LLCs vs PLLCs: What's the Difference?
Learn the key differences between LLCs and PLLCs, including formation requirements, ownership structures, and tax implications.
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LLCs vs PLLCs: What's the Difference?
When it comes to forming a business, there are many options to consider. Two popular choices are Limited Liability Companies (LLCs) and Professional Limited Liability Companies (PLLCs). While both offer liability protection and tax benefits, there are key differences between the two.
In this article, we'll explore the differences between LLCs and PLLCs, including their formation requirements, ownership structures, and tax implications.
Formation Requirements
LLCs are formed by filing articles of organization with the state, while PLLCs are formed by filing articles of organization and obtaining a professional license.
Ownership Structure
LLCs can be owned by individuals, corporations, or other LLCs, while PLLCs can only be owned by licensed professionals, such as doctors, lawyers, or accountants.
Tax Implications
LLCs are taxed as pass-through entities, meaning the business income is reported on the owners' personal tax returns. PLLCs, on the other hand, are taxed as corporations, with the business income reported on the company's tax return.
Other Key Differences
LLCs can be used for any type of business, while PLLCs are typically used for professional services, such as law, medicine, or accounting. PLLCs also require a more formal structure and governance, including a board of managers and a president.
In conclusion, while both LLCs and PLLCs offer liability protection and tax benefits, there are key differences between the two. By understanding these differences, business owners can make an informed decision about which type of entity is best for their business.