Are you forming a new business? If so, the first question you should ask yourself is the type of business entity you are looking to set up. The answer to that question will depend very much on the protections you will prioritize the most. Check out recent JUSTLAW articles for help with determining the right business entity for you. However, if you have already decided you would prefer an PLLC or if you have read our relevant dialogues on the Verdict and have ultimately decided to create a PLLC, this particular article will be extremely important for you to understand.
When will you be required to form an PLLC?
A PLLC stands for a Professional Limited Liability Company. As you probably could guess, the difference between a PLLC and an LLC is that professionals file for a PLLC.
States differ on the requirement of professionals forming a PLLC. Some states opt to push professionals to create PLLCs. Other states permit PLLCs, but don’t necessarily require it. And other states favor professional corporations (e.g. P.C.) and limited liability partnerships (e.g., LLP) and ban PLLCs.
For straightforward purposes, this article focuses entirely on the states that require PLLCs. In other words, these states mandate that the term professionals, which is regularly defined in the particular state’s limited liability company act, form a PLLC.
In most states, the list of professionals almost always includes:
5) Clinical Social Workers
10) Physical, Marriage, & Family Therapists
If you are not one of these professionals, you most likely do not have to create a PLLC. An LLC should suffice. To the contrary, if you are a licensed professional listed above, we urge you to contact our attorneys before you move forward with an LLC or PLLC. Our well-experienced, top of the line attorneys will quickly advise you as to which form is more suitable for your business. More importantly, our attorneys can also advise you as to whether your state requires PLLCs for professionals.
What are the steps needed to take to form a PLLC?
If you have proceeded to this step, that either means you are a licensed professional listed above, you believe you may have to create a PLLC, or you just love reading JUSTLAW content. Or maybe it’s all three? Anyways, here are the steps you will take when forming a PLLC:
1. Check eligibility of PLLCs in your state.
As we said above, an attorney will be able to tell you whether your state requires, permits, or bans PLLCs. Check out your state’s “limited liability company act” if you would like to proceed without an attorney.
2. Create your Articles of Organization.
If you’re reading “Articles of Organization” and are scratching your head, don’t worry. The name of this document varies by state, and is sometimes called “Certificate of Organization”, “Articles of Incorporation”, etc. The bottom line is that every PLLC needs to include such a document. The main purpose of the document is to name a registered agent, along with their relevant contact information. Members can be registered agents. In addition, you will also need an Employer Identification Number (hereinafter referred to as “EIN”). To receive an EIN, you’ll simply just need to file for one with the IRS and they will appoint you one. Moreover, other details that should be included in the Articles of Organization consist of your principal place of business, the services your business will offer, and all of the members of the PLLC and their relevant contact information. (Note: All members should be of the same profession. Speak with a JUSTLAW attorney now to determine if your profession or professions are covered.)
3. Prepare an operating agreement.
An operating agreement will detail how your business will be run. Such details will include information such as: (1) Capital contributions; (2) Members and their ownership rights; (3) Voting requirements for business-related decisions (votes by unanimous decision or 2/3 vote); and much much more. This is required for all PLLCs.
4. Show proof of all member’s licenses to practice their profession.
Finally, and one of the more obvious components of forming a PLLC, includes providing proof of your license to practice your profession.
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JUSTLAW is on a mission to ensure legal insurance becomes a norm. Sign up for our JUSTLAW membership today and receive a free consultation on whether you need to create a PLLC for your business.