Professionals frequently ask our Reno corporate services attorneys about the best way to structure their business in Nevada. We usually suggest that they set up a professional limited liability company, also known as a PLLC. As the owner of a professional services firm, this gives you protection from different types of liability in several ways. You might also find that you will benefit from certain tax advantages.
Defining a Nevada PLLC
Professional business people can form a Nevada PLLC if they offer services in the state. An LLC, or a business with at least one person, is registered in the state. These individuals, called LLC members, own the business. Similar to other LLCs, PLLCs help keep the individual members from claims against them for personal injury or other types of debt. However, the PLLC does not make the members completely immune to legal action.
Defining a Professional Service
A professional service means that the person must be licensed, registered or legally authorized to conduct their service in the state. Different states define professional services according to preset guidelines. Although the state does not have a specific list, Nevada’s Professional Entities and Associations Act recommends that the following industries fall under the category of professional services:
- Clinical professional counseling
- Interior design
- Landscape architecture
- Legal services (provided through attorneys)
- Marriage and family therapy
- Registered nursing
- Residential design and
- Social work.
If you do not know if you should set up a PLLC or incorporate in Nevada, contact our Reno corporate services attorneys.
Setting Up a Nevada PLLC
If you do decide to set up a Nevada PLLC, you will need to do the following:
- Obtain the state professional license for each member.
- Determine if you will need previous approval from the state licensing board. If so, submit the required documents.
- Download the articles of organization, which can be found on the Secretary of State’s website, along with the instructions on how to file them.
- File the articles of organization as directed along with paying the filing fee of $75.
Naming a PLLC
The state of Nevada requires you to include specific wording in the name of your PLLC. For example, you must use an acceptable variation or abbreviation of “Professional Limited Liability Company,” and you must also include the last name of at least one past or present member.
The business can only offer one specific type of professional service unless the services are closely related. For example, you can combine the following:
- Mental health services
- Medicine, homeopathy, and osteopathy or
- Architecture, design, and engineering.
You should have a specific operating agreement although you are not legally required to do so by the state. Even so, you need this agreement so that your members and customers, including banks, know how you plan to run your business. An attorney should help you draft this document.
Understanding Protection from Liability
A PLLC personally protects you from financial liability in the following situations:
- From a creditor who wants to collect debts under the PLLC
- From the malpractice actions of another PLLC member or
- From an injury on the PLLC premises or another injury that does not relate to your professional services.
As a PLLC member, you might be required to carry minimum malpractice coverage, so check your state requirements for your profession or contact our attorney. However, you can still be held personally liable in the following cases:
- If you guarantee that you will personally repay a business loan
- If you are involved in negligent or intentional tort, such as an attack against someone or
- If you commit professional malpractice, such as failing to exercise due diligence when representing a client.
As such, you will need to obtain liability insurance that meets the minimum state requirements.
The Difference Between a PLLC and a Professional Company
A PLLC differs from a professional corporation in the following ways:
- A PC has shareholders while a PLLC has members.
- The shareholders in a PC own shares of stock while the members of a PLLC own interests in a business.
- A PC has income tax obligations while a PLLC usually does not pay taxes. Instead, each member pays his or her own taxes.
For example, if a PC opts to create an S corporation status, the entity can establish a company that bypasses taxes, similar to a PLLC. Furthermore, if the PC does not protect itself, both the company and the shareholders might be taxed as a business and individually. However, Nevada does not have corporate or personal income taxes. Even so, you will need to pay federal taxes. Since these tax differences can be quite complex, speak with a lawyer for additional information.
Call Our Reno Corporate Services Attorneys at (775) 824-0300
For answers to your questions about how to incorporate in Nevada, contact the Sutton Law Center for help.