New York PLLC (Professional LLC): A Complete Guide

What’s a New York PLLC (Professional LLC)?

A New York professional service limited liability company (PLLC) is a type of LLC. A regular LLC and a PLLC are both registered under the New York Limited Liability Company Law. Both protect your personal assets if your company runs into problems. But, they’re different in what kind of activity they can engage in, who may own and run them, and their formation requirements.

Do you need a PLLC for your New York professional business?

New York law has a strict prohibition on the “corporate practice of professions.” This means is that you can’t practice a profession licensed by the New York State Education Department (NYSED) through a regular LLC or corporation. If someone told you otherwise, please do not believe them.

Professions licensed by NYSED include:

• Acupuncturists
• Architects
• Chiropractors
• Dentists
• Doctors
• Engineers
• Interior designers
• Mental health counselors
• Nurses (including NP, LPN and RN)
• Nutritionists
• Social workers
• Therapists (including PT, OT, CAT, MFT, SLP and massage)
• Veterinarians

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). Practicing a profession licensed by NYSED through any other business entity in New York is a criminal class E felony. Class E felonies carry jail sentences of 1-5 years.

If your type of business includes providing professional services, you’ll want to consider forming a PLLC. By creating PLLC, you’ll have the peace of mind that you’re starting your new business on a strong footing.

Benefits of New York PLLCs

Many professionals prefer the PLLC structure for their New York based practices. It combines the company level liability protections of corporations and LLPs with the flexibility of the LLC. This is particularly true for solo practitioners who would otherwise be unable to access LLP type protections.

1. Full liability shield

   New York PLLCs, LLCs and corporations provide a full liability shield. The owners (members) of a PLLC are not responsible for its debts and obligations. Its managers are not either. Liability is “limited” only to the company’s assets. So PLLC members and managers only stand to lose what they keep in the PLLC.

   There is one big caveat to this. The liability shield doesn’t protect against personal wrongdoing. For instance, if you hit someone at your practice because they causing trouble, the law treats this as you doing something wrong, rather than the company. So you are fully responsible and personally liable for it. The law regards malpractice as a personal wrongdoing. Therefore, liability is not limited and PLLC members must ensure they have good malpractice insurance.

2. Charging order protection

   PLLCs, LLPs and LLCs in New York provide charging order protection. It protects owners of a company from having to work with owners they have not agreed to work with. When there is no charging order protection, a person owed money by a business owner can gain ownership of the business.

3. Flexible scope of activities, including professional services

   PLLCs can provide licensed professional services. A New York PLLC may also conduct any business that a regular LLC can. Thus, a doctor can run both a medical practice and a dance studio through a single PLLC.

4. Flexible tax structure for maximum tax advantages

   PLLCs, like LLCs, are, by default, taxed as “disregarded entities.” Tax law treats a PLLC as one and the same as its owners. A PLLC is a sole proprietorship with one owner, and a partnership with more. However, a PLLC can choose to be treated like a corporation for tax-purposes, including a subchapter “C” corporation and subchapter “S” corporation. A PLLC is not subject to federal double taxation unless it chooses subchapter “C” corporation treatment.

5. Can be a solo practice

   There is no minimum number of owners required to form a PLLC. Therefore, a New York solo practice can use a PLLC.

Downfalls of New York PLLCs

Many states are bureaucratic about the practice of licensed professions within their borders. New York is no different. These bureaucracies create certain disadvantages for New York PLLCs.

1. Ownership and management professional license restrictions

   New York PLLCs must be owned and run by professionals licensed in New York to practice the profession or professions the PLLC will engage in. So if a PLLC will provide physical and occupational therapy services, its owners, as well as managers, must be licensed in physical therapy and occupational therapy.

2. Long time and more requirements for forming

   One difference between an LLC and PLLC in New York is ease of formation. It takes a minimum of 3.5 months to form a New York PLLC. NYSED must approve a PLLC before formation is possible. NYSED usually says it takes a minimum of 90 (and sometimes 120) days to review an application. This timeframe does not include postage time, mailroom time, or quality check time. Complicated applications also need professional board approval, which can take several months. On average, forming a New York PLLC takes closer to 5 months.

