PLLC stands for Professional Limited Liability Company that provides the services of a professional, such as a lawyer, doctor or accountant. PLLC arrangements are generally required by state law for any licensed professional to provide services. A notable exception is California, which prevents LLCs of any kind from providing professional services from licensed individuals. A PLLC may have multiple members, but all of the same profession.
Which professionals are required to form a PLLC?
State laws will define which professionals in each field will be qualified to join services in a PLLC. Related professionals may file for a PLLC such as a PLLC of mental health professionals that constitutes a joint practice.
How is a PLLC formed?
The steps to from a PLLC are similar to a typical LLC formation, with a few notable exceptions. For one, most states will require signature and license numbers of the professional incorporating the PLLC. There may also be a need to provide a copy of the professional’s license to ascertain that the individual is indeed eligible to provide professional services. Generally, the formation of a PLLC must be announced in two newspapers for six consecutive weeks.
Partners in PLLCs
Partnership in PLLCs are usually limited to actual professionals providing services, retired professionals that provided services under the PLLC and holders of the estate of a former PLLC member. Even then, they may only have shares in the PLLC two years after the date of death. These distinctions vary by state and a specialized corporate lawyer will be able to explain the distinction related to taxation, formation and ownership of a PLLC.
Taxation of a PLLC
After the formation of a PLLC, taxation usually follows the corporate taxation guidelines. Some PLLCs, such as those that offer services in health, law and others have “Qualified Personal Service Corporation” classification and will pay a flat tax of 35% rather than a variable corporate income tax rate. Other PLLC arrangements include the S corporation status that allows for flow-through income taxation. A PLLC is considered a flow-through entity when the income is not taxed as the income goes directly to the partners who are in turn, taxed on their income. Taxing an LCC that serves as a flow through entity would constitute double taxation and therefore would be a non-taxable entity.
When forming a PLLC, you may find the services of a PPLC lawyer necessary to understand state restrictions on PPLC formation and membership. These laws vary by state and a local business lawyer will be able to inform you on such factors as which professionals must form PPLC, what protections a PLLC ensures, and how a PLLC can be taxed, especially related to your circumstances. There will be associated fees with PLCC formation, in addition to relevant lawyer fees from seeking legal assistance through the PPLC formation process.