Choosing the right business structure to form a business in Florida determines the way the company must deal with taxation and which type of liability protections it may enjoy. It is crucial to consult with an expert attorney to identify the appropriate business structure for each project.
In this article, you will have an overview of the differences between a limited liability company (LLC) and a professional limited liability company (PLLC).
Understanding Florida Business Formation – LLC vs. PLLC
Limited Liability Company
A limited liability company is a hybrid business structure that combines elements of corporations (C-corps) and partnerships.
The owners of an LLC are not responsible for the company’s liabilities. For example, if an LLC is sued, the owners’ personal assets are not exposed to creditors’ claims or judgments placed against the company.
In Florida, LLCs enjoy pass-through taxation, as owners (also referred to as “members”) must report their share of the business’s profits and losses on their individual tax returns. As a consequence, any taxes due are paid individually.
This unique approach to taxation permits LLC members to avoid double taxation, which taxes income at the corporate level and again at the individual level when shareholders receive dividends.
Flexibility is another advantage associated with LLCs. This type of business structure has no restrictions on the number of members allowed, and members are free to choose how the company’s profits should be distributed among them.
LLCs have fewer formalities than corporations, requiring no corporate minutes or resolutions, for instance.
Professional Limited Liability Company (PLLC)
A professional limited liability company (PLLC) is a unique business structure designed for licensed professionals. In some states, professionals whose occupations require a license do not permit them to form limited liability companies.
Similar to LLCs, Florida PLLCs shield members against claims of financial debts or personal injuries. Please note that members can still be held accountable for malpractice claims and some types of personal debts.
For example, let’s say two doctors form a PLLC in Florida. If a patient files a malpractice claim against one of them, the other is not liable for claims against other members. Hence, the personal assets of unoffending members enjoy protection against a third party’s liability.
Different licensed professionals in Florida may rely on PLLCs to protect themselves, including:
- CPAs (certified public accountants)
- Doctor of Medicine
- Doctors of dentistry
- Chiropractic physicians
- Osteopathic physicians
- Life insurance agents
Service providers need to uphold a higher standard of professionalism due to their level of education and the impact of their activities. If a licensed professional commits malpractice, it may result in negative consequences for a person’s health, finance, or livelihood.
The option to form a Florida PLLC is exclusive to licensed professionals. In a PLLC, only licensed professionals can be members, conducting business within their specific profession. When forming an LLC, the members must provide the necessary licenses to demonstrate they have authorization from the state of Florida.