• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Wealth Pilgrim

No Money Worries. No Matter What.

Neal Frankle featured in
  • Home
  • Life Insurance
  • Investing
    • Build Strong Investment Building Blocks To Avoid Going Broke In Retirement
    • Systematic Mutual Fund and ETF Investing
    • Stock Market Investing Guide
    • Choosing the Right Investment Brokerage Guide
    • How Bonds Work Guide
    • How Banks Really Work Guide
    • Annuities – What You Need To Know Before You Invest
    • A Beginners Guide To Buying Individual Stocks
    • Create A Pool Of Great Mutual Funds and ETFs To Pick From To Secure Your Retirement
    • ETF and Index Fund Investment Guide
  • Earn More
  • Banking
  • Retirement Planning
    • Retirement Guide
  • Ask Neal a Question
  • Reviews
    • Upgrade Personal Loans Review
    • Lending Club Review
    • Prosper Review
    • Ally Invest TradeKing Review
    • CIT Bank Review
    • LegalZoom Review
    • Lexington Law Review
    • Airbnb Host Review
    • Should You Drive For Uber?
  • Tax
  • Courses
    • Raise Your Credit Score So You Can Buy a House – Free Video Course

How to Use a Professional Limited Liability Company to Run Your Business

by Neal Frankle, CFP ®, The article represents the author's opinion. This post may contain affiliate links. Please read our disclosure for more info.

If you qualify, you should strongly consider launching your business as a professional limited liability company (Professional LLC). If you love being self-employed, you’ll love the benefits of being a corporation and being a partnership.

What are the advantages of being a professional limited liability company?

They are much simpler and less expensive than corporations to set up and maintain. This is a big plus. When you start your business, you’ll be plenty busy. The last thing you need is to have lots of red tape to worry about. Setting up as a professional limited liability company is a snap.

Looking for more advantages? If you’re a member of a Professional LLC, you aren’t personally liable for your small business debt. Of course, some vendors will ask you to personally guarantee debts, and the Professional LLC doesn’t shield you from those potential liabilities. But for those creditors that don’t ask you to personally sign off on the debt, this protection is very valuable.

Important tip – run your business like a business. Don’t run personal expenses through the business entity. If you use the business to pay for personal expenses, creditors will have a case that the Professional LLC is a fiction and they’ll be able to come after your personal assets. Not a good scene.

Looking for more business protection? Be particularly careful about setting up your operating agreement. In this agreement, make sure to be clear about defining which are personal and which are private assets.

Tax Benefits

While the professional limited liability company offers many of the asset protection benefits that corporations offer, the Professional LLC also provides the tax benefits most often associated with partnerships. That’s right. Profits are passed through from the business to the partners. The Professional LLC entity doesn’t pay tax. That’s cool beans.

How do you qualify to form a professional limited liability company?

You can set up a professional limited liability company if the state you operate in requires that you have a license. For example, if you’re a doctor, lawyer, accountant, chiropractor or financial planner, you might be able to avail yourself of these benefits.

Of course, you have to run a business that is consistent with the licensing requirement. In other words, if you are a lawyer but you want to open up a smoke shop, you can’t do it in the business form of a Professional LLC.

What to be wary of:

First, not all states recognize the Professional LLC business form. Make sure your state does before you go through this process. Also, remember that if you do go this route, everyone who is a partner has to be licensed in the state.

There are other issues, of course, and that’s why I suggest you consult with a tax and legal professional before doing anything. I am a big fan of consulting with knowledgeable professionals, as you know. I learned the hard way that it’s always a good investment to have excellent advice – especially if I’m dealing with money or the government. In this case, you’re dealing with both.

While I do think you should consult an attorney and tax advisor, that doesn’t mean you have to spend a ton of money to set up the professional limited liability company. Consider using LegalZoom to set up your company. Let them do the heavy lifting. They’ll walk you through the setup and filing process once you’ve consulted with your attorney.

How do you set up a Professional LLC?

It’s pretty much the same process as setting up any other limited liability company. However, for a Professional LLC you have to file with a state licensing board, and the board has to approve everything before the Secretary of State gets the paperwork. So as you can imagine, it takes a little longer to form a PLLC than a regular LLC.

How did you set up your company? Is it a Professional LLC? What was the process like? Was it worth it?

Tweet
Pin
Share2

Reader Interactions

User Generated Content (UGC) Disclosure: Please note that the opinions of the commenters are not necessarily the opinions of this site.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Are You Human? * Time limit is exhausted. Please reload CAPTCHA.

Primary Sidebar

Who is Neal Frankle

Neal Frankle

I'm a CERTIFIED FINANCIAL PLANNER™ Professional with more than 25 years of experience. I feel very blessed and hope to share my personal financial experience and professional wisdom with readers of WealthPilgrim.
Read More »

Stay Connected

Facebook Twitter YouTube RSS

More Categories

Career Development
College Funding
Credit Cards
Credit Score Fixes
Money and Marriage
Debt Relief
Estate Protection
Property Investment Loans
Small Business Strategies
Spend Less Money

Disclaimer

Wealth Pilgrim is not responsible for and does not endorse any advertising, products or resource available from advertisements on this website. Wealth Pilgrim receives compensation from Google for advertising space on this website, but does not control the advertising selection or content. Please do the appropriate research before participating in any third party offers. The information contained in WealthPilgrim.com is for general information or entertainment purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation. Wealth Pilgrim does not provide investment advisory services and is not a registered investment adviser. Neal may provide advisory services through Wealth Resources Group, a registered investment adviser. Wealth Pilgrim and Wealth Resources Group are affiliated companies. In accordance with FTC guidelines, we state that we have a financial relationship with some of the companies mentioned in this website. This may include receiving payments,access to free products and services for product and service reviews and giveaways. Any references to third party products, rates, or websites are subject to change without notice. We do our best to maintain current information, but due to the rapidly changing environment, some information may have changed since it was published. Please do the appropriate research before participating in any third party offers.


About · Contact · Disclaimer & Privacy policy

Copyright © Wealth Pilgrim 2022 All Rights Reserved