You’ve decided to start your private therapy practice in New York. Congratulations! Now comes the first major decision: should you form a PLLC (Professional Limited Liability Company) or a PC (Professional Corporation)? PLLC vs PC for therapists in New York, keep reading to find out.
This isn’t just legal jargon. Your choice affects your liability protection, how you pay taxes, what paperwork you’ll file annually, and how easily you can bring in partners later.
I’ve helped dozens of New York therapists, social workers, and counselors navigate this decision. Here’s what you need to know.
What Is a PLLC?
A PLLC (Professional Limited Liability Company) is a type of business structure specifically designed for licensed professionals like therapists, psychologists, social workers, and counselors.
Think of it as a regular LLC, but with special rules for professionals who need state licensing to practice.
Key characteristics of a PLLC:
A PLLC protects your personal assets (home, car, savings) from business debts and lawsuits. If your practice gets sued or can’t pay its bills, creditors generally can’t come after your personal property.
However, a PLLC does not protect you from malpractice liability. If a client sues you for malpractice, you’re personally liable regardless of your business structure. This is why malpractice insurance is essential.
PLLCs have flexible management. You can run it yourself (member-managed) or designate managers. There’s less formality than a corporation.
PLLCs also offer tax flexibility. By default, a single-member PLLC is taxed as a sole proprietorship (income flows through to your personal tax return). You can elect S-corp or C-corp taxation if beneficial.
Finally, PLLCs require an operating agreement, even if you’re the only member. New York law requires this, though many people skip it (which is a mistake).
What Is a PC?
A PC (Professional Corporation) is another business structure for licensed professionals. It’s a corporation, but specifically for professionals who need licensing.
Before PLLCs existed, PCs were the only option for professionals who wanted liability protection. They’re still common, especially among older practices and multi-professional groups.
Key characteristics of a PC:
Like PLLCs, PCs protect personal assets from business debts and lawsuits (but not from malpractice).
PCs have more formal requirements. You need bylaws, must hold annual meetings, keep minutes, and maintain corporate records. There’s more paperwork and administrative overhead.
PCs have different tax treatment. A PC is taxed as a C-corporation by default (the corporation pays taxes, then you pay taxes on salary/dividends). You can elect S-corp taxation to avoid double taxation, which most small PCs do.
PCs also have ownership restrictions. Only licensed professionals in your field can own shares. If you want to bring in a business partner who isn’t a therapist, they can’t own equity.
PCs may have raising capital advantages. If you plan to bring in investors or go big, corporate structure can be more attractive (though rare for therapy practices).
PLLC vs PC: Side-by-Side Comparison
Let’s compare these entities directly:
Liability protection: Both provide the same protection for business debts/lawsuits. Neither protects against malpractice.
Formation requirements: A PLLC requires NYSED Certificate of Authority, then Articles of Organization filed with NYS Department of State. A PC requires NYSED Certificate of Authority, then Certificate of Incorporation filed with NYS Department of State.
Ongoing paperwork: PLLCs have minimal requirements (biennial statement, maintaining operating agreement). PCs have more requirements (annual meetings, minutes, bylaws, more formal structure).
Taxation (default): A PLLC is taxed as sole proprietorship (single-member) or partnership (multi-member). A PC is taxed as C-corporation.
Tax flexibility: Both can elect S-corp taxation (most common for small practices).
Management: PLLCs have flexible, informal management. PCs have formal board of directors, officers, structured hierarchy.
Ownership: PLLCs allow any licensed professional in your field to be a member. PCs allow only licensed professionals in your field to be shareholders (same restriction).
Cost to form: Both cost approximately the same ($200 filing fee + NYSED fees + attorney fees if using one).
Best for: PLLCs work well for solo practitioners or small informal groups who want simplicity. PCs work well for larger groups or practices that want formal corporate structure.
PLLC vs PC for Therapists in New York – Which Should You Choose?
