After determining that you want to form a limited liability company, you have one more important decision to make — should you file as an LLC, or as a PLLC? The choice can impact both your business success and your personal liability for the businesses activities, so it’s critical to make an informed decision.
What is an LLC?
An LLC, short for limited liability company, is a business structure that offers owners some of the benefits commonly available to corporations and partnerships. If you start a business as a sole proprietorship, the assets and debts of the company are inseparable from your personal assets. This puts your personal assets at risk. If your business is found liable in a lawsuit, the damages can come out of your own pocket if your company is out of funding.
An LLC protects the personal assets of business owners by legally separating them from the company. The benefits of an LLC are myriad and include a flexible tax structure, and low administrative requirements. LLCs require substantially less paperwork than corporations, and have no requirement for annual shareholder meetings.
PLLC: An LLC for Licensed Professionals
A PLLC, on the other hand, is a specialized type of LLC for certain licensed professionals in many states. A PLLC has the exact same advantages as an LLC, but includes licensing requirements for members, and specific liabilities which vary by profession. For instance, doctors and lawyers are commonly found in the PLLC category because under a PLLC, members are found personally liable for malpractice instead of the PLLC shielding them.
When deciding between a PLLC and an LLC, the biggest factor is your field. If you are a doctor, lawyer, architect, or other licensed professional, a PLLC may be the right choice for you. Otherwise, an LLC will most likely do the trick for your company.