3. Less widely recognized nationally

   A few states don’t recognize the PLLC form. You’ll have to form a different entity type in order to practice in these states. For example, a PLLC can’t practice in both New York and California, because California doesn’t recognize PLLCs. So a New York PLLC would need to form a PC for the California side of its practice.

Comparison of NY PLLC with other NY registered business entities

We usually recommend that professionals set up PLLCs for their practices. But sometimes, a different type of company might be a better choice. Below is a comparison of the New York PLLC against the PC, LLP, LLC and business corporation.

1. New York professional corporation (PC) vs PLLC

   • Liability shield: Equal. Both provide the same full liability shield.
   • Charging order protection: PLLC wins. New York PCs do not provide charging order protection. New York PLLCs do.
   • Permitted activities: PLLC wins. New York PCs can only conduct professional practice. New York PLLCs can conduct professional practice and also do everything a regular LLC can.
   • Taxation: PLLC wins. PCs are taxed as subchapter “C” corporations, unless they choose to be “S” corporations. Besides these, PLLCs can also choose to be taxed as sole proprietorships or partnerships.
   • Solo practice: Equal. Both can be owned and managed by a single person.
   • Ownership & management: Equal. Both must be owned and managed by licensed professionals.
   • Formation time: Equal. Both take the same time for NYSED formation approval.
   • National recognition: PC wins. PCs are more widely recognized than PLLCs in the United States.

2. New York registered limited liability partnership (LLP) vs PLLC

   • Liability shield: Equal. Both provide the same full liability shield.
   • Charging order protection: Equal. Both provide charging order protection.
   • Permitted activities: Equal. Both can conduct professional practice and engage in other business activity.
   • Taxation: PLLC wins. LLPs are taxed as partnerships. Besides this, PLLCs can be taxed as sole proprietorships, or choose to be taxed as subchapter “S” or “C” corporations.
   • Solo practice: PLLC wins. LLPs must have a minimum of two owners. PLLCs can have one.
   • Ownership & management: Equal. Both must be owned and managed by licensed professionals.
   • Formation time: LLP wins. New York LLPs do not need approval from NYSED to form. New York PLLCs do.
   • National recognition: LLP wins. LLPs are more widely recognized than PLLCs in the United States.

3. New York LLC vs PLLC

   • Liability shield: Equal. Both provide the same full liability shield.
   • Charging order protection: Equal. Both provide charging order protection.
   • Permitted activities: PLLC wins. New York PLLCs can practice licensed professions. New York LLCs cannot.
   • Taxation: Equal. Both are taxed as sole proprietorships or partnerships. But both can also choose subchapter “S” or “C” corporation taxation.
   • Solo practice: PLLC wins. An LLC cannot practice a profession in New York. A New York PLLCs can.
   • Ownership & management: LLC wins. New York PLLCs must be owned and managed only by licensed professionals. LLCs don’t have ownership or management restrictions.
   • Formation time: LLC wins. New York LLCs do not need approval from NYSED to form. New York PLLCs do.
   • National recognition: LLC wins. LLCs are more widely recognized than PLLCs in the United States.

4. New York Business Corporation vs PLLC

   • Liability shield: Equal. Both provide the same full liability shield.
   • Charging order protection: PLLC wins. New York business corporations do not provide charging order protection. New York PLLCs do.
   • Permitted activities: PLLC wins. New York PLLCs can practice licensed professions. New York business corporations cannot.
   • Taxation: PLLC wins. Corporations are taxed as subchapter “C” corporations, unless they choose to be “S” corporations. Besides these, PLLCs can also choose to be taxed as sole proprietorships or partnerships.
   • Solo practice: PLLC wins. A New York business corporation cannot practice a profession. A New York PLLCs can.
   • Ownership & management: Business corporation wins. New York PLLCs must be owned and managed only by licensed professionals. Business corporations don’t have ownership or management restrictions.
   • Formation time: Business corporation wins. New York business corporations do not need approval from NYSED to form. New York PLLCs do.
   • National recognition: Business corporation wins. Business corporations are more widely recognized than PLLCs in the United States.

