In Florida, both Professional Associations (PAs) and Professional Limited Liability Companies (PLLCs) are specific business entities designed for licensed professionals, such as doctors, lawyers, accountants, architects, and other regulated professions. However, there are key differences between these two types of business structures, particularly regarding the legal structure, management, and requirements under Florida law.
Here’s a breakdown of the differences between a PA and a PLLC under Florida law:
1. Formation and Legal Structure
- PA (Professional Association):
- A PA is a type of corporation specifically designed for licensed professionals. It is formed under Chapter 621 of the Florida Statutes.
- PAs are treated as corporations under Florida law, so they are subject to the same rules as other corporate entities, but with specific restrictions on ownership and management.
- In a PA, the owners are called members or shareholders, and the entity must be formed by individuals who are licensed to provide a specific professional service in Florida (e.g., lawyers, physicians, architects, etc.).
- PLLC (Professional Limited Liability Company):
- A PLLC is a limited liability company (LLC) created specifically for licensed professionals under Florida law. It is governed by Chapter 608 of the Florida Statutes, which outlines the formation and operation of LLCs in Florida.
- The members (owners) of a PLLC must also be licensed professionals in the field for which the company is formed.
- A PLLC combines the flexibility of an LLC (with its pass-through taxation and limited liability protections) with the requirement that it be used by licensed professionals.
2. Ownership and Management
- PA:
- PAs must be owned and managed by licensed professionals in the same field. For example, a law firm operating as a PA must be owned by lawyers, and a medical practice operating as a PA must be owned by physicians.
- Shareholders in a PA are professionals licensed in the same field and can be individuals or other entities, but non-professionals cannot own shares in a PA.
- PAs are typically managed by a board of directors and officers, but the professionals must maintain control over the management and operations.
- PLLC:
- The members of a PLLC (owners) must be licensed professionals in the relevant field, just like in a PA.
- PLLCs are typically more flexible in their management structure. The members (owners) can manage the company directly, or they can elect to have a manager (or managers) run the day-to-day operations.
- Unlike a PA, a PLLC is generally more flexible in terms of management structure and decision-making processes, allowing for more informal governance options.
3. Liability Protection
- PA:
- As a corporate entity, a PA provides limited liability protection to its shareholders. However, there is no liability protection for the professional actions of the individual licensed professionals. For example, a doctor in a PA could still be personally liable for malpractice claims, though the PA itself offers liability protection for general business debts.
- The members or shareholders may still be personally liable for their professional conduct (e.g., malpractice or negligence), but the corporation itself protects them from liability for the business’s debts and obligations.
- PLLC:
- A PLLC provides limited liability protection similar to a traditional LLC, meaning that the members are generally not personally liable for the business’s debts or liabilities. However, like a PA, the members of the PLLC will still be personally liable for their own professional misconduct or negligence.
- The PLLC is structured in a way that protects the members from liability for the company’s debts and obligations, but it does not protect professionals from personal liability for their own professional acts.
4. Taxation
- PA:
- A PA is typically taxed as a C-corporation, though it may elect to be taxed as an S-corporation if it meets certain criteria.
- If taxed as a C-corporation, the PA will be subject to corporate income tax, and its shareholders may also face double taxation on any dividends they receive.
- If taxed as an S-corporation, the PA itself will not be taxed, but income will pass through to shareholders, who report it on their personal tax returns.
- PLLC:
- A PLLC is treated like a regular LLC for tax purposes. By default, a PLLC is taxed as a pass-through entity, meaning that income is passed through to the members, who report it on their individual tax returns.
- However, like any LLC, a PLLC can elect to be taxed as an S-corporation or C-corporation, depending on the needs of the business and the members’ preferences.
- The ability to choose a different tax classification offers PLLCs greater flexibility in managing tax obligations.
5. Regulatory Requirements
- PA:
- PAs are subject to the specific regulations and requirements set forth by Florida law under Chapter 621, including rules about governance, professional conduct, and liability. In addition to the normal corporate formalities, PAs must ensure compliance with their respective licensing board (e.g., the Florida Bar for lawyers, the Florida Medical Board for doctors).
- PAs must submit specific documents to the state when forming the company, and the formation process may require additional filings with the applicable professional regulatory agency.
- PLLC:
- PLLCs are governed under Florida’s LLC laws (Chapter 608), but with a restriction that they must only be formed by licensed professionals.
- Like a PA, a PLLC must comply with any regulations or rules set forth by the professional licensing board that governs the profession of the PLLC members.
- PLLCs must submit a special Certificate of Status or Authority to their regulatory body (such as the Florida Department of Health or the Florida Bar) to confirm they are authorized to practice as a licensed professional entity.
6. Flexibility
- PA:
- The structure of a PA tends to be more rigid, particularly in terms of management (i.e., requiring a board of directors and officers), which can make it less flexible for smaller or less complex businesses.
- PLLC:
- PLLCs offer greater flexibility in terms of management structure and decision-making. They can be member-managed or manager-managed, giving the owners more options for how the business is run.
Key Takeaways:
- PA: A Professional Association is a corporate structure specifically designed for licensed professionals in Florida. It is governed by more rigid corporate rules and is suitable for businesses that prefer a more formal structure, typically involving a board of directors and officers.
- PLLC: A Professional Limited Liability Company is an LLC structure for licensed professionals, providing more flexibility in management and offering a pass-through taxation structure. It’s more suitable for businesses that want the benefits of LLCs, such as ease of management and flexibility in operation.
Ultimately, the choice between a PA and a PLLC depends on your business needs, desired management structure, and tax preferences. Roberts Law, PLLC can assist in setting up your businesses based on your goals and needs. Contact us if you need more information or assistance.
Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction or the jurisdiction applicable to your issue/matter. No information contained in this post should be construed as legal advice from Roberts Law, PLLC or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.
