Law Firm Structure: Llc In New York?

Lawyers in New York have several options when it comes to the business entity for their firm, including a professional service limited liability company (LLC or PLLC). A PLLC is a type of business structure that protects business owners and investors from personal liability. It is a variant of the LLC structure, which combines corporation-style limited liability with partnership-style flexibility, but with a few key differences. For example, PLLCs are only available to licensed professionals, and those who manage PLLCs must be licensed in New York. In this article, we will explore the requirements and benefits of forming a PLLC in New York, as well as other business structures available to law firms.

What is a PLLC?

A PLLC, or a Professional Limited Liability Company, is a type of business structure in New York that is geared towards professionals. It is a variant of the standard LLC structure, but with a few key differences.

Firstly, a PLLC is specifically for licensed professionals, such as attorneys, physicians, and other occupations designated in Title Eight of the Education Law. The standard LLC, on the other hand, does not require its members to be professionals or hold any special qualifications.

Secondly, a PLLC must be owned and managed only by licensed professionals, whereas an LLC can be owned by any individual, corporation, partnership, or legal entity.

Thirdly, a PLLC must be formed by filing Articles of Organization pursuant to Section 1203 of the New York State Limited Liability Company Law, and it must be approved by the NYSED. The standard LLC, however, does not require approval and can be formed by filing the Articles of Organization with the Department of State.

Lastly, a PLLC offers personal liability protection and flexibility, as well as pass-through taxation, which can benefit a professional business greatly.

Overall, a PLLC is a great choice for professionals in New York who want to enjoy the benefits of an LLC while still being able to practice their licensed profession.

How to form a PLLC in New York

In New York, a law firm can be a professional limited liability company (PLLC) rather than a traditional LLC. This is because New York law prohibits the "corporate practice of professions", meaning that a profession licensed by the New York State Education Department (NYSED) cannot be practised through a regular LLC or corporation. The only registered business entities that can provide professional services in the state of New York are the PLLC, PC, and registered limited liability partnership (LLP).

Check the availability of your desired PLLC name

The New York State Department of State charges a $5 fee for searching the records for the availability of a name. This can be paid via money order, MasterCard, Visa, or American Express.

Prepare and file the Articles of Organization

A PLLC can be formed by filing the Articles of Organization with the Department of State, pursuant to Section 1203 of the New York State Limited Liability Company Law. A sample format for this document is available from the Department of State. The Articles of Organization must include the New York State professional license number for each licensed member/manager and a Professional Corporations Corporate Contact Information Form.

Obtain a Certificate of Authority

This can be applied for by mail from the New York State Education Department Division of Professional Licensing Services. There is a $20 filing fee for this application.

Publish a notice of the formation of your PLLC

Section 1203 of the Limited Liability Company Law requires a copy of the Articles of Organization or a notice related to the formation of the PLLC to be published in two newspapers for six consecutive weeks. These newspapers must be designated by the county clerk of the county in which the office of the PLLC is located. The newspapers will charge a fee for the publication of the notice.

Submit a Certificate of Publication to the Department of State

Within 120 days of the publication, submit a Certificate of Publication, along with the affidavits of publication of the newspapers, to the Department of State, with a $50 filing fee. Failure to do so within the timeframe will result in the suspension of the PLLC's authority to carry on, conduct or transact business.

File a Biennial Statement

Domestic limited liability companies are required to file a Biennial Statement two years after the filing of the Articles of Organization with the NYS Department of State, and every two years thereafter. The filing fee is $9.

Please note that this is a complex process that can take several months, even without mistakes. It is recommended to seek legal advice if you have any questions.

Advantages of a standard LLC

In New York, a law firm can be a PLLC (professional limited liability company), a type of entity formed to practice a licensed profession. Regular limited liability companies (LLCs) and corporations cannot be used for this purpose in New York. However, a PLLC offers the best parts of an LLC, but with fewer restrictions than a professional corporation (PC).

Now, here are the advantages of a standard LLC:

LLCs offer a good combination of protection and flexibility. They provide a range of taxation alternatives while shielding individual members from personal liability. LLCs are taxed as disregarded entities or partnerships by default, but you can elect to have your LLC taxed as a corporation or S corporation. This flexibility allows members to avoid double taxation and deduct operating losses from their income.

