In some states, a professional association (PA) can be an LLC; however, they are both different business structures. A professional association (PA) is a type of corporation consisting of individuals who belong to a licensed, certified, or registered occupation.
Meanwhile, a limited liability company (LLC) is a type of company where taxes “flow through,” to enable members to pay taxes on behalf of the company. Although the IRS provides some guidance on definitions, PAs and LLCs are business structures defined by state laws. Owing to that, the requirements and powers of PAs and LLCs will vary by state.
For instance, in the state of California, PAs are treated like any other type of corporation. In many ways, they do not differentiate PAs from professional corporations. Also, the state of California does not allow a PA to be an LLC. California notes that a domestic or foreign LLC may not provide professional services.
Have it in mind that professional services are those provided under a license, certification or registration authorized by the state Business and Professions Code, the Chiropractic Act, the Osteopathic Act, or the Yacht and Ship Brokers Act.
In other states, such as Texas, a PA is considered to be similar to, but distinguished from, other types of PCs. The state of Texas notes that a PA is a professional entity with the sole aim of providing a professional service that has to do with services like medicine, osteopathy, podiatry, dentistry, chiropractic care, optometry, therapeutic optometry, veterinary care, or mental health treatment.
4 Key Differences Between LLC and PA in Florida
While both an LLC and a PA might share certain similar features, have it in mind that they also have certain key differences. These may include;
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Single Purpose Requirement
A PA in Florida can be established to provide professional services in a specific area. Note that all shareholders will have to be licensed to carry out the same professional services and the professional service corporation’s purpose will need to correspond to this same professional service.
However, LLCs are known to enjoy flexible organization, have some tax benefits, and offer the owners (or members) limited liability protection. An LLC’s members may include Individuals, Other LLCs, Corporations, and even foreign entities.
Stock Ownership Restrictions
There are ownership restrictions that apply to Florida PAs. Unlike traditional corporations, the shareholders in a PC are expected to be licensed members of the profession in which the entity is organized to do business. Owing to that, a lawyer’s unlicensed wife cannot own shares in her husband’s legal practice, and the state of Florida prohibits members of different professions from owning shares of the same PA.
PAs are also known to feature a more streamlined form of corporate organization, and this gives room for professionals to have greater direct control over corporate operations. An LLC is a business entity structured to have either a single or multiple owners, who are referred to as the LLC’s members.
Also, have it in mind that these members can be added and subtracted over the life of the LLC, and profits can be distributed in different amounts to each of the members. These members, however, are not shareholders of the company.
A PA in the State of Florida will need to contain the words “chartered,” “professional association,” or “P.A.” Note that using other words, such as “company,” “professional service corporation,” or “incorporated” or any other word, abbreviation, affix, or prefix indicating that it is a professional service corporation is specifically prohibited.
The name can contain the last name of some or all the shareholders, including retired or deceased shareholders. However, when it comes to establishing an LLC in the state of Florida, have it in mind that the LLC is required to have a unique name.
In the state of Florida, the name should not already be taken by any other LLC in the state. It also will have to be registered with the secretary of state. Your LLC can have just about any name, but it is expected to end with one of the following: Limited Liability Company, LLC, L.L.C., etc.
Permits and Licenses
PAs in the State of Florida is meant for professionals who render services that require a license or a form of certification. When establishing a PA in the State of Florida, you will need to consult or check the websites of city and county government offices in your area to understand the local permit and business license requirements.
Florida Small Business Development Centers also have to permit and license information for counties and cities under their jurisdiction. You can also visit the Florida Small Business Development Centers website to find the office nearest you.
However, when it comes to forming an LLC, the state of Florida doesn’t require a business license. Although requirements may vary, it will most often depend on the type of services you intend on rendering. You will only be expected to obtain a business license if your offer the following services:
- Childcare centers
- Hair and nail salons
- Dry cleaning
- Insurance agencies
Although sole proprietorship remains the most common business form for a good number of entrepreneurs, professionals such as doctors, lawyers, and accountants often choose to form either a professional association or a limited liability company.
Note that both structures accord the professional the protection of limited liability against the acts and malpractice of employees and colleagues in the business, making one or the other very necessary to a practice involving employees or other professionals.
Also, note that both share so many features that they can become challenging to distinguish, but if you are eager to understand more, ensure to work with a well-experienced lawyer or accountant.