How to form a PLLC in New York: A step-by-step guide

Starting a PLLC in New York is a long and arduous process. Mistakes can lead to significant delays. Also, many of the internal rules NYSED uses to review PLLC applications are unpublished. Our law firm has formed hundreds of PLLCs for clients, and we hope this guide will help you benefit from our experience. However, if you’d like us to handle the process from start to finish, look at our flat-fee package for forming a PLLC in New York.

1. Choose a name

   The business name you choose for your PLLC must meet both NYDOS and NYSED requirements. The main NYDOS requirement is that the name of the PLLC end with “PLLC.”

   NYSED’s New York PLLC name requirements are more onerous. The PLLC name must contain the profession or professions the PLLC will practice. The name also cannot be “misleading” or contain claims of superiority. Sounds pretty straightforward? — Wrong! The way NYSED interprets these naming restrictions is confounding. Here are some examples:

   • Licensed mental health counselors cannot use “LMHC,” but licensed clinical social workers can use “LCSW.”
   • Cannot use made-up words.
   • Use of “and,” “&” and “/” are restricted.
   • Use of plural words is restricted.
   • Use of “MD” requires actual MD degree (not equivalent).
   • Cannot use “hospital,” “clinic” or “center” unless a veterinary practice.
   • Cannot use words NYSED considers undignified or inappropriate.
   • Cannot use “advanced,” “best,” “exceptional,” “expert,” “outstanding,” “premier,” “special,” “super,” or “ultimate.”

2. Draft New York PLLC articles of organization

   A PLLC’s articles of organization is its birth certificate. It lists the PLLC’s name, who owns it, who manages it, and relevant addresses, amongst other things. A form is available on the NYDOS website.

3. Prepare and execute professional practice entity (PPE) Affidavit

   NYSED requires a PPE Affidavit from each owner to be part of the PLLC formation application. The affidavit certifies the PLLC owner’s license information, and that the PLLC will comply with NYSED rules and the New York Education Law. The affidavit must be notarized. A form is available on the NYSED Office of the Professions website.

4. Prepare and submit the New York PLLC formation application to NYSED

   The PLLC formation application comprises:

   • Articles of organization
   • PPE affidavit
   • Cover letter requesting consent to form a PLLC, stating license information for all owners and managers, and explaining the PLLC name
   • Contact information sheet,
   • Check for $10/owner

   Send the application to

   NY State Education Department
   Office of the Professions
   Division of Professional Licensing Services
   Professional Corporations Unit
   89 Washington Avenue
   lbany, NY 12234-1000

   In a few months, if NYSED approves, you’ll receive a “Form PLS709” certificate of authority, which is the consent to forming a PLLC. If NYSED rejects, you might be back to square one, depending on the situation.

5. Hire registered agent (optional)

   New York doesn’t require PLLCs to have a registered agent. It only requires a United States address. The address you provide is where legal and government papers are sent. These papers can be time sensitive, so an agent can help ensure that you receive them by email, even if you are out of the state or the country. You don’t want to go on a holiday, only to come back and learn you lost a lawsuit because you did not receive and respond to papers on time.

6. Submit articles of organization to NYDOS

   A New York PLLC is formed when its articles of organization are filed with NYDOS. The filing package comprises:

   • NYSED approved articles of organization
   • PLS-709 issued by NYSED
   • $200 filing fee
   • $10 certification fee
   • $25 expedite fee (recommended)
   • Cover letter requesting 24-hour expedited handling and certification of filed documents

   Send the package to

   Attention: Expedited Handling
   New York Department of State
   Division of Corporations
   One Commerce Plaza
   99 Washington Avenue
   Albany, NY 12231-0001

   Once processed, NYDOS will send you a certified copy and filing receipt for the articles.

7. Get Federal Employer Identification Number (EIN)

   The EIN serves as the tax identification for the PLLC. If you or another owner has a valid social security number, you can get an EIN directly from the Internal Revenue Service (IRS) website. Otherwise, an IRS Form SS-4 will need to be submitted to the IRS. Once successful, the IRS will issue your PLLC a CP 575 letter, which designates the PLLC’s EIN.

