As a licensed professional in Utah you can structure your business as a Utah professional limited liability company (PLLC). This 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.
A Utah PLLC is a limited liability company (LLC) formed specifically by people who will provide Utah 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.
Note: Utah law often refers to professional services limited liability companies rather than just professional limited liability companies. However, the state still uses the standard abbreviation PLLC.
Under Utah's PLLC law, a professional service is a licensed personal service provided by:
Anyone who is licensed to practice one of these professions can form a Utah PLLC. (In general, you must be licensed by the State of Utah as opposed to another state, but there are exceptions to this rule.)
To form your Utah PLLC you'll need to:
Regarding the first point (having state licenses): Utah law allows unlicensed individuals to be members of PLLCs only the extent allowed by the applicable state licensing or registration act. Otherwise, all members must be licensed.
You can file online using Utah's OneStop Online Business Registration or by mail. The DOC also has a blank certificate of organization form available on its website. The form is specifically for PLLCs (as opposed to regular LLCs). The current filing fee for the certificate of organization is $70.
The name of a Utah PLLC must contain the words "professional limited liability company" or the abbreviations "P.L.L.C." or "PLLC." The name may not contain any language stating or implying that the business is formed for a purpose other than what is stated in your certificate of organization and what is allowed as a professional service under Utah's PLLC law. The name also must comply with any requirements of the state regulating board that has jurisdiction over the professional service your PLLC will provide. Additional naming rules also apply. For more important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.
As mentioned above, all members of a Utah PLLC generally must be licensed to provide the professional services offered by the PLLC, but there are some exceptions. A Utah PLLC can provide only one kind of professional service (along with directly related (ancillary) non-professional services). However, a Utah PLLC may own property and invest the company's money. Utah PLLCs and/or their members are subject to the regulation of the relevant state professional licensing authorities.
You should make sure you have an operating agreement for your PLLC. Unlike professional licenses, articles of organization, naming restrictions, and service restrictions, this is not a state requirement. However, it is important to have an operating agreement so that other members of the PLLC (if any), as well as outside companies and businesses (for example banks), know what the internal rules are for the company. Depending on your own level of knowledge and expertise, you should consider having a lawyer assist you in preparing this document.
Forming your professional service business as a PLLC will protect you personally from:
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:
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 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:
The tax differences between PLLCs and PCs can become complicated. For example, 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.
Utah 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.
For more information on the requirements for forming and operating an LLC in Utah, such as those relating to annual reports and 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.