Are you looking to form a professional limited liability company (PLLC) in New York, but you’re not sure how the formation process works? There are several important steps when it comes to creating a New York PLLC that is compliant and able to do business in the state.
What is a New York Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. A New York PLLC is an LLC formed for the purpose of rendering professional services such as those rendered by attorneys, physicians, dentists, veterinarians, pharmacists, nurses, engineers, architects, public accountants, and other professions listed in Title Eight of New York’s Education Law.
The New York PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in New York have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in New York (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
New York requires that a professional limited liability company’s name end with the words "Professional Limited Liability Company" or "Limited Liability Company" or the abbreviation "P.L.L.C.," "PLLC," "L.L.C.," or "LLC." The name must accurately describe the profession for which the company was formed and may not be misleading. If the name references a specialized area of professional practice, evidence must be submitted substantiating the authority to use such specialty designation. In addition, the name of a deceased person may not be used unless 1) such person's name was already part of the name at the time of such person's death, or (2) such person's name was part of the name of an existing partnership or professional corporation and at least two-thirds of such partnership's partners or corporation's shareholders, as the case may be, become members of the PLLC.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can officially check if a name is available by submitting a written request to the Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.The request should state that you wish to confirm the availability of a name and list the name or names to be searched. Once you’ve chosen a name and confirmed it’s available, you can reserve the name for 60 days for $25 by submitting an Application for Reservation of Name to the Division of Corporations. The reservation period is renewable for two subsequent 60 day periods if a Request for Extension of Reservation of Name form is submitted with a $25 fee prior to the expiration of the current reservation period.
Step Two) Designate a Registered Agent
Every PLLC in New York is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In New York, the Secretary of State acts as agent for service of process for domestic LLCs, including PLLCs. Appointing a registered agent in addition to the Secretary of State is optional. If you choose to designate a registered agent, such agent must be (1) a natural person who is a resident of New York or has a business address in New York, (2) a domestic limited liability company or an authorized foreign limited liability company, or (3) a domestic or foreign corporation authorized to do business in New York.
Without a registered agent, you could lose your good standing with the state of New York, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your New York professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Profession that your PLLC will practice
- County in which your PLLC is located
- Address for purposes of forwarding service of process
- Name(s) and residence address(es) of the original members and original managers, if any
- Name and signature of organizer
- Filer’s name and mailing address
You can file your completed Articles of Organization by mail, in person, or by fax with the New York Department of State. New York PLLCs currently can’t be formed online. You will also need to file a certified copy of the Articles of Organization with your profession’s licensing authority within 30 days after filing with the Department of State.
Cost to Form a PLLC
The filing fee for the Articles of Organization is $200. Expedited processing is available for fees ranging from $25 to $150.
Filings are typically processed by the Department of State within 7 business days. 2 hour, same day and 24 hour processing options are available for an additional fee. These processing times are from when the appropriate unit as the Department of State receives your documents, and also assume that your documents are complete and without any errors.
Step Four) Create an Operating Agreement
After you register a PLLC in New York, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
New York has a number of state taxes, such as corporation franchise tax and sales tax, that may apply to your business. Which New York state taxes apply to your PLLC will depend on how your PLLC is treated for federal tax purposes and its specific business activities. More information about New York state taxes is available on the New York Department of Taxation and Finance’s website. You can also review the New York State Tax Guide for New Businesses to learn more about business taxes in the state.
Depending on where in New York your business is located, you may also need to pay some local taxes. You should contact your PLLC’s city and county to confirm whether any additional taxations apply to your business. Resources for the four largest cities in New York are available online: New York City, Buffalo, Rochester, and Yonkers.
Step Six) Obtain Business Licenses and Permits
Most businesses in New York are required to obtain some kind of state license or permit to operate legally in the state. You can use the NYS Business Wizard for help determining the requirements for your PLLC. You will also need to confirm that you meet the necessary licensing requirements for your profession. The New York Office of the Professions maintains a list of professions online. As with taxes, you should also check with your PLLC’s city and county to confirm if any local licensing requirements apply to your business.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in New York
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
New York requires that all employers carry workers’ compensation insurance and disability insurance. If you plan to hire employees, your PLLC can fulfill these requirements either through obtaining coverage through an insurance carrier authorized by the Workers’ Compensation Board, or your PLLC can seek authorization to self-insure, either individually or as part of a group. You can visit the Workers’ Compensation Board’s website for more information about workers’ compensation and disability insurance. The Workers’ Compensation Board also publishes an Employers’ Handbook. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
In New York, income is reported on income tax forms filed with the Department of Taxation and Finance. The appropriate form for your PLLC form depends on how your PLLC is classified for tax purposes. You can find the various New York State tax forms on the Department of Taxation and Finance’s website, though keep in mind that some entities are required to file electronically.
Understand annual reporting
In New York, LLCs, including PLLCs, are required to file a Biennial Statement with the New York Department of State. The Biennial Statement sets forth the address to which the New York Secretary of State should mail a copy of any process accepted on your PLLC’s behalf. The Biennial Statement must be filed every two years in the calendar month in which your PLLC’s original Articles of Organization was filed with the New York Department of State.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.