Professional Entities

The Fourth in a Series of Articles for Entrepreneurs
by Bukre Ayan

Licensed professionals (like physicians, attorneys, architects) may operate their businesses under professional service companies (“professional company” or “professional entity”). There are two kinds of professional entities – professional corporations (“PC”) and professional limited liability companies (“PLLC”). In this article, the formation and operation of NY professional companies will be discussed.

Selecting a Name

Similar to the other for-profit companies, the NY Department of State (the “NY DOS”) requires that the name of the professional companies should be distinguishable from the names of other existing companies. An entity search by name through the NY DOS’s online database may help you to decide if the name is available. (Please see the link for the online database https://apps.dos.ny.gov/publicInquiry/.) To verify the name is available, you can also make a name availability inquiry with the NY DOS. Depending on the type of entity, the name of the professional entity must end with P.C., PC, or PLLC, P.L.L.C. In addition, the name of a deceased person may not be included in the name of the entity, unless the deceased person used to be a partner of the entity.

Certification before Formation

Prior to the formation filing with the NY DOS, a certificate of authority or a certificate of good standing must be obtained from the appropriate licensing authority. The certificate provides that each member and/or manager if the entity is a PLLC, or each shareholder, director, and/or officer if the entity is a PC are licensed and authorized to practice in the profession for which the entity is being formed. The NY Department of Education is the licensing authority for all licensed professionals except attorneys. (Please see the link for a complete list of the Department of Education professions http://www.op.nysed.gov/prof/.)

Operation and Single-Purpose Limitation

The operation of general for-profit entities and the NY law requirements that need to be satisfied were discussed in our previous articles. Similar requirements apply to professional entities. For example, professional entities need to hold annual meetings and PLLCs have to publish their formation in two newspapers – one weekly one daily – once a week for six weeks. Our prior articles provide more information regarding the requirements for legal entities, in general.

A professional entity may be formed to practice only in the profession for which its shareholders/members are licensed. In addition, NY State (with very few exceptions) prohibits professional companies licensed to practice one profession from hiring individuals to provide other licensed services. Even when a shareholder/member is licensed in more than one profession (attorney and accountant, for example), separate companies must be formed to provide each of these professional services. One of the few exceptions to this limitation applies to chiropractors. A chiropractic professional entity can hire licensed massage therapists. Be sure to consult your attorney if you think an exception applies to you.

Formation

Depending on a licensed professional’s needs, goals or objectives, a PC or a PLLC may be formed. The differences between corporation and LLC formations in NY were discussed in an earlier article and are equally applicable to these ‘professional’ versions. Just remember that professional entities require ‘certification’ (generally from the Department of Education) before they can file with the Department of State.

(For more information, please consult an attorney. Our next article will be on S-Corporations.)

Please be advised that this article is not intended to provide you with any legal advice, and prior results do not guarantee a similar outcome.

Ms. Bukre Ayan is an international associate with the firm of Reed CNY Business Law, P.C., specializing in business, immigration and real estate law. Bukre received her LLM degree from Syracuse University College of Law in 2020 and is admitted to practice in both New York State and the Republic of Turkey. The Spanish translation was done by Ms. Sylvia Espinosa, a Mexican law student who is completing her studies at SU College of Law.

If you have any questions or comments about these articles, contact Ms. Bukre at (315) 558-0642, or bayan@reedbusinesslaw.com. You may also visit www.reedbusinesslaw.com.

Photos by Karolina Grabowska and Ivan Samkov from pexels