Professional Corporation vs LLC (Differences and Requirements)

If you want to run your own business, you may wonder about the differences between establishing a professional corporation vs. LLC. If so, I am here to help. Usually, start-ups benefit from establishing an experienced corporation, while small businesses realize more advantages when establishing an LLC.

A professional corporation and professional limited liability companies are quite different from one another, but they have a few essential things in common. For one, the basic premise of both types is to offer licensed professionals the opportunity to form a business together.

However, there is no cut-and-dried decision regarding forming a corporation or LLC. You need to review the differences and requirements for each entity. While these two types may sound similar, they have some key differences.

In this brief article, we’ll describe what makes them distinct from each other. It can help you clarify the distinctions between owning a professional corporation vs. LLC small business. The information below will help tune you in on what each entity offers for the small business owner or entrepreneur.

I can help you in the decision-making process. You will need a top business attorney with a virtual law firm fully equipped with skills and knowledge to help you create the correct business entity for your company. Contact me for guidance at sam@mollaeilaw.com anytime.

Professional Corporation and Professional Limited Liability Protection – What Are The Differences?

Licensed individuals organize a professional corporation (PC) to provide professional services and tax advantages. In contrast, a professional limited liability company is an LLC made up exclusively of licensed professionals; they have been legally authorized to offer a professional service to the public that requires a license before rendering the service. Both of them can provide liability protection.

LLC and PC owners have personal liability protection from debts incurred by the business and any claim to business assets to the best of my knowledge. This means creditors cannot come after or attach personal assets. The exception is if a creditor proves the company was misrepresenting itself or operating fraudulently.

Although PCs don’t offer the level of personal liability protection of S corps or LLCs, this structure does protect owners from malpractice claims filed against other associates.

In addition, a professional corporation (PC) and limited liability company (LLC) is an excellent choice because both of them offers personal asset protection.

Reviewing a Professional Corporation vs. LLC Business Structure – How is a C-Corporation Set Up?

When surveying professional corporations vs. LLC businesses, you should first define the C-corporation and note the differences. It is a traditional corporation and the most common domestic company in the US and globally. Products and services we purchase daily come from incorporated companies. If you want to draw angel investors to your business or go public, you may consider establishing this type of corporation.

The limited liability company also referred to as a professional LLC, is a popular choice for smaller companies. This new entity type offers tax advantages that this corporation does not. Taxes pass-through to the owners of an LLC, and, therefore, the professional LLC is not taxed.

If you establish a C-corporation, you are subject to double taxation. In other words, the company pays taxes on its income, and the shareholders and owners pay taxes on the dividends of the shares. If you want to avoid paying taxes twice, you need to form an LLC or establish an S-corporation business.

An S-corporation is much like an LLC. Net profits in an S-corporation are “distributed” to stockholders, who then add these profits to their income for tax reporting purposes. S -corps is similar to all other corporations, except for this tax issue.

I can assist you in finding out which structure will best benefit your company’s operations. Contact me today at sam@mollaeilaw.com so we can outline what works and will not work for your start-up company or small business.

How Is the Structure Different When You Compare a Professional Corporations vs. LLC Business?

The structure is significant when a professional corporation vs. LLC business is compared. For example, a traditional C-corporation features a hierarchy where the power behind the operations is divided among the shareholders. The shareholders (or stockholders) appoint the directors who make the decisions for the company.

The directors appoint or employ company officers to run and manage the company. The stockholders or owners who possess more company shares influence voting and making money.

The Limited Liability Company Business Structure

The LLC members run the LLC and decide what needs to be done to operate the business profitably and successfully. Owners decide the following:

• The division of ownership
• Profit allocation
• Operational matters

When you review a professional corporation vs. LLC, an LLC is essentially similar to a sole proprietorship (if a single person runs the company) or a partnership (if a couple oversees the company). However, the liability protection provided is much like what owners receive when setting up a corporation.

When an LLC is established, the LLC members create the rules for division or power and profits.

Furthermore, the owner/s have the right to choose an employee who oversees the operation inside the LLC and should be knowledgeable with ongoing compliance requirements, fewer maintenance requirements, and management responsibilities.

When Should You Form an LLC?

Usually, an LLC is better for a smaller company with only a few workers and principals.

What are the Key Differences to Consider When You Review a Professional Corporation vs. LLC?

You want to learn the key differences when assessing the benefits of a professional corporation vs. an LLC. The following information elaborates and underscores these differences.

Ownership of the Company

An LLC does not have to have more than one owner to survive. A corporation must establish a base of owners and shareholders to thrive in its particular field or industry.

Meetings

You do not need to regularly hold meetings if you establish your company as an LLC. A corporation, however, does need to hold meetings, as this is a legal requirement for establishing this business entity.

That is why you need my help when establishing an LLC or corporation. You need to know what to do to comply legally. I can help establish your business, enhancing your professional standing and reputation in the business community.

Documentation

A corporation requires much more paperwork than an LLC to operate as a business. Documents must be routinely submitted to remain legally compliant and maintain the company’s corporate status. Owners must hold and document annual shareholder meetings and keep minutes of corporate meetings.

LLC owners do not have to follow corporate owners’ mandates. However, both a corporation and LLC must secure the services of a registered agent. A registered agent handles and processes the paperwork for a corporation or LLC when formed and after that.

Growth

A C-corporation is not just a regular corporation and shouldn’t be underestimated. It often invites angel investors or venture capitalists – investors who wish to invest in a start-up operation. Therefore, by establishing your business as a corporation, you can more easily transition into a public company. You can also receive the funding you need for expansion at a lower cost.

An LLC does not have this type of advantage. However, many LLC owners are not interested in offering public shares on the stock exchange. Their primary interest is to save on taxation and protect themselves from lawsuits.

If someone sues an LLC, the owners’ assets are protected, such as a car(s) and real estate.

I can further guide you on what you need to do to set up a C-corporation, S-corporation (if you wish to avoid double taxation), or an LLC. Email me today at sam@mollaeilaw.com.

What Happens Next?

As you can see, there are distinct differences and requirements when you review a professional corporation vs. an LLC business. If you want help to initiate the correct business formation process, let me help you establish your company to meet your business goals now and in the future.

Contact me at sam@mollaeilaw.com, and let’s discuss your options now.