If you’ve been in the business world for some time, you’re probably familiar with the different types of entities that you can form through the Florida Division of Corporations.
Limited liability companies (LLC) have recently experienced a growth in popularity because LLC’s allow you to protect your personal interests. LLC’s can also be structured to optimize a business’s tax treatment, as they are treated as a pass-through entity.
In Florida, individuals that hold Florida professional licenses may structure their business as a Florida professional limited liability company or PLLC. This classification provides certain liability protections regarding the licensed profession similar to the advantages of an LLC.
Particular rules and regulations exist regarding the formation and maintenance of a Florida PLLC. Consult with a Florida business law attorney regarding your specific needs; however, some answers to common questions may be helpful.
What is a PLLC?
This type of business is similar to an LLC in the sense that there are members who own and run the business. However, a PLLC must be organized and operated by individuals who hold a proper Florida license in the associated profession.
Qualifying individuals under Florida PLLC law provide personal services to the public and have a license or other legal authorization to fulfill these services. Compliance with the licensing requirements must continue to be satisfied as required by Florida state law. For instance, only the following individuals can be members of a PLLC:
- Medical physicians and osteopathic physicians, surgeons, dentists, and other medical specialties such as podiatrists and chiropractors;
- Certified public accountants and public accountants;
- Life insurance agents;
- Certain types of architects and engineers; and
- Others designated by law.
Beyond this requirement, there are other similarities between a PLLC and LLC. All members can play a role in day-to-day operations, decision making, and other management tasks. They can also share in the profits and losses, without the constraints of forming a corporation.
“PLLCs are somewhat unique to the State of Florida. BrewerLong is a PLLC, because it best reflects that this is a company that is owned and operated by licensed attorneys.”Trevor Brewer
How Do You Form a PLLC?
Successfully forming a PLLC in Florida requires you to fulfil a few essential elements. As a professional in Florida, you must possess an active license for the profession associated with the PLLC.
Next, you need to file articles of organization with the Florida Division of Corporations. The articles of incorporation must include a statement of purpose for your PLLC.
The name of your PLLC must include “Professional Limited Liability Company,” “P.L.L.C.,” or “PLLC” in the title. Other naming restrictions may apply to ensure the successful registration of your PLLC.
Your PLLC registration may be filed online, or you may complete a blank form for physical filing with the Florida Division of Corporations.
Limitations on a PLLC’s Liability
The attraction of limited liability entities, including corporations, LLCs, and PLLCs, is that you can insulate your interests from the debts and obligations of the company. PLLC’s offer liability protections in the following scenarios:
- Creditors looking for payment of debts owed solely by the PLLC;
- Liability for the malpractice of another PLLC member; and
- Injury of individuals related to your PLLC but with no connection to your malpractice or tort.
However, PLLCs do not offer absolute protection from liability. A PLLC does not provide liability from:
- Liabilities related to your professional misconduct or malpractice;
- Personal guarantees you’ve executed on behalf of the PLLC for loans or other financing; or
- Negligent or intentional commissions of tortious conduct.
The liability protections afforded to members of a PLLC create an attractive business structure for multi-member PLLCs.
Are there any restrictions on “limited” liability?
The attraction of limited liability entities, including corporations, LLCs, and PLLCs, is that you can insulate your personal interests from debts and obligations of the company. Creditors cannot touch your own assets for debts owed by the PLLC and claimants cannot reach your property due to misconduct by other members. Still, “limited” doesn’t mean complete elimination of liability. You cannot protect your own assets from:
- Liabilities related to your own professional misconduct; and,
- Personal guarantees you’ve executed on behalf of the PLLC for loans or other financing.
What are some of the legal requirements for a Florida PLLC?
Florida law outlines several legal requirements that PLLCs must comply with. As stated above, you must file the proper paperwork to organize your company, and it needs to bear a name that includes some derivation of “PLLC” in the title.
Additionally, the PLLC must provide only services that you are professionally licensed to provide. There is an exception for investments that are directly related to business operations.
Members of the PLLC must hold a license in the designated profession. Individuals such as business managers, investors, “silent” members, and others may not have any ownership interest in the PLLC unless they also possess the professional license issued by the State of Florida.
PLLCs prohibit current stakeholders from transferring their ownership interest to any person who does not hold the professional license. The professional license must be issued by the State of Florida and be for the professional services offered by the PLLC.
Do I need to prepare an Operating Agreement for a PLLC in Florida?
An operating agreement is essentially a blueprint for your business, defining the organizational rules, distribution of profits and losses, structure for decision making, and many other issues. You’re not required to execute an operating agreement when forming a PLLC, but there are many advantages. Generally, preparing one is a benefit because it reduces the likelihood of disputes and disruptions in company operations.
How do I deal with taxes and insurance?
For tax purposes, a PLLC is a “pass-through” company, which means that tax liability goes to the individual members instead of the entity itself. Like an S-corporation, stakeholders report income and losses on their tax returns. The IRS requires the PLLC to file of an informational return. However, there’s no tax liability for the entity.
All individual members of a PLLC should carry individual professional insurance policies to cover their own losses in the event of malpractice. The company and other members aren’t liable for such misconduct, as described above. With a proper insurance policy and coverage in place, you’re protected against claims stemming from your professional services.
How Is a PLLC Different from a Professional Association?
Ownership of a PA is based on shares of stock, whereas PLLC member ownership is based on membership interest in the business.
PAs also possess different tax obligations from PLLCs, which may become complicated. As stated above, PLLCs are treated as pass-through tax entities. Although a PA may elect to register as an S-corp, absent this filing, PAs that operate as normal corporations are subject to double taxation each tax year.
Contact a Knowledgeable Orlando, Florida Business Attorney Today
The experienced business law attorneys at BrewerLong are here to answer your questions about PLLCs in Florida. Our seasoned team of business law attorneys are equipped to offer efficient counsel to ensure the success of your PLLC.
Please contact us to schedule a consultation. After review and analysis of your business, we provide individualized legal support for your particular needs. Our office represents clients throughout the Orlando area and Central Florida in a wide range of business law matters, including business entities and formation.
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