A Limited Liability Company or LLC follows a formal business structure, consisting of ‘members’, it allows personal asset protection and has pass-through taxation similar to that of a sole proprietorship or partnership. Before starting your LLC it’s important to keep in mind that there are different types and this will be a key step in planning your business. This article will explore four different types of LLC’s in the US, giving you a better idea of what your next step should be.
Four Different Types of LLC’s in the US
Professional LLC (PLLC)
If you perform any professional services, for example, if you are a lawyer wanting your own practice, if you offer medical services, or if you are an architect, a professional LLC will be needed. Additionally, in order to apply for this the respective applicants will also need proof of their professional qualifications and licenses. A PLLC offers protection in terms of limited liability, however any malpractices will not be covered.
When applying for a PLLC check what documents your state requires because not all states will have the same requirements. Below is a list of common requirements and information to be aware of when applying for a PLLC:
- What is your Qualifying Profession and do you have Licence as proof of your profession?
- Are there any industry-specific rules and regulations to adhere to?
- Your company name (according to the state) will need ‘PLLC’ stated behind it.
- You will need approval of your Articles of Organization by the state licensing board (according to the profession you are in).
- Is the organizing member a licenced professional?
A Foreign LLC refers to opening an LLC in another state that is not the one you are currently operating in, and it will need to be registered within the new state as a Foreign LLC. Additionally, a Foreign LLC will also have the same taxes and other fees payable compared to a Domestic LLC, which is the state where the original LLC is formed.
As mentioned previously, a Domestic LLC is simply the state where the original LLC is formed and operating from.
Initially started in Delaware, the Series LLC follows a different business format than the above three in that it consists of a ‘Master LLC’ (the primary business), which branches into other ‘Individual Series LLC’, it also offers a lot of diverse options and benefits for doing business, one example (amongst many) is that each different ‘branch’ can have different managers who have their own methods and responsibilities, this offers each individual entity a lot of freedom. In terms of liability protection, each individual series is protected from any liabilities that may also originate from one of the other individual series LLCs, including the primary LLC.
When you consider starting a Series LLC it is important to know where you can start, the following states will allow a Series LLC (in alphabetical order):
District of Columbia
* Puerto Rico can also form a Series LLC.
Some potential pitfalls of owning a Series LLC can be that the liability protection won’t be covered if proper procedures are followed according to the state you operate in, in addition, if you open a Series LLC in a state where it isn’t ‘allowed’ it could impact the protection of your assets in other branches of your LLC.
It is advised to do the necessary research, as well as inquire with the rules regarding opening a Series LLC in states that don’t allow it.
Opening your LLC will require various documents and processes, and importantly the state your LLC operates in will have different requirements. Visit TRUiC’s extensive online library of all the business resources you need on how to form your LLC.