Essential Legal Checklist for New York PLLC Formation
Are you a therapist, counselor, chiropractor, or psychologist looking to establish a Professional Limited Liability Company (PLLC)?
As a professional in a regulated industry, forming a PLLC involves specific legal considerations. At MJ Morley Law, we understand the unique challenges you face, which is why we've created this comprehensive legal checklist tailored to PLLC formation. Let's explore the essential steps to establish your PLLC and protect your private practice!
Understanding NEW YORK PLLC Formation
Forming a Professional Limited Liability Company (PLLC) requires adherence to industry-specific regulations. Below is a checklist of crucial legal items to address, with explanations to guide you through each step. While this checklist serves as a valuable guide, it's essential to consult with a legal professional specializing in PLLC formation to ensure compliance with state laws and regulations.
What Is a PLLC?
A Professional Limited Liability Company (PLLC) is a business structure for professionals like therapists, counselors, psychologists, physicians, nurse practitioners or chiropractors. It offers limited liability, which means if something goes wrong in your business (like a lawsuit or debt), your personal assets (like your home or car) are protected. However, you’re still personally responsible for any professional mistakes, like malpractice.
Step-by-Step Legal Guide to Forming a PLLC in New York
1. Eligibility Requirements for a New York PLLC
Only licensed professionals can form a PLLC. In New York, this means you must be certified in a regulated profession, such as therapy, counseling, psychology, or any other profession listed in Title VIII of the New York Education Law.
• Key Point: All members of the PLLC must hold valid licenses in the profession the company will provide.
2. NAMING Requirements for a New York PLLC
Your PLLC needs a name that’s not already in use and must include the words “Professional Limited Liability Company” or the abbreviation “PLLC”. You can check the availability of your business name on the New York Department of State’s Division of Corporations Database.
• Example: If you’re a psychologist, your PLLC might be called “New York Psychology PLLC.”
• Important Tip: Avoid using a name that’s similar to another business to prevent any legal or trademark issues.
3. How to Obtain a Certificate of Authority from the New York State Education Department (NYSED)
Before you can officially form your PLLC, you need to get a Certificate of Authority from the New York State Education Department Office of the Professions. This proves that you and all the other members of your PLLC are licensed professionals.
• How to Get It:
• You need to fill out Form PLS709 (the application for a Certificate of Authority).
• Mail this form along with proof of your professional license to:
• New York State Education Department, Division of Professional Licensing Services, Corporations Unit, 89 Washington Avenue, Albany, NY 12234.
• Important: There is no online option for this. It must be mailed, and it can take a few weeks to a few months to process.
4. File Your PLLC Articles of Organization
The Articles of Organization is the main document that creates your PLLC. You file this form with the New York Department of State.
• Steps:
• Complete Form DOS-1336 (Articles of Organization).
• Include your PLLC’s name, address, the professional services you’ll offer, and details about your registered agent (the person who will accept legal documents for your PLLC).
• Submit the form along with the required filing fee to the New York Department of State, Division of Corporations.
• Filing Fee: The current filing fee is $200.
5. How to Create a PLLC Operating Agreement
An Operating Agreement outlines how your PLLC will be run. It includes the responsibilities of each member, how decisions are made, how profits are shared, and what happens if someone leaves the PLLC.
• Tip: While this document is not filed with the state, it’s essential to have one in place to avoid conflicts down the road.
6. How to Publish a Notice of Formation
After your PLLC is officially formed, you must publish a notice in two local newspapers (one daily and one weekly) for six consecutive weeks. This is called the publication requirement.
• Steps:
• The county clerk in the county where your PLLC’s office is located will designate the newspapers for you.
• After the notice has been published for six weeks, the newspapers will provide affidavits (proof of publication).
• You’ll need to submit a Certificate of Publication along with the affidavits to the New York Department of State.
• Important: You must complete this within 120 days of forming your PLLC. If you don’t, your PLLC’s ability to conduct business could be suspended. We strongly reccomend working with a service to complete this for you.
7. Get Professional Liability Insurance for your PLLC
Professional Liability Insurance (also known as malpractice insurance) protects you from lawsuits related to your professional services. As a licensed professional, this is critical for covering malpractice claims.
• Tip: Choose a policy that fits the specific risks associated with your profession. For example, mental health professionals may need specific coverage for client claims.
8. Apply for an EIN (Employer Identification Number) for your PLLC
An Employer Identification Number (EIN) is like a Social Security number for your business. You’ll need it to open a business bank account, file taxes, and hire employees.
• How to Get It: You can apply for an EIN for free on the IRS website.
Why Should You Form a PLLC for your Private Practice?
• Protection for Your Personal Assets: If your business is sued, your personal assets, like your house or car, are protected.
• Simplified Taxes: PLLCs are usually taxed as pass-through entities. This means that the business doesn’t pay taxes; instead, the members report income on their personal tax returns.
• Fewer Formalities: PLLCs have fewer requirements than corporations, making it easier to manage.
Potential Challenges
• You’re Still Liable for Professional Mistakes: Even though your personal assets are protected, you can still be sued for malpractice.
• Publication Requirement: Publishing a notice can be a hassle and is often an unexpected cost.
Ready to Form Your PLLC?
At MJ Morley Law, we specialize in helping professionals like therapists and counselors set up their PLLCs. We’ll handle the paperwork and make sure everything is done correctly, so you can focus on growing your practice. Contact us today for a consultation to get started!