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Are Professional Corporations and LLC Companies Alike?

Professional Corporations and Limited Liability Companies – Like Ordinary Corporations and LLCs, Sort Of.

Like many other states, when licensed professionals – like doctors, lawyers, dentists, accountants, architects, and insurance agents, to name a few – form companies to do business, they do not form your run-of-the-mill corporation or LLC.  Instead, they form professional corporations (often abbreviated “PA”) or professional limited liability companies (often abbreviated “PL,” or for newer entities, “PLLC”).  Some entities use the older suffix “chartered,” which can represent either a PA or a PLLC.

In most ways, a PA and a PLLC function just as ordinary for-profit corporations and LLCs function, and by statute, the Florida Business Corporations Act and Florida Revised LLC Act, respectively, apply to PA’s and PLLC’s in almost all instances.  For instance, both are incorporated/organized using the normal process set forth in the Florida statutes for corporations and LLCs. Unless the obligation arises from the delivery of professional services, shareholders and members also bear no greater responsibility for the debts or obligations of the PA or PLLC than do shareholders or members of ordinary entities. Thus, the individual members of an accounting PLLC cannot be held liable for breach of a contract to purchase an abacus.  Because the contract does not involve the delivery of professional services, the individual members cannot be held liable.

The key distinction comes when the professional is providing professional services through the entity.  Forming a PA or a PL and conducting business through that entity does not relieve a licensed professional from liability for failing to abide by the standards of professional care for that particular field. Thus, doctors cannot avoid individual liability for malpractice by conducting business through a PA. In fact, both the doctor and the PA can be held liable for malpractice.

As should be clear, PA’s and PL’s cannot engage in any business aside from the delivery of professional services for a specific field.  A law firm cannot offer accounting services, and a doctor’s practice cannot offer architectural drawings on the side.  That being said, PA’s and PL’s are permitted by statute to make passive investments in the stock market or in real estate.

Do you have a question about professional corporations in the State of Florida?  If so, contact our business litigation law firm at 561-659-7878 or 877-915-4040.

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