about the taxation of LLCs and LLPs you can look at or inquire with:
- New York City General Corporation Tax
- New York City Unincorporated Tax
- New York City Department of Finance Business webpage
There are other issues that should be addressed in regards to the taxation of an LLC or LLP:
- If an LLC is treated as a sole proprietorship, all income and expenses will need to be reported on the member's personal tax return.
- If an LLC or LLP is treated as a partnership, you are required to file a Partnership Return, Form IT-204.
- If an LLC or an LLP is a c corporation or has elected s corporation status, they will be required to file a New York State corporation franchise tax return.
- Both LLCs and LLPs may be required to pay estimated income tax or a filing fee on the behalf of certain partners or members.
Professional Service Limited Liability Company
Professional Service Limited Liability Companies, or PLLCs, are formed by certain professionals in New York to be able to practice the profession. In general, in professions that are regulated, persons without licenses cannot practice in that relevant profession. Therefore, they cannot practice their profession through a New York limited liability corporation without breaching that rule.
Any professionals that fall under the Education Law that wish to practice together under the protection of a limited liability company, they must form a PLLC. Though no member may participate in a PLLC unless they are authorized to practice their relevant profession. While there are a number of professions that can be found in the New York Department of Education some of the most common types of PLLCs include:
While there are a number of professions that can be found in the New York Department of Education some of the most common types of PLLCs include:
It is possible for a PLLC in another state to perform its services in the state of New York but they must be licensed to practice their profession in both the state where the PLLC was formed as well as the state of New York. Additionally, a PLLC can enter into business contracts and hold leases in connection within the practice of the professions that their members are licensed but cannot engage in any business that is not connected to their PLLC's profession. It is important to note that while a PLLC may enjoy protection from the liability of debt, it does not have protection against malpractice.
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