Professional Corporations & Professional Limited Liability Companies

Professional corporations & professional LLCs are enterprise structures that are perfect for certain specialties. The professional corporation (PC) and professional limited liability company (PLLC) are the formations of choice for a lot of business proprietors who work in the following fields:

  • Accounting
  • Law
  • Pharmaceuticals
  • Construction
  • Engineering
  • Other related fields

PCs and PLLCs may also help licensed professionals defend their private property in case of lawsuits against their practices.

PCs and PLLCs Similarities

Proprietors are usually required to be licensed in the same occupation. Proof of licensing is commonly required for state approval. Trade-specific rules could apply to your organization title. States could require entity-specific endings on your firm title ("PC" for a Professional Corporation and "PLLC" for a Professional Limited Liability Company, for instance).

Professional Corporations & Professional Limited Liability Companies

By forming a PC or PLLC, owners are not free from private legal responsibility for malpractice or different lawsuits filed against them. Nevertheless, these formation varieties do protect proprietors from the malpractice of different proprietors throughout the company. Remember, not all states acknowledge the PLLC entity. PCs and PLLCs are taxed in another way. PCs are usually taxed like a C Corporation, with the PC paying taxes on the company price, which may result in double taxation.

PLLCs, however, are taxed like LLCs, which usually have pass-through taxation of the members. Chances are you'll want to consult with a tax advisor before forming either a PC or PLLC to find out the best tax solutions for your firm. Creating these firms can also require further steps on the part of the owners. Together with approval from the Secretary of State, professional entities typically should seek approval of their formation paperwork from a state professional licensing body.

Advantages and Disadvantages of a Professional Corporation

A professional corporation could proceed if a shareholder or worker dies or leaves the corporation, whereas a partnership should be dissolved if this occasion arises.

Professional Corporations

In many states, professionals who wish to incorporate their practices should create what's referred to as a professional corporation. In different states, some professionals choose to incorporate as either a professional company or an everyday company. In all states, certain professionals are allowed to form professional corporations or professional service companies. The checklist of execs required to include as a professional corporation is completely different in every state.

Normally, however, obligatory professional incorporation must apply to the following professionals:

  • Accountants
  • Engineers
  • Health care professionals including audiologists, dentists, nurses, opticians, optometrists, pharmacists, bodily therapists, physicians, and speech pathologists
  • Attorneys
  • Psychologists
  • Social staff
  • Veterinarians

You must name your state's company with the submission office (often the Secretary of State or Company Commissioner) to see which professions are required to form professional companies in your individual state.

Benefits of a Professional Corporation

Professional corporations are completely different from typical companies, because all shareholders in a professional corporation should be members of the same occupation within the same enterprise. For instance, a bunch of doctors can form a professional corporation if their business is to prescribe drugs.

How Do I Set Up a Professional Corporation?

If you're serious about establishing a professional corporation, ensure that you know the necessities of your state. You might have to hold a certain designation within the firm title, equivalent to "PC" for professional corporation. Additionally, you must draft company bylaws. These are the principles of how your business will function and be ruled. You will have to designate officers and their tasks, assign decision-making procedures, and set any phrases relating to administration and funds.

The ultimate step is to register your company in your state. Should you feel you need assistance, your local small business affiliation or a company lawyer can provide help. Some states even have guides posted on their websites to assist in guiding you through the process.

If you need help with your professional corporation, 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, Stripe, and Twilio.