In many US states, professionals who offer their services through a business entity must form a PC (Professional Corporation) or a PLLC (Professional Limited Liability Company). This process differs widely from state to state, so it’s important to make sure that you’re aware of your state’s requirements. Some states don’t allow lawyers, dentists, real estate agents, architects, or certain other licensed professionals to offer their services through traditional business entities like LLCs or corporations. If you live in one of these states, you will likely need to form a PC or a PLLC instead.
What is a PLLC?
As a general rule, the members of a PLLC are not personally liable for the company’s debts, tax costs, or lawsuits. (There are exceptions.) Just like an LLC, a PLLC separates a member’s personal liability from the company’s liability. However, an individual member CAN still be sued for malpractice. As an example, suppose that a group of chiropractors formed a PLLC to practice their craft. If a customer slipped and fell in their front office, the company would likely be held liable. However, if a customer was injured during a chiropractic session, the individual practitioner would likely be held liable instead. (Also, just like an LLC, the courts can still pierce the corporate veil and sue an individual, if they suspect fraud or illegal activity.) Just like LLCs, PLLCs are more flexible than corporations, and offer certain tax benefits.
What is a PC?
A PC is very similar to a traditional corporation. A PC is required to have a board of directors, follow bylaws, and submit Articles of Incorporation to the state, just like a corporation is. The major difference is that the members of a PC are all licensed professionals, performing the service that they are licensed to perform. Depending on the state you’re in, your board members may need to be licensed professionals, as well. A PC offers the same liability protection that a PLLC offers.
Which Should I Choose?
Some states only allow professionals to form PLLCs, some don’t allow PLLCs and require that members incorporate as PCs instead, and some states don’t allow either. So you should check your state’s laws before you make this decision. Otherwise, aside from the licensing requirements, this decision is no harder than choosing between a corporation or an LLC. LLCs offer a more flexible management model, while corporations are more rigid. LLCs are also simpler to form. However, corporations tend to attract more investors, and ownership shares are easier to transfer. (If you need help choosing between business entities, read What Business Entity is Right for Me? or try our business entity selector tool.)
Whether you choose to form a PLLC, or to incorporate as a PC, the important thing is to make sure that you follow all of your state’s requirements. L4SB makes the process easy: we do the research and file the paperwork for you, allowing you to get your business up and running as quickly as possible.
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