How to Form a Professional LLC in New York

As a licensed professional in New York you can structure your business as a New York professional service limited liability company (PLLC). (Most states refer simply to professional limited liability companies but New York generally refers to professional service limited liability companies while still using the abbreviation PLLC.) Structuring your business as a PLLC will give you protection from several important types of liability. It also may provide certain tax advantages compared to other ways of structuring your business.

Note: Some of the details of New York's PLLC laws will change as of November 1, 2016. This article is based on New York law prior to those changes taking effect.

What is a New York PLLC?

A New York PLLC is a limited liability company (LLC) formed specifically by people who will provide New York licensed professional services. LLCs in general are businesses registered with the state that consist of one or more people—called LLC members—who own the business. Like other LLCs, PLLCs protect their individual members from people with claims for many (but not all) types of financial debts or personal injuries.

What is a Professional Service?

Under the relevant New York law, professional service is defined only generally, as any type of personal service which may be lawfully rendered by a member of a profession within the purview of that profession. Other states' laws often provide itemized lists of professional services. These lists typically include, at a minimum, physicians, surgeons, dentists, lawyers, certified public accountants, professional engineers, architects, and veterinarians, but usually include other professions, as well.

While New York's LLC law does not provide an itemized list of professional services, it does have provisions that indicate that all of the following—when properly licensed by the state—constitute professional services:

• the practice of medicine
• the practice of dentistry
• podiatry
• optometry
• ophthalmic dispensing
• pharmacy
• nursing
• chiropractic
• certified shorthand reporting
• veterinary services
• professional engineering, land surveying, architectural and/or landscape architectural services
• clinical social work services
• creative arts therapy services
• marriage and family therapy services
• mental health counseling services
• psychoanalysis services
• applied behavior analysis services, and
• the practice of law.

If you're unsure whether your New York licensed or authorized profession is considered a professional service for the purpose of forming a PLLC, check with a local business attorney.

How Do I Form a New York PLLC?

To form your New York PLLC you'll need to:

• have the state license for each professional who will be a member of the company
• file articles of organization with the Division of Corporations (DOC) within the New York Department of State (DOS)
• within thirty days of filing your articles of organization with the DOC, file a certified copy of the same document with the relevant state licensing authority, and
• within 120 days of filing your articles of organization with the DOC, publish a copy of the articles (or the same substantive information as is contained in the articles) for six consecutive weeks in two newspapers in the county where the PLLC's office is located.

If you're unsure regarding the publication or other formation requirements, check with a local business attorney.

You can download a blank articles of organization form (Form DOS-1374-f-l). The downloadable form is specifically for PLLCs as opposed to regular LLCs. The form for PLLCs, unlike the form for regular LLCs, requires additional information such as the names and residential addresses of all PLLCs members or managers. The current filing fee is $200.

Naming Restrictions

New York requires that your PLLC's name end with the words "Professional Limited Liability Company" or "Limited Liability Company" or the abbreviation "P.L.L.C.", "PLLC", "L.L.C." or "LLC". Other LLC naming rules also apply. For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.

Service and Membership Restrictions

A New York PLLC can only provide the professional services indicated in its articles of organization. The practice of multiple professional disciplines is not allowed for PLLCs in the professions of medicine, dentistry, veterinary medicine, licensed clinical social work, mental health counseling, psychoanalysis, creative arts therapy, and marriage and family therapy. PLLCs that combine design professions (engineering, architecture, land surveying and landscape architecture) are allowed as long as there is at least one PLLC member licensed for each professional service provided by the PLLC. A New York PLLC generally can engage in any other, non-professional business activities permitted under the state's LLC laws. In general, only licensed professionals can be members of a New York PLLC. And, finally, remember that New York PLLCs and/or their members are subject to the regulation of the relevant state professional licensing authorities.

Operating Agreement

New York requires all PLLCs to have an operating agreement. You and your fellow PLLC members must enter into the agreement before, at the time of, or within 90 days after the filing of the Articles of Organization. The operating agreement is the primary document that establishes the rights, powers, duties, liabilities, and obligations of the PLLC members between themselves and with respect to the PLLC. The operating agreement is an internal document and is not filed with the Department of State. New York law is silent on the consequences of not adopting an operating agreement. Depending on your own level of knowledge and expertise, you should consider having a lawyer assist you in preparing this document.

A PLLC Will Not Protect You From All Liability

Forming your professional service business as a PLLC will protect you personally from:

• creditors seeking to collect unpaid debts owed solely by the PLLC
• liability for the malpractice of other PLLC members (technically known as "vicarious liability"), and
• people who are personally injured in connection with your PLLC because of things having nothing to do with your own professional malpractice or torts (for example, if someone slips and falls in your PLLC's offices).

Regarding protection from liability for the malpractice of fellow PLLC members, be aware that, for some professions in some states, PLLC members are required to have a minimum amount of malpractice insurance before they are eligible for such protection. Therefore, it's always a good idea to double check your state's PLLC laws, as well as your state's rules for your particular profession, regarding minimum insurance requirements.

Meanwhile, you are personally responsible if:

• you personally guarantee repayment of a business loan
• you engage in professional malpractice (such as completely botching a patient's treatment or egregiously mishandling a client's case), or
• you intentionally or negligently commit a tort (such as assaulting someone).

Because you are not protected from your own malpractice, you should make sure you have professional liability insurance—and, if applicable, that your coverage meets any minimum insurance requirements.

A PLLC is Different From a Professional Corporation

A PLLC is not the same thing as a professional corporation (PC). A PLLC is a newer type of business entity than a PC. Here are some of the key differences:

• a PLLC, like other LLCs, is comprised of members, but a PC, like other corporations, is comprised of shareholders
• following from the previous point, PLLC ownership consists of so-called membership interests in the business, but PC ownership is based on shares of stock; and
• a PLLC, like other LLCs, is a so-called pass-through tax entity, meaning that in most states (though not New York) only the individual members have income tax obligations, while a PC, like other corporations, usually has its own income tax obligations.

The tax differences between PLLCs and PCs can become complicated. New York, unlike most other states, directly taxes LLCs through an annual filing fee. (More information on this fee is available in other Nolo LLC articles.) Moreover, a PC can elect a special tax status (S corporation status) that effectively makes it a pass-through tax entity like a PLLC. And, meanwhile, PCs that don't elect special status may be subject to double taxation—in other words, both the PC itself and its shareholders may have to pay taxes on business income.

New York allows professionals to form both PLLCs and PCs, and both PLLCs and PCs provide liability protection for, respectively, their members or shareholders. Because the protection is essentially the same for both PLLCs and PCs, but PLLCs are simpler to create and operate, many professionals prefer the PLLC structure.

Additional Information

For more information on the requirements for forming and operating an LLC in New York, such as those relating to taxes, see Nolo's articles in 50-State Guide to Forming an LLC and 50-State Guide to Annual Report and Tax Filing Requirements for LLCs, along with the other articles on LLCs in the LLC section of the Nolo website.