What is a PLLC, and How Does It Relate To You?

 Posted on March 28, 2023 in Business Law

Oswego Professional LLC Attorney

Limited Liability Company vs. Professional Limited Liability Company?

Limited Liability Company (LLC)

A Limited Liability Company is also known as an "LLC," a popular business entity that incorporates the flexibility and limited liability protection of a Corporation. Essentially, an LLC combines a partnership and a corporation, which includes the primary benefit of limited liability protection. A weakness of a partnership is it lacks limited liability protection. A drawback of a Corporation is its' rigid corporate structure. The LLC incorporates the best features of a Partnership and the best parts of a Corporation.

LLC Structure

The formation of an LLC is the most popular business entity and cost-effective in Illinois. The LLC provides limited liability protection meaning that the owners of an LLC are not responsible for the debts of the LLC. Owners of an LLC are called "members." Generally, an LLC member is not personally liable for the company's bills and liabilities. However, there are circumstances where a member may be personally responsible for the debts of an LLC. Seeking an experienced business counsel is vital to help you structure your business enterprise. An accountant is inexperienced in business law and is not suitably qualified to assist in legal matters. People falsely assume that the formation of an LLC is simple. The structure and formation of an LLC are simple, but other factors must be considered when forming an LLC for a client. An accountant is ill-equipped to understand these factors. These factors may include providing strategies to protect one's assets and house in case of a lawsuit. Business ownership is risky, and the legal perils are real. Similarly, an LLC benefits from limited liability protection like a Corporation. 

LLC Business Structure

Forming an LLC is much simpler than a Corporation and does not require the same burdensome formalities, paperwork, and annual filings with the State. Those subject to liability in an LLC, like in a Corporation, are called Members. Generally, an LLC Member is not personally liable for the business’s liabilities. This includes actions taken by other Members of the LLC that give rise to liability. 

The LLC Business Structure combines the tax benefits of being a pass-through business entity, which means that a Member(s) taxes are reported on their tax return. The LLC enjoys the same pass-through tax structure as an S corporation. The LLC is a famous business structure and a highly-popular business structure.

What is a Professional LLC (PPLC)? 

A Professional LLC is a recent development with the same benefits as an LLC. Still, a Professional LLC is designed for businesses regulated by the Illinois Department of Financial and Professional Regulation ("IDFPR"). Illinois has recently prohibited professionals from being organized as LLCs. However, an extensive list of professionals is regulated and required to use the Professional LLC designation. These professionals include the following:

• CPAs and Accountants

• Therapists

• Counselors

• Physical and Occupational Therapists

• Barbers 

• Chiropractors

• Engineers

• Salons

• Dentists

• Physicians

• Cosmetologists

The Professional LLC provides members of an LLC with similar protections to members of an LLC. The critical difference is that certain professionals that IDFPR regulates are supposed to register as Professional LLCs and their LLCs or Corporations with IDFPR. Limited liability protection of an LLC or Corporation does not cover professional negligence. However, a malpractice insurance policy must cover a professional's professional negligence.

How Does a PLLC get Formed?

The first step in forming an LLC is to create the LLC. After the Secretary of State accepts the LLC, the second step is filing an Articles of Amendment (LLC Form 5.25). Next, article 3(h) is filled out, changing the name and format to a PLLC versus an LLC. After the Illinois Secretary of State recognizes this change, you must file the PLLC (identified by the State of Illinois) with IDFPR. Hiring an experienced business counsel is important because creating a Professional LLC is only possible for somebody with previous experience.

How Do You Amend Your LLC to a Professional LLC?

According to the Illinois Professional Limited Liability Act (see 805 ILCS 185/) and the Illinois Limited Liability Company Act (see 805 ILCS 180/), businesses that qualify to be regulated by the IDFPR may amend their LLC formation documents with the Illinois Secretary of State and form a PLLC instead of an LLC. Therefore, this change should be done immediately to avoid penalties and disruption in your business operations.

Kendall County Professional LLC Attorneys Serving Yorkville, Oswego, Plainfield, Plano, and Surrounding Areas

Gateville Law Firm can assist you with forming an LLC or Professional LLC or amending your LLC to a PLLC. Running a business is difficult because of several taxes, legal, and other requirements. Hire an experienced business attorney that can assist you. Call us today at 630-780-1034. Our attorneys and staff have the knowledge and systems to serve you carefully.

Sources:

Illinois Limited Liability Company Act (see 805 ILCS 180/)

Illinois Professional Limited Liability Act (see 805 ILCS 185/)

www.corpnet.com

https://idfpr.illinois.gov/profs/proflist.asp