What is the difference between a PLLC and an LLC?
Full Question:
I'm starting a start up Financial Advisory firm and want to know just the basic difference between setting it up as a LLC versus a PLLC? Which is better and why? Just the basics.
03/23/2009 |
Category: Corporations ยป Professional... |
State: Michigan |
#15730
Answer:
In a professional corporation, ownership is restricted to members of a certain profession. A professional corporation is typically formed by licensed professionals, such as public accountants, chiropractors, dentists, optometrists, veterinarians, osteopaths, physicians and surgeons, doctors, dentists, podiatrists, chiropodists, architects, professional engineers, land surveyors, and attorneys,etc.. In a professional corporation a shareholder is not shielded from liability for his or her own malpractice in a professional corporation, but the shareholder is not liable for the malpractice of any other employee of the corporation. Professional corporations are managed in a manner similar to general corporations, though all directors and officers of a professional corporation, other than the secretary, must be qualified persons with respect to the underlying profession of the entity. The shares of a professional corporation may only be owned by similarly qualified persons, or by partnerships, other professional corporations or limited liability companies that are wholly owned by other licensed individuals.
A Limited Liability Company (LLC) provides the liability protection of a corporation and the federal tax benefits of a partnership. Just as shareholders of a corporation are protected from corporate liabilities, the owners or “members” of a limited liability company are generally not personally liable for the debts of the business, and a member’s financial risk is limited to the amount of his or her investment. Unlike a corporation, however, the income and losses of a limited liability company are not attributed to the company, but instead flow through to the members, avoiding the double-taxation encountered by corporations.
The following are MI statutes:
450.222 Definitions.
Sec. 2. As used in this act:
(a) "Licensed person" means an individual who is duly licensed or
otherwise legally authorized to practice a professional service by a
court, department, board, commission, an agency of this state or
another jurisdiction, or any corporation all of whose shareholders are
licensed persons.
(b) "Professional corporation" means a corporation that is organized
under this act for the sole and specific purpose of rendering 1 or more
professional services and has as its shareholders only licensed persons,
the personal representatives or estates of individuals, or other persons
as provided in section 10.
(c) "Professional service" means a type of personal service to the
public that requires as a condition precedent to the rendering of the
service the obtaining of a license or other legal authorization.
Professional service includes, but is not limited to, services rendered
by certified or other public accountants, chiropractors, dentists,
optometrists, veterinarians, osteopaths, physicians and surgeons, doctors
of medicine, doctors of dentistry, podiatrists, chiropodists,
architects, professional engineers, land surveyors, and attorneys at
law.
450.4102 Definitions.
Sec. 102.
(1) Unless the context requires otherwise, the definitions in this
section control the interpretation of this act.
(2) As used in this act:
(a) "Administrator" means the director of the department or his or
her designated representative.
(b) "Articles of organization" means the original documents filed
to organize a limited liability company, as amended or restated by
certificates of correction, amendment, or merger, by restated
articles, or by other instruments filed or issued under any
statute.
(c) "Constituent" means a party to a plan of merger, including the
survivor.
(d) "Contribution" means anything of value that a person
contributes to the limited liability company as a prerequisite
for, or in connection with, membership, including cash, property,
services performed, or a promissory note or other binding
obligation to contribute cash or property, or to perform services.
(e) "Corporation" or "domestic corporation" means any of the
following:
(i) A corporation formed under the business corporation act,
1972 PA 284, MCL 450.1101 to 450.2098.
(ii) A corporation existing on January 1, 1973 and formed under
another statute of this state for a purpose for which a
corporation may be formed under the business corporation act,
1972 PA 284, MCL 450.1101 to 450.2098.
(iii) A corporation formed under the professional service
corporation act, 1962 PA 192, MCL 450.221 to 450.235.
(f) "Department" means the department of labor and economic
growth.
(g) "Distribution" means a direct or indirect transfer of money or
other property or the incurrence of indebtedness by a limited
liability company to or for the benefit of its members or
assignees of its members in respect of the members' membership
interests.
(h) "Electronic transmission" or "electronically transmitted"
means any form of communication that meets all of the following:
(i) It does not directly involve the physical transmission of
paper.
(ii) It creates a record that may be retained and retrieved by the
recipient.
(iii) It may be directly reproduced in paper form by the recipient
through an automated process.
(i) "Foreign limited liability company" means a limited liability
company formed under laws other than the laws of this state.
(j) "Foreign limited partnership" means a limited partnership
formed under laws other than the laws of this state.
(k) "Limited liability company" or "domestic limited liability
company" means an entity that is an unincorporated membership
organization formed under this act.
(l) "Limited partnership" or "domestic limited partnership" means
a limited partnership formed under the Michigan revised uniform
limited partnership act, 1982 PA 213, MCL 449.1101 to 449.2108.
(m) "Low-profit limited liability company" means a limited
liability company that has included in its articles of
organization a purpose that meets, and that at all times conducts
its activities to meet, all of the following requirements:
(i) The limited liability company significantly furthers the
accomplishment of 1 or more charitable or educational purposes
described in section 170(c)(2)(B) of the internal revenue code,
26 USC 170, and would not have been formed except to accomplish those
charitable or educational purposes.
(ii) The production of income or appreciation of property is not a
significant purpose of the limited liability company. However, in
the absence of other factors, the fact that a limited liability
company produces significant income or capital appreciation is not
conclusive evidence of a significant purpose involving the
production of income or the appreciation of property.
(iii) The purposes of the limited liability company do not include
accomplishing 1 or more political or legislative purposes
described in section 170(c)(2)(D) of the internal revenue code,
26 USC 170.
(n) "Majority in interest" means a majority of votes as allocated
by an operating agreement, or by the statute in the absence of an
allocation by operating agreement, and held by members entitled to
vote on a matter submitted for a vote by members.
(o) "Manager" or "managers" means a person or persons designated
to manage the limited liability company pursuant to a provision in
the articles of organization stating that the business is to be
managed by or under the authority of managers.
(p) "Member" means a person who has been admitted to a limited
liability company as provided in section 501, or, in the case of a
foreign limited liability company, a person that is a member of
the foreign limited liability company in accordance with the laws
under which the foreign limited liability company is organized.
(q) "Membership interest" or "interest" means a member's rights in
the limited liability company, including, but not limited to, any
right to receive distributions of the limited liability company's
assets and any right to vote or participate in management.
(r) "Operating agreement" means a written agreement by the member
of a limited liability company that has 1 member, or between all
of the members of a limited liability company that has more than 1
member, pertaining to the affairs of the limited liability company
and the conduct of its business. The term includes any provision
in the articles of organization pertaining to the affairs of the
limited liability company and the conduct of its business.
(s) "Person" means an individual, partnership, limited liability
company, trust, custodian, estate, association, corporation,
governmental entity, or any other legal entity.
(t) "Services in a learned profession" means services rendered by
a dentist, an osteopathic physician, a physician, a surgeon, a
doctor of divinity or other clergy, or an attorney-at-law.
(u) "Surviving company", "surviving entity", or "survivor" means
the constituent that survives a merger, as identified in the
certificate of merger.
(v) "Vote" means an affirmative vote, approval, or consent.
