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Utah Professional LLCAre you looking to form a business entity in Utah for people who are licensed to provide professional services? If so, you may be interested in starting a professional limited liability company (PLLC).

The PLLC is a popular choice for licensed entrepreneurs looking to start businesses with fellow doctors, attorneys, accountants, engineers, or other professionals, thanks to its ability to reduce each professional’s personal liability while also providing a host of other benefits.

In this article, we’ll walk you through the steps required to form a professional LLC in Utah in compliance with state and federal laws. Let’s get started!

What Is a Professional Limited Liability Company?

For the most part, professional limited liability companies are quite similar to standard LLCs, and they share many of the same benefits.

In general, an LLC is a business entity type that brings together some of the most popular attributes of casual entities, like sole proprietorships and general partnerships, with the formality of corporations. The resulting entity is one that is highly flexible and customizable, while also providing some great benefits to its owners.

The factor that differentiates a PLLC from a standard LLC is that the PLLC is strictly for licensed professionals to operate their businesses with other licensed professionals. In Utah, the types of professionals who form PLLCs include public accountants, architects, attorneys, chiropractors, dentists, professional engineers, naturopaths, nurses, optometrists, osteopathic physicians, pharmacists, physicians, surgeons, physician assistants, physical therapists, podiatrists, psychologists, real estate brokers or sales agents, social workers, mental health therapists, veterinarians, and real estate appraisers.

The state of Utah isn’t particularly strict regarding PLLC membership, at least not to the level of some other states. In many states, there are guidelines dictating that all or at least half of a PLLC’s members must be licensed in the same profession, but Utah does not have this requirement. Instead, Utah leaves the question of membership up to each profession’s regulating board — unlicensed individuals are allowed to be members of PLLCs “to the extent allowed by the applicable licensing or registration act relating to the professional service.”

Let’s discuss a couple of the attributes that make the PLLC such a popular option for these professionals.

Limited Liability

A big benefit of a professional limited liability company is its ability to provide personal asset protection to its owners/members. Let’s say you operate a general partnership instead of a PLLC. If your business is sued, your creditors can pursue your personal assets to satisfy the lawsuit. This means your house, car, personal bank accounts, and personal possessions are all fair game.

However, for PLLC owners, this isn’t the case. Instead, creditors can only pursue the assets of your actual business. It’s important to note that this doesn’t defend your PLLC from malpractice suits. For example, if you are a member of a PLLC for doctors and you botch a surgery, the PLLC will not protect you from the patient filing a malpractice suit.

Taxation

One of the main benefits of the PLLC is the fact that it gives its owners some options regarding how they want to be taxed. While a professional corporation also gives you choices regarding taxation, to an extent, the PLLC is much more flexible in this regard.

You can choose to have your PLLC taxed as a pass-through entity (similar to sole proprietorships or general partnerships), which means that your PLLC itself will not owe taxes. Instead, your profits and/or losses will “pass through” your PLLC to your owners, who will then pay taxes on that money on their own personal returns.

Another option is to be taxed like a C corporation or an S corporation. C corporation taxation is the most common form of taxation for corporations, but as this tax structure leaves its owners subject to double taxation (wherein the same money is taxed both at the corporate level and the individual level), it’s not a popular option for PLLCs.

The S corporation is a similar form of taxation to the pass-through method but avoids the self-employment taxes that come with partnership or sole proprietorship-style taxes. While this can save you some money because you won’t have to pay both the employer and employee portions of Medicare and Social Security, people who choose this form of taxation should be careful to ensure they’re still paying enough into Social Security to be able to draw from this entitlement when they retire.

How to Form a Utah Professional Limited Liability Company

Each state has its own method for forming PLLCs, as there is no uniform nationwide formation process. In Utah, the formation process for a PLLC is nearly identical to the process for a standard LLC, but there are some crucial differences.

Step 1 – Name Your PLLC

The first step is to choose a business name. Utah requires that the name of every PLLC registered in this state must contain the words “Professional Limited Liability Company” or the abbreviations “P.L.L.C.” or “PLLC.”

In addition to the legal requirements, there are also some practical applications to discuss. Generally speaking, your business name should indicate what your PLLC does. For instance, if you operate a PLLC for attorneys, you should probably have either the words “attorneys” or “lawyers,” or the phrase “law office” in your business name.

