A Limited Liability Company (or LLC) is a type of legal entity created to own and operate a business. This type of business structure is attractive for small businesses because it limits the business owner’s personal liability over business debts while also streamlining tax and profit margins. Unlike a corporation that must pay its own taxes, an LLC is not considered separate from its owners for tax purposes – the profits and losses of an LLC pass directly to the owners. The owners then record the business’ profits and losses on personal tax returns like they would any other profit.** LLC members are also protected against having to personally pay business debts and claims. Because only LLC assets are used to pay off business debts, members of an LLC can only lose the amount they invested. Creditors cannot seize personal assets, such as your house or car, to pay the debts accumulated by your Limited Liability Company.
A Professional Limited Liability Company (or PLLC) is like an LLC but is specific to businesses that require professional licensing—think attorney, engineer, doctor, or accountant. A PLLC provides the same pass-through tax benefits and personal liability protection but holds members of a PLLC responsible for their own professional negligence (i.e., medical malpractice). The main difference between an LLC and a PLLC is that a Professional Limited Liability Company has restrictions on who can be members. In Mississippi, all members of the PLLC must have the required accreditation listed on the operating agreement.
Forming an LLC or PLLC requires documentation to be filed with the correct state agencies, an operating agreement, and may also require approval from a state licensing board. Contact us today for assistance in starting your LLC or PLLC!
* THIS POST IS IN NO WAY INTENDED TO GIVE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP. PLEASE CONTACT OUR OFFICE TO SET UP A CONSULTATION AND TO EXECUTE AN ENGAGEMENT AND FEE AGREEMENT. ** THIS POST IS IN NO WAY INTENDED TO PROVIDE TAX ADVICE. WE STRONGLY SUGGEST CONSULTING A CPA FOR QUESTIONS REGARDING TAX CONSEQUENCES.