Form a Professional Corporation PC or PLCC Online
In this article, we’ll delve into the world of business naming conventions and explore the significance of «P.C.» after a business name. Nikki Winston is a CPA who enjoys writing about accounting, tax, personal finance, and career advice. Both PC and LLC organizers must file the necessary paperwork with what does pc stand for in business the secretary of state to form a new entity.
File a PC or PLLC
Limited liability companies (LLCs) are another type of incorporated business entity. A PLLC and a PC will both provide an additional layer of protection against malpractice suits arising from actions taken by other owners of the company for a professional service. However, professional corporations are recognized only in certain states and reserved for some professions, whereas any type of business can form an LLC.
In this way, each remaining professional shares in the management responsibilities and profits without any liability for each other’s malpractice actions. If a business in Michigan is engaged in the sale of products or services, it must get a license. The particular requirements, however, may change according on the kind of business and the region.
For example, North Carolina prohibits licensed professionals from forming LLCs to render their services. The professional corporation is an incorporation structure preferred by highly skilled workers who’d like to start an independent practice rather than work a corporate job. Since regulations differ across state and local jurisdictions, the registrations required for your business are unique depending on the location and your business operations. However, payroll tax and sales tax are common registrations for businesses in many state and local jurisdictions. The burden of paperwork and administration is often too much for a small business to handle.
This doesn’t protect you from every financial responsibility, but it helps. For example, if a client slips and falls on your steps, she can sue your corporation but not you personally; the corporation might be required to pay her damages, but she can’t touch your personal assets. However, if you’re a doctor and commit malpractice, you can still be held personally liable in addition to the corporation being liable. Your PC protects other shareholders, such as other doctors in your practice.
Professional Corporation (PC) vs. LLC (How to Choose)
In many instances, a group of professionals licensed in the same industry forms a group of practitioners. By doing so, it provides liability protection for each member and practitioner of the group. The group has this protection whether they all work in the same facility or in separate locations. A PC is a variation of a corporation, but unlike a traditional corporation, the shareholders must hold a license in the business in which they plan to operate.
In this article, we’ll delve into the mystery and provide you with the answers you’ve been looking for. Consult an attorney or CPA before choosing the best legal entity for your business. The regulations for setting up and running a PLLC vary from state to state, but in most cases the steps are similar to starting an LLC. Here is an overview of the process, but again, you’ll need to check your own state’s specifics. When browsing through company names, you may have come across a suffix like «P.C.» or «PC» after a business name.
The two main differences between LLC and PC are eligibility criteria and taxation.
Limited Liability
A professional corporation can only be formed in certain states and limited to certain licensed professions. LLCs have many benefits as well, including the simplicity of forming the entity. Members don’t have as many reporting or governance requirements as PC shareholders. LLC members are all equally liable for both their negligent acts and the debts of the business. The better news is that PC owners can elect to be taxed as an S-corporation by filing Form 2553 with the IRS. While many states require annual registrations or franchise taxes for LLCs, some states are free to file while others can be hundreds of dollars.
This is what is meant by the term limited personal liability and the main reason people who start off as sole proprietors or in partnerships choose to incorporate. In conclusion, «P.C.» after a business name indicates that the company is a proprietary company, owned by one or more individuals. This structure is often used by small businesses or entrepreneurs who want to maintain control over their company. While there are other business structures available, proprietary companies offer a unique set of characteristics that can be beneficial for certain businesses.
Forming a professional entity (PC or PLLC)
Being your own boss and starting your own company means you’re now responsible for looking into all the administrative practices, paperwork, legal documents, and taxes yourself. All these extra steps can be stressful if you’re completely new to it all. Even for a seasoned veteran, unless you happen to be an experienced business attorney, there are probably going to be some things you will need a hand with. Choosing to be taxed as an S-corporation allows LLC members to pay less tax. They’re instead considered employees of the corporation and don’t pay self-employment taxes. An LLC taxed as a C-corporation means members become shareholders and don’t pay tax on their profits.
In this case, the business entity must file as a foreign (out-of-state) company. Also, some states allow professionals to choose between forming a professional corporation or forming a regular corporation. Anyone is eligible to form a limited liability company, but some businesses, such as insurance and banking businesses, cannot form an LLC. Only professionals with a state license authorizing them to practice can form a professional corporation. In conclusion, it’s critical to comprehend the numerous business jargon and legal requirements before starting a business.
Differences Between an LLC and PC
- Organizing a professional corporation is not necessarily the only option.
- This is what is meant by the term limited personal liability and the main reason people who start off as sole proprietors or in partnerships choose to incorporate.
- By default, LLCs are disregarded for tax purposes, and members report all business income on personal tax returns.
- The main reason to set up your business as a PC is to limit your personal liability from lawsuits and business debts.
- Before we get too deep into a comparison, it is important to note that this guide is only here to serve as an overview for general education.
If you’re like many licensed professionals, your dream is to be your own boss. Maybe you’ve worked under someone else and learned the ropes or perhaps you’re ready to just form your own company right off the bat. Whatever your situation may be, opening up a new business is an exciting time that can also sometimes bring about its own set of headaches.
It’s a legal structure used in some jurisdictions to provide professionals with the limited liability of corporations while still holding them personally liable for professional malpractice claims. Specific requirements of corporations vary significantly from state to state. In terms of tax advantages and tax law, an LLC has the flexibility to go with the default, which is “pass through” taxation, S-Corp.
- Instead, they are limited to Professional Corporations or Registered Limited Liability Partnerships (RLLPs).
- Similar to how the PLLC is analogous to the LLC, a PC is in many ways similar to a standard corporation.
- We’ll highlight what makes each business structure unique, what options you have with each one, and what their limitations are.
- Practitioners must also pay licensing fees and renew credentials each year.
LLCs and PCs have similarities in how they are formed, but professional corporations require additional steps. LLC owners file articles of organization, and PC owners file articles of incorporation in the state where they’ll do business. Business owners are wise to consider several types of legal entities before deciding to register as a PC or any type of corporation. In addition to federal rules, look into your state’s rules for each type as well because many states have different requirements for them. In the event that a professional retires or chooses to leave the group, ownership is easily transferred to the others in the group.
Can a professional corporation be taxed as an S Corp?
Similar to how the PLLC is analogous to the LLC, a PC is in many ways similar to a standard corporation. The main difference being, again, that professionals cannot operate as regular corporations and only professionals can be shareholders in a PC. We’ll highlight what makes each business structure unique, what options you have with each one, and what their limitations are. Unlike other entities, selling a PC is simple and only changes the name of the shareholders.