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PLLC vs. LLC: Which Entity Should You Incorporate as?

Depending on what your profession is, a Professional Corporation or Professional Limited Liability Company might just be a better fit for how you do business. Let’s take a closer look at PLLCs vs. LLCs.

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This title looks like a typo at first glance, doesn’t it? Entrepreneurs tend to be more familiar with the ins and outs of Corporations and LLCs, the two most common business formations, than they are with PCs and PLLCs. However, depending on what your profession is, a Professional Corporation or Professional Limited Liability Company might just be a better fit for how you do business. Let’s take a closer look at PLLC vs. LLCs.

Professional Corporation (PC)

Corporations have always erred on the more formal side than LLCs, which tend to be flexible. They still allow you to keep your personal assets separate from the business while providing a structure that enables your business to accept money from investors. And believe it or not, your career may be the deciding factor as to whether or not you should form a Professional Corporation. PCs are legal structures authorized by state law for selected licensed professions including doctors, accountants, architects, and lawyers.

Unlike a regular corporation, PCs do not absolve a professional for personal liability for their own negligence. The entity also doesn’t provide the same kinds of personal liability protection that an LLC or S-Corp would. However, if an associate files a malpractice claim against you, the PC steps in to protect owners. But many states require professionals to form this entity if they decide to incorporate — which we recommend doing since so many of these professions need a foundation in place that aids to, and protects, your practice.

Professional Limited Liability Company (PLLC)

To briefly recap what an LLC does, a Limited Liability Company keeps your professional and personal assets separated. It also provides liability protection in the event of unforeseen circumstances which could be anything from a lawsuit to on-site injury.

A Professional Limited Liability Company is quite similar to an LLC in that it is organized for the purpose of providing professional services for professions where a license is required to provide services. Some of these may include the aforementioned PC professions — lawyers, doctors, and architects. These legal structures are authorized by some states to limit personal liability for claims related to a co-partner's negligence or misconduct, ensuring that one partner is not liable for the entirety of these claims.

If you work out of a state where a license is required to provide services, you’ll want to form a PLLC. However, keep in mind that not every state provides PLLC legislation, so check in with yours first to see if they do. 

Deborah Sweeney is the CEO of MyCorporation.com. MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and on Twitter @mycorporation.

Please note that KPMG Spark’s sponsorship of this blog article is not intended to address the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services. This content represents the views of the author, and does not necessarily represent the views or professional advice of KPMG Spark.

KPMG SparkJanuary 11, 2017Posted In: Accounting Info

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