For most therapists starting solo or small practices in New York, a PLLC is the better choice.
Here’s why:
Less paperwork. You’ll have enough administrative work running your practice without adding annual meeting minutes and formal corporate resolutions.
Simpler taxes. Default pass-through taxation is straightforward. You can always elect S-corp status later if your income justifies it.
More flexible. PLLCs are easier to modify as your practice grows or changes.
Modern standard. PLLCs have become the go-to structure for new professional practices in the last 15 years.
When a PC Might Make Sense
Consider a PC if:
You’re forming a large group practice with multiple therapists and want formal governance structure (boards, officers, voting procedures).
You’re taking over an existing PC and don’t want to go through the hassle of converting entities.
Your accountant or financial advisor has specific tax reasons for recommending PC structure for your situation.
You plan to eventually sell the practice or bring in outside investors (rare for therapy practices, but possible).
Common Myths About PLLCs and PCs
Let me clear up some misconceptions I hear constantly:
Myth: A PLLC protects me from malpractice lawsuits.
False. Neither a PLLC nor PC protects you from professional malpractice liability. You need malpractice insurance for that. The business entity protects you from business debts (like unpaid office rent or vendor contracts), not from claims related to your professional services.
Myth: PCs are more “legitimate” or “professional” than PLLCs.
False. Both are legitimate legal structures. PLLCs are actually newer and more modern. Clients won’t know or care which entity type you chose.
Myth: I can form a regular LLC instead of a PLLC and save money.
False and risky. In New York, licensed professionals like therapists must use a PLLC or PC. A regular LLC is not valid for professional practices. If you form a regular LLC, you’re not actually getting liability protection and could face regulatory problems.
Myth: I don’t need an operating agreement for my PLLC if I’m the only member.
False. New York law requires all LLCs (including PLLCs) to have an operating agreement, even single-member LLCs. Without one, your PLLC is governed by default state law, which is often not what you want.
The Formation Process: PLLC vs PC
Both entities require similar steps in New York, but there are some differences:
For a PLLC:
First, choose your practice name and verify availability.
Second, apply for Certificate of Authority from NYSED Office of Professions (this proves you’re a licensed professional). The application requires your professional license number, verification, and fee.
Third, once approved by NYSED, file Articles of Organization with NYS Department of State. You’ll pay a $200 filing fee.
Fourth, obtain your EIN (Employer Identification Number) from the IRS.
Fifth, draft and adopt your Operating Agreement.
Finally, open a business bank account.
For a PC:
The process is nearly identical, except you file a Certificate of Incorporation instead of Articles of Organization, and you draft Bylaws instead of an Operating Agreement.
The timeline and costs are essentially the same.
Tax Considerations
Here’s where things get interesting, and where you should consult with a CPA or tax advisor for your specific situation.
Default taxation:
A single-member PLLC is taxed as a “disregarded entity” (sole proprietorship). All profit and loss flows through to your personal tax return (Form 1040, Schedule C). You pay self-employment tax (15.3%) on all net income.
A PC is taxed as a C-corporation by default. The corporation pays corporate income tax, then you pay personal income tax on salary and dividends. This creates “double taxation” which is why most PCs elect S-corp status.
S-corp election (most common for profitable practices):
Both PLLCs and PCs can elect to be taxed as an S-corporation.
With S-corp taxation, you pay yourself a “reasonable salary” (subject to employment taxes), and remaining profit is distributed as dividends (not subject to self-employment tax). This can save significant money on taxes once your practice is profitable.
Example: Your PLLC nets $120,000. Under default taxation, you pay self-employment tax on the full $120,000 (about $18,360). Under S-corp taxation, you might pay yourself a $60,000 salary (employment taxes on $60,000) and take $60,000 in distributions (no self-employment tax), saving roughly $9,180 annually.
The catch is that S-corp taxation requires running payroll, filing additional tax forms, and more accounting complexity. It’s usually worth it once you’re netting $60,000+ annually, but discuss with your CPA.