   The CP-575 EIN letter, together with the certified copy of the articles of organization, is needed to open a bank account. Each bank has its own policies about what they need to open an account. So call your bank to be sure.

8. Create an operating agreement for PLLC

   New York requires a PLLC to create an operating agreement. The operating agreement is a legal contract amongst the PLLC, its owners, and its managers. It details the structure and operations of the PLLC, the rights of owners and managers, and, importantly, what happens when things go wrong. A well crafted operating agreement is essential as it helps to prevent problems before they arise, and protects the PLLC and its owners from external forces.

9. Complete organization of PLLC

   A New York PLLC is ready to do business once it goes through a process called “organization.” Organizing a PLLC involves drafting, signing, and certifying a few important documents. These documents include:

   • Operating agreement
   • Statement of the organizer
   • Initial resolutions of members (owners)
   • Initial resolutions of managers
   • Membership (ownership) notices or certificates
   • Membership ledger

   These steps formally record the official acts of the PLLC, who owns how much of it, and who runs it.

10. File certified articles of organization with NYSED

    Once you’ve formed your PLLC, New York requires it to file a certified copy of its articles of organization within 30 days of filing. You would have received this if you followed the steps above. Make a copy and mail it to the same NYSED address you sent the PLLC formation application to.

11. Publish legal notices of PLLC formation

    After you’ve formed your PLLC, it must publish legal notices for six consecutive weeks in two newspapers to inform the public of its formation. This has to be done within 120 days of formation.

    Not any newspaper will do. They must be designated by the county clerk of the county where your PLLC’s legal office is located. So you’ll have to contact the county clerk for the specific newspapers, and then contact the newspapers to arrange for publication.

    The legal notices must contain information about the PLLC, including its name, when it was formed, its address and its purpose. Most newspapers can help you with this. Once the newspapers complete the process, they will each send you an affidavit of publication.

12. File PLLC certificate of publication with NYDOS

    After you receive the affidavits of publication from the two newspapers, you’ll need to draft a certificate of publication. A form is available on the NYDOS website. To complete the process, send the following to the same NYDOS address as the PLLC articles of organization filing:

    • Certificate of publication
    • Affidavits of publication from two newspapers
    • $50 filing fee
    • $25 expedite fee (recommended)
    • Cover letter requesting expedited filing of the certificate of publication

    Once processed, NYDOS will mail you a filing receipt for the certificate. This serves as proof that your PLLC completed the New York publication process.

NY PLLC checklist: Formation essentials

• Draft NY PLLC articles of organization
• Draft and notarize professional practice entity (PPE) affidavit
• Draft NY PLLC formation application cover letter, including license information and explanation of PLLC name
• Send articles, affidavit, cover letter and $10/owner to NYSED office of professions, to get a certificate of authority
• Send the certificate of authority and approved NYSED approved articles NYDOS, with a cover letter requesting certification and expedited processing, and $235
• Get certified articles and filing receipt from NYSED
• Get Employer identification number (EIN)
• Create an operating agreement
• Draft, execute and certify organizational documents, including operating agreement, statement of the organizer, initial resolutions of members, initial resolutions of managers, membership notice and membership ledger
• File certified NY PLLC articles of organization with NYSED
• Draft legal notice of publication
• Contact county clerk of PLLC’s office county, as stated in articles, to get designated newspapers in the county for legal notices
• Hire designated newspapers to publish legal notices
• Get affidavits of publication from newspapers
• Draft NY PLLC certificate of publication
• Send affidavits and certificate to NYDOS, with a cover letter requesting expedited processing, and $75.

Ongoing requirements for New York PLLCs

After you’ve successfully set up your PLLC, you’ll have to keep up to date with certain things to keep it in good standing. Otherwise, New York may shut down your PLLC.

1. Biennial statements

   New York State doesn’t require a PLLC to file an annual report or pay an annual filing fee. Instead, it needs to file a biennial statement every two years with NYDOS, in the month it was formed. It is a simple process that you can complete on the NYDOS website.

