PLLC vs. LLP in New York: Legal, Tax & Formation Differences

Key Takeaways

• PLLCs are required for licensed professionals (e.g., lawyers, doctors) in New York, while LLPs also serve professionals but offer a different liability structure.
• Both PLLCs and LLPs offer pass-through taxation but differ in regulatory oversight and formation requirements.
• PLLCs require approval from the New York State Education Department (NYSED) before formation.
• LLPs in New York are only available to certain licensed professions and provide liability protection to partners from each other's malpractice.
• Choosing between a PLLC vs LLP in New York depends on the type of profession, liability concerns, management preferences, and regulatory compliance needs.

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.

Liability Protection Differences

When comparing a PLLC vs LLP in New York, liability protection is a core difference:

• PLLCs protect members from business debts and liabilities, but not from malpractice claims arising from their own actions.
• LLPs provide liability protection for each partner against the negligent or wrongful acts of other partners or employees not under their direct supervision.

In both entities, professionals remain personally liable for their own malpractice. However, in an LLP, individual partners are typically shielded from personal liability for partnership debts and other partners’ mistakes, which can be attractive for professionals like attorneys in group practices.

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:

• Attorneys
• Physicians
• Accountants

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:

• Attorneys
• Physicians
• Accountants

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.

Considerations When Choosing Between PLLC and LLP

Choosing between a PLLC vs LLP in New York should involve analysis of several factors:

• Practice Size and Management Style: Solo practitioners or small groups may prefer PLLCs for simplicity, while LLPs work well for larger, collaborative practices.
• Malpractice Risk: LLPs may offer greater protection among partners in firms with multiple professionals.
• Administrative Burden: PLLCs require more regulatory interaction, especially with the NYSED. LLPs, being conversions of general partnerships, involve fewer upfront approvals.
• Tax Goals: Both allow for pass-through taxation, but PLLCs provide more flexibility with potential S corporation election for tax savings.

Consulting with a business attorney can help evaluate which structure best aligns with your goals and compliance needs. You can find a qualified attorney on UpCounsel to help with entity selection and formation.

Key Differences Between PLLC and LLP Structures

Formation Requirements in New York

The process of forming a PLLC vs LLP in New York involves different steps and state agencies:

For PLLCs:

1. Obtain Professional Licensing Approval – Submit documentation to the New York State Education Department's Office of the Professions.
2. Name Approval – The name must include “PLLC” or “Professional Limited Liability Company” and be approved by NYSED.
3. File Articles of Organization with the New York Department of State after receiving professional certification.
4. Publication Requirement – Within 120 days of formation, the PLLC must publish notices in two newspapers and file a Certificate of Publication.

For LLPs:

1. Register as an LLP – Existing general partnerships must register as LLPs with the New York Department of State using the “Certificate of Registration.”
2. Name Requirements – The firm name must include “Registered Limited Liability Partnership” or “LLP.”
3. No NYSED Approval Required – Unlike PLLCs, LLPs do not need NYSED certification, although all partners must be licensed.
4. Publication Requirement – LLPs also face the same publication obligations as PLLCs.

Both entity types must comply with New York’s professional conduct rules and maintain good standing with licensing boards.

Who Can Form a PLLC or LLP in New York?

In New York, only certain licensed professionals can form a PLLC or LLP. These include individuals licensed under Title VIII of the New York Education Law. Common professions eligible to form a PLLC or LLP include:

• Attorneys
• Physicians and other medical professionals
• Certified Public Accountants
• Architects and Engineers
• Veterinarians
• Dentists

A key distinction is that LLPs are often preferred by law firms and accounting firms that want a partnership model with protection from other partners’ liabilities. In contrast, PLLCs are often favored by professionals seeking a more corporate-style structure while maintaining liability protections and compliance with licensing boards.

Frequently Asked Questions

1. What is the primary difference between a PLLC and an LLP in New York?
   A PLLC requires approval from the NYSED and is typically used by licensed professionals forming a new entity, while an LLP is a registered partnership offering liability protection among partners.
2. Can an attorney form a PLLC or LLP in New York?
   Yes. Attorneys may form either entity, depending on whether they want a partnership model (LLP) or a company structure (PLLC).
3. Is there a publication requirement for PLLCs and LLPs in New York?
   Yes. Both PLLCs and LLPs must publish formation notices in two newspapers and submit a Certificate of Publication to the Department of State.
4. Are PLLCs taxed the same as LLPs in New York?
   Generally, yes. Both entities are taxed as partnerships unless they elect corporate taxation. Single-member PLLCs are disregarded entities unless otherwise elected.
5. Which is better for liability protection—PLLC or LLP?
   It depends. An LLP offers protection from liabilities arising from other partners' actions, which is beneficial in firms with multiple professionals. A PLLC protects members from business debts but not from personal malpractice.

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