LLCs also offer flexible management structures, allowing owners to shape the company to meet business needs. The owners of an LLC are "members" rather than shareholders or partners, and an LLC can have one or many members.

Another advantage of LLCs is the protection they offer against business debt and liability. In an LLC, the company's assets can be liquidated to repay debt, but the personal assets of the owners are protected.

LLCs are also easy and efficient to set up, making them a popular choice for many business owners. They can be formed by filing formation paperwork with the state, and the flexible structure of an LLC means that it can be adapted to the needs of the business.

Requirements for a PLLC

In New York, a PLLC (or a Professional Limited Liability Company) is a type of entity formed to practice a licensed profession. A PLLC is identical to an LLC, with two exceptions: every member of a PLLC must be a licensed professional, and the company must be primarily managed by professionals in that field.

Licensing and Professional Requirements

All members of a PLLC must be licensed professionals in their respective fields. The company must also be managed and owned by licensed professionals. This means that a non-professional cannot be a member or manager of a PLLC. For example, a law firm cannot hire a CEO unless that person holds a license to practice law.

State Licensing Approval

PLLCs require state licensing approval before formation, which must be obtained from the state licensing board for your profession. This is in contrast to LLCs, which only need to file with the Secretary of State.

Operating Agreement

New York requires a PLLC to create an operating agreement. This is a legal contract among the PLLC, its owners, and its managers. It details the structure and operations of the PLLC, the rights and duties of owners and managers, and what happens in the event of disputes or other issues.

Articles of Organization

To form a PLLC, you must submit articles of organization to the New York Department of State. These articles must be signed by an organizer and identify at least one member. The articles must also include the names and addresses of all members. As you add or remove members, you must amend your articles.

Business Name

The name of your PLLC must meet both NYDOS (New York Department of State) and NYSED (New York State Education Department) requirements. The main NYDOS requirement is that the name of the PLLC ends with "PLLC." The NYSED requirements are more detailed, as the PLLC name must contain the profession or professions the PLLC will practice. The name cannot be misleading or contain claims of superiority.

Publication Requirements

New York law requires that a copy of the articles of organization or a notice related to the formation of the PLLC be published in two newspapers in the area it is based in for six consecutive weeks. After this, a Certificate of Publication, along with the affidavits of publication, must be submitted to the Department of State within 120 days to avoid suspension of the PLLC's authority to conduct business.

Biennial Statement

Unlike LLCs, PLLCs in New York are required to file a biennial statement that identifies the company's address or its resident agent's address.

Compliance

Each member of a PLLC must maintain their licenses, and it is recommended to conduct periodic compliance reviews with your lawyer to stay on top of deadlines and required filings.

Taxation

The EIN (Employer Identification Number) serves as the tax identification for the PLLC. If you or another owner has a valid social security number, you can obtain an EIN from the IRS website. The PLLC can choose to be treated like a corporation for tax purposes, including subchapter "C" and subchapter "S" corporations.

Please note that this is not an exhaustive list of requirements and that seeking professional legal advice is always recommended when forming a new business entity.

Naming rules for a PLLC

Choosing the right name for a Professional Limited Liability Company (PLLC) in New York is a legal requirement. The New York State Education Department (NYSED) plays a key role in approving or rejecting PLLC names for private practices. The NYSED takes its responsibility of regulating PLLCs seriously and holds very high standards to ensure that the chosen business name complies with the specific rules and regulations of New York State.

The naming rules require that the letters "PLLC" follow the chosen name. The name must also comply with the guidelines established by the New York State Department Division of Corporations. The professional body governing the licenses may have naming requirements and restrictions of its own.

Some examples of restricted words for business names in New York are: academy, annuity, assurance, attorney, bank, benefit, blind, board of trade, casualty, college, conservatory, corporation, cooperative, council, doctor, education, elementary, endowment, exchange, fidelity, finance, guaranty, handicapped, historical, indemnity, insurance, investment, lawyer, mortgage, partnership, school, surety, union, and university. This list is not exhaustive.

The name must be unique and distinguishable from other business names on file with the New York Department of State. The Department of State's website has a list of all the corporate filings in the State of New York. Even if the chosen name complies with the NYSED's requirements, the application can still be rejected if the PLLC name is too similar to an existing professional entity in New York.

The process of forming a PLLC in New York is complex and can take several months, even if no mistakes are made. The NYSED uses many unpublished internal rules to review PLLC applications.

Frequently asked questions