As a licensed professional in Massachusetts you can structure your business as a Massachusetts 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 Massachusetts PLLC is a limited liability company (LLC) formed specifically by people who will provide Massachusetts 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.
In the relevant Massachusetts law, professional services include services performed by:
If you are licensed to practice one of these professions in Massachusetts you should be able to form a Massachusetts PLLC. More generally, any person who is required by state law to have a Massachusetts license before providing services should be able to form a Massachusetts PLLC for those services.
To form your Massachusetts PLLC you’ll need to:
The Secretary of State has a blank certificate of organization form specifically for PLLCs (as opposed to standard LLCs) available on its website. The form is in PDF format and you can type in the required information on your computer (you will have to print it out in order to sign it). The current filing fee for the certificate of organization is $500 by mail and $520 for online filing.
Massachusetts requires that your PLLC contain the words "limited liability company" or "limited company," or else the abbreviation "L.L.C.", "L.C.", "LLC" or "LC." Your PLLC’s name also must not be deceptively similar to the name of a preexisting business. For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.
In general, a Massachusetts PLLC can provide professional services in more than one profession if doing so isn’t prohibited by the state’s licensing laws or by any of the applicable regulating boards. Massachusetts 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, the certificate of organization, and naming 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 your business. 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.
At the same time, 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.
Massachusetts allows professionals to form both PCs and PLLCs. Massachusetts’s rules for PLLCs rely in part on the state’s older rules for PCs.
For more information on the requirements for forming and operating an LLC in Massachusetts, 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.