As a licensed professional in North Carolina you can structure your business as a North Carolina 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 North Carolina PLLC is a limited liability company (LLC) formed specifically by people who will provide North Carolina 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 North Carolina law, a professional service is a state licensed service provided by:
Anyone who is licensed to practice one of these professions in North Carolina can form a North Carolina PLLC.
To form your North Carolina PLLC you’ll need to:
All members of the PLLC must be licensed professionals.
You can download an Articles of Organization, Professional LLC (Form PLLC-02) from the SOS website. (The PLLC articles form is different from the articles form used by nonprofessionals.) The form is in PDF format. You can type in the required information, print it out, and then upload and submit it online. You must include your licensing board certification with your articles submission. If your licensing board doesn't offer online or electronic certification, then you will need to file your articles by mail and include an original board certification. The current filing fee is $125.
The name of a North Carolina PLLC must contain the word “Professional” or the abbreviation “P.L.L.C.” or “PLLC.” Additional naming rules also apply. For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.
Generally speaking, a North Carolina PLLC can only provide one type of professional service along with related (ancillary) services. However, several specific combinations of professional services are also allowed. For example, PLLCs that provide some combination of architectural, landscape architectural, engineering or land surveying, geological, and soil science services are allowed as long as at least one PLLC member is licensed to provide each of the services offered by the PLLC. Similarly, many combinations of specific medical services are permitted. Generally speaking, at least one member of a North Carolina PLLC must be licensed to provide a professional service offered by the PLLC. And, finally, remember that North Carolina 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 all members of the PLLC, 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.
North Carolina’s laws for PLLCs are mainly based on the state’s preexisting law for PCs. North Carolina 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 North Carolina, 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.