Are you an attorney, dentist, accountant, doctor, architect, or other licensed required professional?
If so, and you have yet to, it may be time to formally incorporate your practice into a Professional Corporation (“PC”), or a Professional Limited Liability Company (“PLLC”).
***WARNING - each state has different rules and procedures for forming and operating a PC or a PLLC. Be sure to contact us at Goosmann, we can walk you through the differences and how a professional service corporation could be beneficial.
There are two main (although there are plenty more) advantages to formally incorporating your professional services: taxes and limited liability.
Whether you form a PC or an PLLC there will be tax advantages. PCs are subject to two-tier taxing. The tax occurs at both the corporate entity level and personal. However, PC’s are allowed retained earnings up to a $150,000 dollar. A PLLC, just like an LLC, allows for pass through tax status and the members are taxed on their distributive share of the company’s earnings. In general, a single level tax is more beneficial than a two-tier system. However, businesses should not be formed exclusively on tax consequences. For both entities, the tax deductions such as fringe benefits and general business expenses ae deductible, which is another great advantage!
The other advantage to forming a professional services corporation is the limited liability. Although as a professional, and reasonably so, you cannot limit your liability arising out of your work as a professional, you are not held personally liable for the liabilities of the business.
For more information on determining what type of business you are, visit one of our blogs! Both PCs and PLLCs may be formed by an individual or multiple individuals, and there are plenty of advantages to both. Ultimately, you should sit down with an attorney and CPA to find out which option would be better. Call or stop in to our Sioux City law firm, Sioux Falls law firm, or Omaha law firm today!