When you’ve come up with a name you like (we suggest making a list of 3-4 name ideas, in case your first choice is already taken), you should perform a name search on the Division of Corporations and Commercial Code website. If you’d like more information about LLC name searches in Utah, check out our guide.

Step 2 – Designate a Registered Agent

Every PLLC operating in the state of Utah is required to have a registered agent who acts as a middleman between your business and the state. The registered agent’s role is to accept important document deliveries from the state — especially service of process — inform you of the delivery, and then forward the materials on to your business.

There are quite a few options when it comes to who can serve as your registered agent in this state. You can hire a registered agent service, designate a trusted friend or family member, or even serve as your PLLC’s own registered agent yourself. However, we typically advise against serving as your own registered agent because you would need to be available during all standard business hours in case the state needs to make a delivery.

If you choose to use an online formation service to create your PLLC, you may be able to get a full year of registered agent service for free. If you’re interested in this option, we recommend Northwest Registered Agent or IncFile, our two favorite services for PLLC formations.

Step 3 – File Your Certificate of Organization

Next, you’ll need to fill out a formation document known as the Certificate of Organization (Professional Services Limited Liability Company).

Among the information you’ll need to complete this form is the name of your PLLC, the address of your principal place of business, the professional service provided by your PLLC, the name and address of your registered agent, the name and signature of your PLLC’s organizer, the names and addresses of your members and/or managers, the duration of your PLLC, and whether or not your PLLC is female-owned or minority-owned.

When you’re ready to file these forms, you can submit them to the Division of Corporations and Commercial Code online, by fax, by mail, or in person, along with your $70 filing fee. Utah processes all online filings within 24 hours. If you choose to submit your filing on a paper form, you can expect to wait for 7-10 business days until it is processed. There is expedited filing available for faxed submissions, but seeing as this option has an additional $75 fee, we’re not sure why you wouldn’t just file online instead.

Step 4 – Create an Operating Agreement

An operating agreement is a crucial part of any PLLC, as this internal document outlines your company’s financial structure, as well as how the business will be managed. You don’t actually need to submit this document to the state, but it is still legally required that you have one because it can help you avoid conflicts between your member/owners down the line.

What information should be included in your Utah operating agreement? It’s up to you to determine what you want in your company’s agreement, but we recommend the following sections:

  • Ownership interests
  • The rights and responsibilities of the members
  • Voting rights
  • Profit/loss allocation
  • Management by a manager or by members
  • Guidelines for voting and holding meetings
  • Plans for replacing a member, if necessary

Step 5 – Obtain an EIN

A federal tax ID number — also known as an Employer Identification Number (EIN) — is essentially the business equivalent of a Social Security number. It’s a nine-digit number that serves as an identifier for your specific business entity.

If you operate a PLLC, you should absolutely get an EIN for your business, as this will help you pay taxes, hire employees, open business bank accounts, and more.

Thankfully, acquiring an EIN is a painless process, and it’s also entirely free of charge. All you need to do is head over to the EIN Assistant on the IRS website and fill out the form. It’s just that easy — once you finish the form, the IRS will provide your EIN immediately.

Step 6 – Apply for Licenses, Taxes, and Income Reports

At this point, your PLLC has been successfully created, but that doesn’t mean the process of getting your business off the ground is complete. You still need to acquire any applicable business licenses that may apply to your PLLC.

Depending on the nature of your business, your professional licenses will vary, so you should check out the state’s Division of Occupational and Professional Licensing website to figure out which licenses you’ll need.

In addition, your PLLC will most likely need to register for sales and use tax and withholding tax, which you can apply for on the State Tax Commission website. You will also probably need to register for unemployment insurance tax with the Department of Workforce Services site.

In Conclusion

Forming a professional limited liability company in the state of Utah requires quite a bit of information, and there can be a significant amount of legwork involved in forming one as well. Still, the process is certainly simpler than the process of forming a professional corporation, which is the other popular option for certified professionals in Utah.

As long as you follow the steps in this guide — and seek advice from a reputable attorney if you run into any questions or concerns — you should be able to form your new PLLC in a compliant fashion that allows your business to thrive for many years to come.