LLC, “S” corporation, “C” corporation . . . you might think you know all there is to know about the different ways to incorporate a business. What you might not know, however, is that there’s another business type called a PLLC and – depending on your industry – you might be required by law to form this specific type of company.
What does PLLC stand for?
PLLC stands for Professional Limited Liability Corporation. In this context, “professional” indicates required licensing. Attorneys and health care professionals most commonly fall under the PLLC umbrella, but it really applies to anyone who is required to obtain government licensing to practice in their field.
What does it take to form a PLLC?
In most ways, a PLLC functions just like an LLC, and the formation is similar as well, with a few caveats. You’ll need approval from your state’s licensing board, and depending on your state’s specific laws, you’ll need to file certain forms. There’s a lot of variance here between states, but you can expect the incorporation process to take a bit longer if you are going the PLLC route.
You may also face restrictions on who can own shares in your business. In some states, for example, only licensed attorneys can hold stock in law firms. In other states, those who aren’t attorneys may be allowed to own shares, but only with the approval of the appropriate licensing board.
What’s the point?
If the system seems restrictive, realize that there are many benefits to these types of requirements, both for businesses and consumers. PLLC requirements insure the integrity of your field by not allowing those without the proper knowledge and licensing to influence – and possibly harm – your field as a whole.
They also restrict your competition to other qualified professionals, therefore protecting your bottom line. Without these restrictions, the going rate for the services you offer could plummet as the market fills with those who charge lesser rates because they don’t truly understand the magnitude of what it takes to obtain licensing in – and excel at – your profession. Then, of course, you have professions like medicine, where the requirement to form a PLLC keeps health care in the hands of those who are knowledgeable and dedicated to healing.
The process of forming a PLLC may take a bit longer, but it affords you the same protections as an LLC and – perhaps more importantly – keeps you on the right side of your state boards and the IRS.