Articles

What Is a Professional Corporation or PLLC?

A professional corporation (PC) is a corporation that provides organized to provide services by professionals that must have a state license. (Some states refer to a professional corporation as a professional association (PA) or a service corporation (SC).) Many states also allow licensed professionals to form a Professional Limited Liability Company (PLLC). A PLLC provides more flexibility to the owners than that permitted with a professional corporation. 

Although what professions must be licensed varies among the states, typically they include:

  • Accountants
  • Architects
  • Chiropractors
  • Dentists
  • Doctors
  • Lawyers
  • Mental health professionals

How Is a Professional Corporation or PLLC Formed?

The Articles of Incorporation for a professional corporation are similar to those of a standard corporation. In addition, every professional corporation must appoint and maintain a registered agent for the business. However, there are several significant differences from regular corporations.

  • Many states require that all shareholders be licensed professionals. Some states do permit non-professionals to be shareholders, but usually limit non-professional shareholders to less than 50 percent.
  • Most states require approval by the proper state licensing body before the incorporation documents before they can be filed with the secretary of state.
  • The sole corporation’s purpose must be to provide the services of the licensed professionals, such as providing legal or medical services.
  • In addition to the standard state naming requirements, the corporation’s name must clearly indicate that it is a professional corporation. Often this is done by including "Professional Corporation" or the abbreviation "P.C.," "PC," or, in some states, "P.A." (professional association) or "S.C." (service corporation).  And, depending upon your state, you may have to include your profession in your corporate name.
  • Many states require that the corporation carry insurance or have a surety bond as an additional means of protecting the public in the event of malpractice by one of the shareholders.

Very similar rules apply to the formation of a PLLC. 

Ongoing Responsibilities of the PLLC and Professional Corporation

Once you have formed your professional corporation, you must comply with the ongoing corporate compliance responsibilities, such as issuing shares, adopting bylaws, electing directors, holding meetings, filing annual reports, and maintaining a registered agent. While a PLLC generally has fewer state-mandated responsibilities, all states require that the PLLC maintain an in-state registered agent and most require the PLLC to file annual reports. Although it is not required by the state, it is strongly recommended that the members of a PLLC adopt a written operating agreement that defines the members' rights and responsibilities, details the process joining or leaving the PLLC, and provides rules for the management and operation of the PLLC.  

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