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
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.