Many therapists running their own business or private practice opt to become a Limited Liability Company, LLC. An LLC is a specific type of legal entity that grants you limited liability and makes you, as an owner, not personally liable for the debts or liabilities of your practice.
A Professional Limited Liability Company, PLLC, is a specific type of LLC for professionals licensed by a state board, such as therapists. It provides liability protection similar to that of an LLC but with additional regulations and requirements. Sometimes, it is required for occupations in which a person is licensed by the state for the services they provide.
Each state has its own requirements and designations and may require you to form a PLLC in lieu of an LLC, depending on where you live and work. You'll need to research and work with the state you operate out of in order to determine which entity is best for and required of you.
Differences between LLC and PPLC
LLC
- It can be owned by individuals, corporations, or other LLCs.
- Does not require professional licensing for ownership.
- Offers more flexibility in terms of operations and management structure.
PLLC
- It must be owned by a licensed professional.
- Requires at least one owner to be a licensed professional in the specific field.
- Often subject to specific regulations and ethical guidelines related to the profession.
However, when it comes to taxes, both LLCs and PLLc are considered pass-through entities, meaning they don't pay corporate income tax. Instead, profit and losses are passed through to the owners' personal tax returns.