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Capital Absorption Opportunity · Business entity forms

Professional Corporations and Professional Limited Liability Companies (PCs and PLLCs)

Definition

A professional corporation (PC) or professional limited liability company (PLLC) is a state-law entity that licensed professionals, such as physicians, lawyers, or accountants, may use to practice; state law usually limits ownership to licensees and does not shield a professional from liability for their own malpractice. For federal tax purposes a PC is a corporation[3] taxed at the same flat 21 percent rate as other C corporations unless it elects S status,[1] while a PLLC is classified like any LLC: a partnership if it has two or more members and disregarded if it has one, unless it elects otherwise.[4]

Federal law

Formed under state law. No Act of Congress creates it; the federal laws below apply to it as described.

  1. Tax Cuts and Jobs Act (popular name), Pub. L. 115-97, § 13001, 131 Stat. 2096. Rewrote 26 U.S.C. § 11(b) so the corporate income tax is a single 21 percent of taxable income, which applies to professional corporations taxed as C corporations. Official text: govinfo.gov, U.S. Government Publishing Office.
  2. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 11, 68A Stat. 11. Imposes the federal income tax on every corporation, including professional corporations taxed as C corporations (26 U.S.C. § 11(a)). Official text: govinfo.gov, U.S. Government Publishing Office.

Federal regulations

Rules issued by federal agencies under the laws above.

  1. Business entities; definitions, 26 CFR 301.7701-2 (Internal Revenue Service, Department of the Treasury). Treats an entity organized under a statute that calls it incorporated or a corporation (which includes a PC) as a corporation for federal tax purposes. Official text: govinfo.gov, U.S. Government Publishing Office.
  2. Classification of certain business entities, 26 CFR 301.7701-3 (Internal Revenue Service (Department of the Treasury)). Default classification of a PLLC as a partnership (two or more members) or disregarded entity (one member). Official text: govinfo.gov, U.S. Government Publishing Office.