Preparing to Form a PLLC
Check your state’s requirements. You’ll need permission from your state to form a PLLC, so make sure you satisfy the requirements. You can find your state’s laws online. Some states require that you belong to certain professions, such as law, accounting, medicine, engineering, or architecture. However, other states, such as New York, define “professional services” a little more broadly. Consult with a local business attorney if you have questions. You must also be professionally licensed by the relevant state board. For example, a lawyer can only form a PLLC if they have a valid bar license from the state.
Name your business. Your business name should be memorable and distinct. It should also relate to your business. Typically, professionals include their name in their business name. For example, you might name a law firm Jacoby & Smith, PLLC. Most states will require that you include the designation “PLLC,” “P.L.L.C.” or “Professional Limited Liability Company” at the end of your name.
Confirm the name is available. Before you can register your PLLC, you should check that no one else has chosen your name. Your state should have a website of business names you can search. It is usually on the Secretary of State’s website.
Gather proof of licensing. You’ll need proof of licensing for all owners of the PLLC, who are called its “members.” For example, lawyers will need copies of their current bar cards.
Obtain prior approval, if necessary. You might need your professional licensing board to approve the creation of the PLLC ahead of time. Check with your state law and submit any required paperwork. Retain copies of all submitted documents for your own records.
Filing Your Articles of Organization
Choose a registered agent. If your PLLC is sued, you need someone who can accept service of process. Because of this, you must have an agent. Typically, one of the members can serve as the registered agent. You might also want to hire a business to serve as the registered agent. Shop around. There are many businesses that advertise their services on the Internet.
File online, if possible. Visit your state’s Secretary of State website to see if you can file your articles of organization online. If you can, then you can probably pay your filing fee with a credit card at the same time.
Draft articles of organization, if necessary. You might need to fill out a form, which you can probably download from your Secretary of State’s website. Generally, your articles will need to contain the following information: The PLLC name. The profession you will practice. Where your PLLC will be located. The name of your registered agent. The names and addresses of all original members and managers of the PLLC. The signature of at least one organizer.
Pay your fee. Each state will charge you to create a PLLC. The amount varies by state, so check with the Secretary of State’s office for the amount and acceptable methods of payment.
Send a copy of your articles to your licensing authority. After you submit your articles, you’ll receive a certificate of formation. In some states, you’ll need to forward this certificate to your state’s professional licensing board. Check with the board to see if this is a requirement.
Publish your articles in a newspaper. New York requires that you publish for six consecutive weeks in two newspapers for the county where your office is located. You must do this within 120 days of filing your articles of organization. Other states also have this requirement. Because newspapers regularly go out of business, you should check with your Secretary of State about where you should publish your notice.
Taking Care of Other Requirements
Get tax IDs. New businesses need to pay state and federal taxes. You also will need a tax ID number to open a bank account for your business. Get the following: You’ll need an Employer Identification Number (EIN) from the IRS if you hire employees or have more than one member for the PLLC. You can obtain the number here: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online. You’ll also need a state tax ID if you have employees or sell goods or services to the public. Contact your state’s Department of Revenue.
Draft an operating agreement. This document explains how your company will be run. Most states will not require it, but it’s a good idea to have one written anyway. Keep it at your principal place of business. A thorough operating agreement will contain the following information: Each member’s ownership percentage. Typically, members make a cash contribution and get an ownership percentage based on that amount. Members’ rights and responsibilities. Members’ voting powers. You can give each member an equal vote, or weight it according to their ownership percentage. The method of dividing profit and losses. Usually, you will divide them according to each member’s ownership percentage. Rules for how the PLLC will be managed. Rules for calling meetings and taking votes. Buy-sell agreements, in case a member leaves, dies, becomes disabled, or is fired. Typically, the remaining members agree to buy the departing member’s share of the business.
Obtain other licenses and permits. You’ll need a professional license to form a PLLC, but you might also need other permits and licenses from your state before you can open your doors. The requirements vary by state, but you should check with your state and county governments. You might also want to check with your nearest Small Business Development Center, which you can find here: https://www.sba.gov/tools/local-assistance/sbdc.
Hire employees legally. You must pay unemployment and workers compensation taxes if you hire employees. Contact the appropriate state office to find out how to pay them. You also should report new hires to your state’s New Hiring Reporting System within 20 days of hire. You can find your state office at the Department of Health and Human Services website: https://www.acf.hhs.gov/css/resource/state-new-hire-reporting-websites.
Open a bank account. Take your EIN and certificate of formation or articles of organization to a bank. Consult with the bank about what type of account you should open for your business. Avoid using your personal bank account. By commingling personal and business funds, you jeopardize the legal status of your PLLC.
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