What Is a PLLC?
"PLLC" is the abbreviation for "professional limited liability company." A PLLC is a business structure made for licensed professionals in specialized industries such as the medical or legal fields.
This type of business structure allows professionals like doctors, lawyers, chiropractors, and real estate agents to have limited liability protection against debts, taxes, and judgments against the business.
- PLLCs and LLCs have different business structures.
- Members of a PLLC are not personally responsible for the business debts and business taxes of a PLLC or judgments against a PLLC.
What Is the Difference Between an LLC and a PLLC?
The key difference between an LLC and a PLLC is that members of a PLLC must have a professional license. Some states have laws that do not allow professionals to form a regular LLC. Thus, individuals with professional licenses must form a PLLC to operate with limited liability protection in that state.
LLCs and PLLCs are both required to register with a state licensing board, typically a secretary of state, in a process known as "organization." However, since PLLCs are for licensed professionals only, forming a PLLC requires proof of licensure for each individual member. Also, at least one licensed member must sign the registration documents, also known as the "articles of organization," that will be submitted to the licensing board.
LLCs and PLLCs both offer limited liability protection for their members. That means that individual members are not personally responsible for judgments against the business or its debts or taxes.
However, keep in mind that members of PLLCs are not protected against malpractice suits or lawsuits that allege professional negligence. Even as a member of a PLLC, you will need to carry your own malpractice insurance in the event that you must defend malpractice claims.
Owners of PLLCs Are Not Responsible for the Debts and Taxes of the Business
Members of PLLCs are not personally responsible for paying business debts or taxes that their PLLC may owe.
A PLLC is a separate business entity from the individual members of a PLLC. This means that if someone sues a PLLC, the business owners' personal assets are not used to satisfy a judgment. It also means that if the PLLC defaults on a loan, the individual members are not responsible for repaying the loan. The same is usually true for any business tax debt.
However, there are times when members of a PLLC will be personally responsible for business debts and business taxes. This is sometimes called "piercing the corporate veil." It occurs when business owners mix personal and business funds, forcing the court to treat the company and the owner as the same entity.
You can avoid this outcome by keeping diligent track of your financial records and following generally accepted accounting practices, such as maintaining separate accounts.
Seeking Further Guidance?
If you're a licensed professional seeking help setting up your PLLC, consider using a service like FindLaw to get in touch with a business attorney today. Forming a PLLC requires additional steps that can be complicated for anyone just starting. A dedicated attorney can answer your questions and help organize your business with ease.
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