What About Solo Practice vs Group Practice?
Your entity choice might also depend on whether you’re solo or planning to grow.
Solo practice:
If you’re planning to stay solo indefinitely, a PLLC gives you maximum flexibility and minimum paperwork. You can always convert to a PC later if needed (though it’s a hassle).
Group practice:
If you’re starting with partners or plan to add associate therapists, both PLLC and PC can work. PLLCs are simpler for small groups (2-5 people). PCs provide more formal structure for larger groups (6+ people) where you want clear governance, voting rights, and defined roles.
Adding associates later:
If you’re solo now but might add W-2 employees or 1099 contractors later, your entity choice doesn’t really matter. Both PLLCs and PCs can hire employees.
If you want to add equity partners (people who own part of the practice), you’ll need to amend your operating agreement (PLLC) or issue stock (PC). PLLCs are generally easier to modify.
Common Questions
Can I change from PLLC to PC later, or vice versa?
Yes, but it’s a pain. You’d need to dissolve one entity and form a new one, transfer all contracts and assets, notify clients and vendors, get a new EIN, and update everything. It’s doable but expensive and time-consuming. Better to choose correctly from the start.
Do I need an attorney to form a PLLC or PC?
Legally, no. Practically, it’s highly advisable. The NYSED Certificate of Authority process is confusing, and mistakes mean delays or rejections. Operating agreements and bylaws need to be properly drafted. DIY formation using online services often results in problems down the road (missing operating agreements, incorrect filings, lack of compliance).
How much does it cost to form a PLLC or PC?
Filing fees are about $200-300 total for either entity (NYSED fee plus DOS filing fee). If you hire an attorney, expect to pay $1,500-3,000 for full-service formation including NYSED application, filing, EIN, and operating agreement or bylaws. DIY using online services costs $500-800 but often doesn’t include NYSED application (which you need) or operating agreement (which you also need).
What’s the difference between a PLLC and a regular LLC?
A PLLC is specifically for licensed professionals. In New York, if you’re a therapist, you must use a PLLC (or PC), not a regular LLC. The main practical difference is that PLLCs require NYSED approval and all members must be licensed in the same profession.
Can I practice under my personal name or do I need a business name?
You can do either. Many therapists use their personal name (Jane Smith, LCSW, PLLC). Others create a practice name (Riverside Therapy, PLLC). Both are fine. If you use a business name, make sure it’s available and follows NYSED naming requirements.
What Happens If You Choose Wrong?
Choosing the wrong entity isn’t the end of the world, but it can cause headaches:
If you form a regular LLC instead of a PLLC, you don’t have valid liability protection and could face regulatory issues with NYSED.
If you form a PLLC but really needed a PC for your specific tax situation, you’ll pay more in taxes than necessary until you convert.
If you skip the operating agreement or bylaws, you’re governed by default state law, which might not match how you want to run your practice.
If you don’t file correctly with NYSED, your formation will be rejected and you’ll start over.
The good news is that most therapists starting solo practices do well with a PLLC. It’s the simpler, more flexible option that works for 80-90% of situations.
Next Steps
If you’re ready to form your practice:
First, decide between PLLC and PC based on your situation (solo vs group, preference for simplicity vs formal structure, tax considerations).
Second, choose your practice name and verify it’s available.
Third, either hire an attorney to handle formation or prepare to spend 20-30 hours researching and filing everything yourself.
Finally, don’t skip the operating agreement or bylaws. This is where you define how your practice operates, what happens if you want to dissolve it, and how decisions get made.
Starting a private practice is exciting. Getting the legal foundation right from day one means you can focus on what you do best (helping clients) instead of worrying about legal problems down the road.
If you’re forming a practice in New York and want guidance on PLLC vs PC, or if you want someone to handle the entire formation process, or have questions about an LLC, I offer free 15-minute discovery calls to discuss your specific situation.
