Professional Corporations and Professional Limited Liability Companies

Usually, once you’ve decided whether you want to form a limited liability company or a corporation (or some other type of entity), it’s off to the races. But for certain entrepreneurs, there may be an additional step or two when setting up your company.

Many states require that certain professionals form a professional corporation (PC) or a professional liability company (PLLC) rather than their standard cousins. These entities are often required for doctors, lawyers, nurses, veterinarians, psychologists, and chiropractors. For states that provide PLLC and PC structures, professionals are typically required to form a professional entity rather than the standard version.

By the same token, states often require that all members of a professional entity be licensed professionals of the chosen profession. For example, if a group of nurses decides to set up a PLLC, they can’t admit a non-nurse as a member to the company. They also can’t set up a “standard” LLC and use it to provide nursing services to the public.

Setting up a PLLC or PC usually requires a few extra steps in comparison to an LLC or corporation. The members of the entity may need to provide proof that they are qualified to join the company. For example, attorneys forming a PC may need to submit copies of their law license. Some states, like New York, require that the paperwork be submitted to a special regulatory agency that regulates the profession. (In New York, this entity is called the New York State Education Department.)

From a liability perspective, the PLLC and PC are similar to their cousins, although it’s important to note that members may be personally liable for malpractice claims. It’s important to make sure you understand the liability implications and obtain insurance to protect you against any future claims.

It’s important to determine whether you need a professional LLC or corporation ahead of time, since trying to form a standard LLC or corporation may result in rejected paperwork and processing delays.

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