Are you looking to form a professional limited liability company (PLLC) in Vermont, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Vermont PLLC that is compliant and able to do business in the state.
What is a Vermont 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. In Vermont, PLLCs allow professionals who are individually licensed, such as health care, financial, legal, and real estate professionals, to operate as a company.
The Vermont 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 Vermont 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 Vermont (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:
In Vermont, the name of a professional limited liability company must end with either (i) the word “Professional” with “Limited Liability Company” (“LLC or “Ltd Liability Co”) or “Limited Company” (“LC” or “Ltd Co”), or (ii) the abbreviation “PLC.” The name may not contain the word "cooperative" or the abbreviation "coop." or "co-op."
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. To check if your chosen business name is available, you can search the Secretary of State’s records online using the business search tool. If you wish to reserve a name for future use, you can submit an Application for Name Reservation to the Corporations Division, either online, by mail, or in person. The reservation period is 120 days (which may be renewed up to two times), and the filing fee is $20.
Step Two) Designate a Registered Agent
Every PLLC in Vermont 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.
Your PLLC’s registered agent in Vermont must be an individual person, an LLC, or a corporation registered to do business in Vermont. It must also have a physical address in the state of Vermont. Your PLLC may not act as its own registered agent, but any principal (member or manager) of your PLLC may be designated as the registered agent.
Without a registered agent, you could lose your good standing with the state of Vermont, 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 Vermont 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
- Indication that your PLLC is a professional limited liability company and the type of professional service to be provided
- Fiscal year end month
- Business description
- Business email
- Physical and mailing address of the initial designated office
- Name, physical address, and mailing address of initial registered agent
- Whether your PLLC will be member-managed or manager-managed
- Name and address of each member or manager, as applicable
- Effective date of the Articles of Organization
- Name, address, and signature of the organizer
You can file the Articles of Organization online through the Secretary of State’s Corporations Division’s website or by mail or in person with the Corporations Division.
Cost to Form a PLLC
The filing fee for Articles of Organization in Vermont is $125.
Online filings are usually processed in less than 1 business day. Mailed filings can take 7-10 business days.
Step Four) Create an Operating Agreement
After you register a PLLC in Vermont, 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.
Depending on how your PLLC is classified for tax purposes, it will be subject to either the corporate income tax or business entity tax laws in Vermont. You can learn more about these taxes, as well as other Vermont state business taxes such as sales & use tax, on the Department of Taxes website. The Department of Taxes Business Center website also has helpful tax information for new businesses. Many business taxes can be filed and paid online using the MyVTax website.
Depending on where in Vermont your business is located, you may also need to pay some local taxes. You should contact your local tax authorities to confirm your PLLC’s local tax obligations. If your PLLC operates in one of the four largest cities in Vermont, you can visit the following websites for local business resources and contact information: Burlington, South Burlington, Rutland, and Barre.
Step Six) Obtain Business Licenses and Permits
Vermont does not have a general state business license. However, you will need to make sure you have the proper professional licenses to render professional services through your PLLC. You can find more information about professional licensing on the State of Vermont’s website. You should also contact the city and county in which your PLLC operates to confirm whether your business will need any local licenses or permits.
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 Vermont
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.
Like most other states, in Vermont employers are required to obtain workers’ compensation insurance for their employees. If your PLLC will have employees, you can learn more about workers’ compensation in Vermont on the Department of Labor’s website. 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 Vermont, your PLLC will report its income by filing a business or corporate income tax return. Depending on the tax classification of your PLLC, the members of your PLLC may also be subject to additional reporting requirements with respect to your PLLC’s income.
Understand annual reporting
In Vermont, PLLCs are required to file an Annual Report within the three months following the PLLC’s fiscal year end. The Annual Report contains basic information about your PLLC and is needed to keep your PLLC in good standing with the Secretary of State. The Annual Report can be filed online or by mail, and the fee is $35.
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.