As a licensed professional in Arizona you can structure your business as an Arizona 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.
An Arizona PLLC is a limited liability company (LLC) formed specifically by people who will provide Arizona 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.
Under the relevant Arizona law, professional service is defined only generally, as a service that may be lawfully rendered only by a person licensed or otherwise authorized by an Arizona licensing authority to render the service. Other states’ laws often provide lists of professional services. These lists typically include, at a minimum, physicians, surgeons, dentists, lawyers, certified public accountants, professional engineers, architects, and veterinarians, but often include other professions, as well. If you’re unsure whether your Arizona-licensed or -authorized profession is considered a professional service for the purpose of forming a PLLC, check with a local business attorney.
To form your Arizona PLLC you’ll need to:
You can download a blank articles of organization form (Form L010.002) by going to the Corporations Division website. The form is designed to be used both with regular LLCs and PLLCs—it includes a few additional items to be completed for PLLCs. The current filing fee is $50. (Additional fees apply for expedited processing.)
Within sixty days after the Corporations Division approves the articles of organization, a copy of the articles must be published in a newspaper of general circulation in the county of the SMLLC’s place of business for three consecutive publications. The Corporations Division website has a list of acceptable newspapers in each county. You do not need to file an affidavit of publication with the Corporations Division.
An Arizona PLLC must contain the words “professional limited liability company” or the abbreviations “P.L.L.C.”, “P.L.C.”, “PLLC” or “PLC”, in uppercase or lowercase letters. The name may consist of the full or last name of one or more PLLC members. Other names are also allowed, so long as they are not prohibited by the laws or ethics for the relevant profession. Other naming restrictions also apply. For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.
Generally speaking, all members of an Arizona PLLC must be licensed to provide the professional services offered by the PLLC. Arizona PLLCs and/or their members are subject to the regulation of the relevant state professional licensing authorities. If you are planning on having your PLLC provide more than one kind of professional service, or additional, non-professional services, consult with a local business attorney to ensure you are complying with current Arizona PLLC laws.
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.
Arizona 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 Arizona, 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.