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Written by : Christopher Rudisail |
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okay in this video i wanted to address some entity choice issues so in this video we're going to cover do you need to set up a llc so that's a limited liability company or a pllc which stands for professional limited liability company so the reason why this is an important discussion is because under state law depending on what kind of business you're running you might not be allowed to form certain entities okay you always need to check with your your state regulator your state statute so we're gonna start at the top here i've got one slide in front of us and an example and we'll go over why entity selection is so important so again just to reiterate before you ever form a legal entity for your business make sure you're forming the correct one you need to consider things like what line of business are you going to be in what are the tax considerations um and who's going to own it right do you have u.s persons non-us persons do you have entities in there do you have a trust that's going to be an owner all of these things drive what kind of entity you might want to form and also each each state has their own rules and regulations around what kind of business you can form right so you need to very carefully review your state statutes and regulations to determine which and which entity is appropriate for your business so the state of florida is what we're going to focus on here as an example in the state of florida amongst other states they draw a distinction between what is a pllc or a professional limited liability company and just your standard llc the llc is certainly the most popular entity type in the state and it can be used for most businesses however in certain cases so certain businesses certain industries certain professions you cannot use an llc if you're using a standard llc you are in violation of state statute so under florida law a professional services company these include companies that are being operated by doctors lawyers cpas dentists engineers is another one these are the types of businesses where the people that are doing the work need special licenses from the state and so for that reason they're not allowed to operate under just a standard llc structure these businesses have to be organized as either general partnerships limited partnerships llps limited liability partnerships they can be organized as a professional association or pc is also permitted or lastly but not least a professional limited liability company right so very very important here notice how the standard llc is nowhere in this list that is not allowed so here's where it goes all wrong i see a lot of people set up companies using one of those online entity formation services so they're just document processors they're not lawyers they're not accountants they don't provide any tax advice legal advice nothing they're just filing the forms for you these types of companies they don't consider anything about your business when they file the paperwork none and so what you'll find yourself in this predicament where you'll use a company thinking it's the appropriate entity type and then afterwards you find out wait a minute i just formed an entity that i'm completely not allowed to operate under state law given the type of my business so in this example we have adam and brian are licensed attorneys in florida and they're going to open their own law firm right so they're each going to own 50 of the firm and after owning 50 of the firm so they decide that they're going to hire um just one of these processing companies to file the documents of the state of florida right they don't want to do it themselves and so based on the online questionnaire this online company decides well we're just going to set up an llc for you they provide them just a template llc operating agreement writes all boilerplate terms nothing specific and this company knows that they're going to want to run a law firm yet because they don't know any better they're just going to still file documents to form an llc and not a pllc so what's the obvious problem here well under state law a law firm adam and brian are attorneys they're going to be operating a law firm a law firm cannot be run as an llc under florida law so adam and brian are in direct violation of the state statutes this creates problems not only for their business but them professionally for their own florida bar licenses so obviously you would want to head off this problem to begin with but now that the damage is done they either need to you know they need to cease conducting business immediately dissolve the entity and form a new one or file the appropriate documentation to convert the llc to a professional limited liability company as soon as possible uh so this is why and this applies to all states right each state has their own uni unique rules and again just to reiterate figure out what type of business you're going to be opening look at your state statute see if you can operate under that type of structure and if not find the appropriate one make sure you're doing this right from the beginning because you don't want to find yourself in the same mess that adam and brian are dealing with right now so uh that covers it for the pllc versus llc structure debate um i hope you found that helpful if you have any questions please leave me a comment below happy to answer any i can and i look forward to seeing you again in the next video thank you
Thanks for your comment Teddy Lozo, have a nice day.
- Christopher Rudisail, Staff Member
what is a pllc pllc stands for professional limited liability company but first i'm not your attorney i'm not your cpa i'm just providing easily accessible information you can get anywhere on the internet through the google machine i'm just trying to curate it all here into one place for all entrepreneurs just like you so let's get into it um a pllc is required by states for very specific job types um so for lack of kind of better icons that i've got here clipart um you know hal is a plumber um and uh let's call this guy jeeves i guess jeeves um let's say jeeves is an architect in some states jeeves here is considered a professional because you have to get a a certificate or some sort of like a license in order to become an architect so in some states and again this is going to be different in every state so whichever state that you're forming your llc in if you don't know which state you're forming it in we have a video for that we also have a playlist that goes over a bunch of different uh stuff that talks about this kind of small business 101 from soup to nuts all this great information packed in a night look nice little bow um so let's say jesus is an architect and um maybe in uh wyoming he doesn't need to be considered a pllc but in new york maybe he does so he just needs to check with his usually if you've been working in a state you went to school in a state schooling for whatever you're doing they're probably going to let you know that you need to be one or the other i have seen instances where an architect didn't know and they filed an llc through us and then came back and said hey i needed a pllc why didn't you tell me and frankly we don't you know there's so many different permeations of everything it's it's impossible for us to know we kind of expect the customer uh to to tell us what they need um so most of the time a plc is going to be for things like an attorney or a accountant or an architect or a healthcare professional a nurse maybe um different states uh are a little less uh uh strict states like new york uh are very strict uh i i know that to provide like some kind of nail salon services uh in the state of new york you have to go to the health review board we've actually done that with a customer before where we had to get approval from the health board of new york state to get them a pllc so uh that's all it stands for is a professional limited liability company do your research on this one you're gonna need to kind of just type in you know what your job title is you know are you a plumber are you a carpenter um are you an attorney what not but generally i would say don't hold me to this but i would generally say that attorneys cpas healthcare professionals and architects probably and engineers are the ones that need to check for this type of stuff and do this research and see do they need to be an llc or a pllc but again uh figure out whether you want to be an llc or corporation then figure out what state you're going to file in then figure out do you need a pllc or a professional corporation or just a limited liability company or a corporation and that's everything you need to know about what a pllc is without doing your own research this is just kind of the uh the surface level information here just to kind of get you going uh but if you got information uh good information out of this video please like and subscribe we've got a lot more videos coming if you have a question about uh you know wanted to do a deeper dive or you have another question ask in the comments but also if you're forming an llc or a corporation or you've got a friends or family members that are doing that send them over to betterlegal.com and we will help them and get them the most complete and affordable package that contains everything you need to be able to walk into a bank and open a business checking account and i will see you on the next video
Thanks JeoseMasELedaA your participation is very much appreciated
- Christopher Rudisail
About the author
I've studied soil science at Great Basin College in Elko and I am an expert in remote sensing. I usually feel drunk. My previous job was radio & tv talk show host I held this position for 19 years, I love talking about drama and dance crew. Huge fan of Jill Morrison I practice acrobatic gymnastics and collect buttons.
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