In some states, professionals that hold a license can form a professional limited liability company (PLLC) rather than the more common LLC. While we don’t offer PLLC formations, we do offer LLC and Incorporation services. Get started below.
This article will walk you through the required steps to form a New York professional service limited liability company (PLLC), which is a variation on a traditional limited liability company geared toward licensed professionals. It will also help you determine if the PLLC business structure is appropriate for you.
A New York PLLC could be a suitable business structure for licensed professionals planning to provide their services in the state of New York. Title Eight of New York Education Law outlines which professions may form a New York PLLC, including engineers, architects, health care professionals, and accountants, among others.
Professionals in New York State who are licensed by the New York State Education Department, Office of the Professions can structure their businesses as a professional corporation (PC) or a PLLC. Both structures provide certain liability protections through the legal separation of business and personal assets. they may also be tax advantages.
As a corporation, a PC has more rigid formation and operating requirements than a PLLC, including bylaws and a board of directors.
From a technical perspective, a PLLC is not a corporation. It consists of one or more owners who are called members. By default, PLLCs and LLCs are taxed as pass-through entities, meaning that the business itself isn’t taxed on profits before they’re distributed to the members, who then pay taxes on their share of the profits on their personal tax returns. This avoids the “double taxation” experienced by PCs and C corporations, which are taxed at the business level and again at the personal level when profits are distributed to shareholders. PLLC members also have the option of being taxed as a C corporation or S corporation, which can be financially advantageous to some PLLCs.
Many professionals prefer the PLLC structure due to its less rigid structure, ease of formation, and flexibility.
Your New York PLLC name cannot already be in use by another business.
Your chosen name must meet the following criteria:
The New York Division of Corporations makes it easy to search for available names. Once you’ve found a suitable name, you have the option of reserving it for 60 days until you’re ready to file by submitting an Application for Reservation of Name to the state and paying a fee. Alternatively, you can use ZenBusiness’s name reservation service. We also offer a convenient domain name service to help you establish a website for your new business.
Many states require you to designate a New York registered agent before forming a PLLC or LLC. This is the PLLC’s official contact person and the one who receives legal notices such as service of process when a business is sued. New York is different in that, by default, the New York Secretary of State is listed as your official registered agent. But the state still gives you the option of naming your own registered agent instead. The agent must be an entity or individual available during regular business hours at a registered office within the state.
Although you can leave the Secretary of State as your registered agent, it’s actually possible to save a good deal of money using a registered agent service like ZenBusiness instead, as we explain in this article.
To form a New York PLLC, you must submit Articles of Organization to the state. To do so, you’ll need the following information:
It’s important to decide if your professional LLC will be manager-managed or member-managed. Member-managed occurs when members oversee the day-to-day activities of your PLLC and make decisions on the PLLC’s behalf. Manager-managed occurs when you appoint a member(s) or hire an individual(s) from outside the PLLC with or without a stake in ownership to manage your PLLC.
To complete the process, you will also need to:
A licensed professional member with your organization can fill out and file these documents by mail or online with New York State’s Division of Corporations (DOC). The completed form should be submitted to the DOC in Albany along with the $200 filing fee. Payments can be made by cash, check, or money order or by credit card with a separate authorization form. Expedited service is available for an additional fee.
New York is one of the few states that requires PLLCs to adopt a written operating agreement. Members can do this before, at the time of, or within 90 days of filing their Articles of Organization. This agreement is a legal, internal document that describes how you plan to run your business.
New York PLLCs must have a Federal Employer Identification Number (EIN). Even if you don’t have employees, the IRS requires this number to identify your business on tax returns and other financial documents. Financial institutions will often request to see your EIN when you open a business bank account or conduct other activities.
New York State requires all businesses with employees to register with the NYS Department of Labor after receiving their EIN.
You can get an EIN by applying to the IRS or by using ZenBusiness’s EIN service.
New York PLLCs may be subject to a business franchise tax on profits depending on their tax structure, and members are subject to personal income tax on their share of profits from the business. For state and federal purposes, a PLLC may be taxed as a partnership, C corporation, or S corporation. For an overview of business taxes in New York, visit the Department of Revenue.
Calculating business taxes can be headache-inducing in any state, but especially New York. It’s highly advisable to seek out a qualified tax professional for help.
Check with your city and county governments to determine any additional local tax obligations.
A general business license is not required to operate a New York PLLC because each professional is licensed individually. Since requirements vary at the local, state, or federal level, you may need to obtain other licenses and permits. These may depend on the nature and location of your business.
ZenBusiness can provide you with a business license report service that lists any licenses and permits you may need for your PLLC’s operation.
It’s advisable to seek guidance from an insurance agent to determine what type(s) of insurance your PLLC needs.
Most New York business owners choose to purchase general liability insurance even if it’s not required. General liability insurance helps protect your PLLC from direct or indirect damages to another party. However, it only covers damages caused by your business or your employees that are not due to your malpractice or professional services.
A New York PLLC does not protect its members from malpractice claims. Each member should determine requirements for professional liability insurance in their profession, which can protect against liability costs if a client complains about your services.
A PLLC may protect you personally from the malpractice or negligence of other PLLC members. However, for some professions, PLLC members must have a minimum amount of malpractice insurance to qualify for this protection.
The New York Department of Labor requires employers to provide workers’ compensation insurance for their employees, and the Department of Labor requires most employers to provide unemployment insurance.
Having a business bank account is recommended to separate your company assets from your personal assets. This separation makes accounting and tax filing easier, simplifies audits, and may help your business comply with legal requirements.
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain name, our goal is to help you succeed. Check out our services and contact us today to see how we can help you grow your company.
The filing fee for a New York PLLC is $200 for the Articles of Organization. It can be paid by cash, check, money order, or credit card. PLLCs must submit an annual filing fee of $25 or more based on the organization’s income although financial statements are only required every other year. ZenBusiness’s Worry-Free Compliance Service can take the mystery out of these requirements to keep your organization in good standing.
No, working with a lawyer is not required, but it may be advisable. Additionally, online business services like ZenBusiness can provide most of the information that you need to form your New York PLLC.
Yes, New York allows professionals to form PCs.
A New York PLLC may practice multiple related professions provided it has at least one member licensed in New York for each profession. Certain professions like medical doctors or veterinarians may not form a PLLC with other professions.
Revenue from New York PLLCs may be subject to personal income tax and/or a corporate franchise tax. State tax rates are based on the entity’s federal filing status and whether members are taxed as a corporation, partnership or sole proprietorship. For an overview of business taxes in New York, visit the Department of Revenue.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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