Why form a professional entity?
A professional corporation (PC) or professional limited liability company (PLLC) is a C-Corporation, S-Corporation or Limited Liability Company (LLC) that is setup to provide professional services. These services are defined by state law and vary from state to state, but they often include professions that require a license to operate (accountants, architects, dentists, doctors, lawyers, etc.) Some states refer to professional entities as professional associations (PA) or service corporations (SC).
Pros and Cons of Professional Entity
Pros of a PC or PLLC:
- Organizational benefits. Since a PC or PLLC is actually a corporation or LLC, they will include all the same benefits associated with that business organization / structure.
- Limited liability protection. Owners are not held personally responsible for business liabilities or debt (they are not protected from negligence or malpractice).
- Protection from partners. Owners of PCs and PLLCs are not held financially responsible for the acts of others in the business (unless they are in a supervisory role to that person).
Cons of a PC or PLLC:
- Assumed liabilities. A partner in an LLP is personally liable for his or her own negligence, or the negligence of an employee working under the partner's direct supervision.
- Restricted availability. Each state has different laws regarding PCs and PLLCs, but they are often limited to certain types of businesses. Some only allow legal, medical, accounting, architecture and other firms to obtain professional status. A Professional Limited Liability Company (PLLC) is not recognized in all states.
- Lengthy approval process. Professional businesses may take longer to incorporate. A number of states require approval of a licensing board before the business can be formed.
How to Start a PC or Professional Limited Liability Company (PLLC)
Start out by setting up a C-Corporation, S-Corporation or Limited Liability Company (LLC).
Each state will have different requirements for structuring a business as a professional entity. Some states do not offer this option, but if a state requires you to form a PC or PLLC based upon you business description, additional fees may be required.
* If you start with us, we will contact you if the state requires organization of a PC or PLLC. |