2. Tax obligations

   The annual tax returns that a PLLC has to file depends on its tax classification. Typically, it would need to file a New York Form IT-204-LL, plus, if it has more than one owner, an IRS Form 1065. However, if the PLLC chooses subchapter “C” corporation taxation, it would need to file a New York Form CT-3 and IRS Form 1120, instead; and if it chooses subchapter “S” corporation taxation, it would need to file a New York Form CT-3-S and IRS Form 1120-S. PLLCs may be subject to various local tax reporting requirements like New York City unincorporated business income tax or business corporation tax. You will want to check with an accountant about what specific tax returns your PLLC needs to file, and when the deadlines are.

Forming a New York professional limited liability company (PLLC): Final thoughts

Forming a New York PLLC for your practice is an excellent choice for your practice. Compared to other options, the PLLC provides the widest amount of protection for your assets and ownership; and is the most flexible in terms of activities and taxation.

On the other hand, setting up a PLLC is a long and difficult process, even when done with no mistakes. We’ve helped hundreds of New York professionals establish their practices, and would be happy to assist with forming your PLLC.

New York PLLC: Frequently Asked Questions (FAQ)

1. What does forming a PLLC in New York cost?

   If you do it yourself, forming a professional limited liability company in New York will cost a minimum of $270. This excludes expedited handling fees, registered agent fees and newspaper fees. NYDOS charges $200 to file articles of organization, and $50 to file certificates of publication. It also charges $10 to certify a document, and $25 per filing for 24-hour expedited handling. NYSED charges $10/member for PLLC formation approval. Registered agent and newspaper fees vary.

2. Do you need a lawyer to form a PLLC in New York?

   No. A lawyer isn’t needed to form a Professional LLC. However, setting up a PLLC is complicated, and an experienced business formation lawyer can help you navigate the process.

   When you hire us to set up your PLLC, we get all the information needed in the beginning, and review and refine it to minimize pushback from NYSED and NYDOS. We then prepare all the documents, handle all the communications, and shepherd the entire process, while sending you periodic updates along the way. Rarely, NYSED contacts us with something they are slightly uncomfortable with. When this happens, we work with you and them to find a solution where everyone is comfortable, and NYSED usually approves on the spot. Typically, all you have to do is sign documents at the starting line and finish line – we do everything else.

3. Can you convert an LLC into a New York PLLC?

   No. NYSED will not approve the conversion of an LLC into a PLLC. The closest you can get to a conversion is to go through the complex process of a “merger.” In a merger, a new PLLC is formed, and then the LLC becomes part of the PLLC and ceases to exist. The PLLC remains as the legal continuation of the LLC.

4. Can you start a New York practice without a PLLC?

   Yes. The most basic business form is the “sole proprietorship.” This is where you simply hang a sign on your door and say you’re open for business. Professionals can practice in New York through a sole proprietorship. However, in a sole proprietorship, you and your practice are treated as a single unit. So your personal assets aren’t protected in your business.

   For example, imagine if someone was walking up the stairs to your office, and slipped on a puddle of water. The person fell and was seriously injured. The person sues your practice is awarded $5,000,000 by the court. Your practice has $1,000,000 in assets and pays this amount to the person. What happens to the remaining $4,000,000? If your practice was a sole proprietorship, you would be personally responsible for it, and would need to pay the $4,000,000 out of your personal assets even if it bankrupts you. But, if your practice was a PLLC, you won’t have to pay a cent out of your personal assets, and the person forfeits the $4,000,000.

5. Can you form a New York PLLC with someone from a different profession?

   Yes, with exceptions. NYSED allows PLLCs to practice multiple professions, so long as at least one owner of the PLLC is licensed in each of the professions practiced. However, you cannot form a PLLC that will practice more than one profession, if it will practice any of the following professions:

   • Certified behavior analyst assistant
   • Creative arts therapist
   • Dentist
   • Licensed behavior analyst
   • Licensed clinical social worker
   • Marriage and family therapist
   • Doctor
   • Mental health counselor
   • Psychoanalyst