What Is a Professional Law Corporation? Everything You Need to Know

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Written By AndrewPerry

Founded in 2015 by a group of passionate legal professionals and enthusiasts, FlowingLaw started as a small blog. Today, it's a thriving community where ideas, expertise, and legal advice flow freely.

 

 

 

 

If you’ve ever wondered how law firms are structured behind the scenes, the concept of a professional law corporation (PLC) might intrigue you. This type of corporation is specifically designed for licensed professionals, such as attorneys, who want to operate their practice as a business while maintaining compliance with legal and ethical standards.

In this guide, we’ll dive into what a professional law corporation is, its benefits, and how it’s set up. Plus, we’ll tackle some common questions to help you decide if this structure is the right fit for your legal practice. Let’s break it down!

What Is a Professional Law Corporation?

At its core, a professional law corporation is a business entity formed by licensed attorneys to provide legal services. Unlike a traditional corporation, a PLC adheres to specific regulations that ensure compliance with professional licensing boards and state laws.

Key Characteristics of a PLC:

  • Restricted Ownership: Only licensed professionals can own shares in the corporation.
  • Regulatory Compliance: Subject to both corporate and professional conduct laws.
  • Liability Protection: Provides limited liability to shareholders, but personal malpractice liability remains.

Why Is It Unique?

Unlike a general corporation, a PLC safeguards the ethical standards of the legal profession while offering the financial and administrative benefits of incorporation.

Why Choose a Professional Law Corporation?

Deciding to establish a professional law corporation isn’t just about following trends—it’s about maximizing efficiency and minimizing risks. Here’s why many legal professionals opt for this structure:

1. Limited Liability Protection

  • Protects personal assets from business liabilities.
  • Offers a shield against debts or obligations incurred by the corporation.

2. Tax Advantages

  • Flexibility in taxation as a corporation or an S-corp.
  • Potential for tax-deductible business expenses.
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3. Professional Credibility

  • Enhances the firm’s reputation as a legitimate and established entity.
  • Clients may feel more secure working with a structured business.

4. Continuity of the Practice

  • Ownership can be transferred to other licensed professionals.
  • Ensures the firm can continue operating smoothly in case of unforeseen circumstances.

Steps to Establish a Professional Law Corporation

Thinking about forming a PLC? Follow these straightforward steps to ensure your firm complies with legal requirements:

1. Verify Licensing Requirements

  • Ensure all shareholders and directors are licensed attorneys.
  • Check state-specific laws governing professional corporations.

2. File Articles of Incorporation

  • Submit the appropriate documentation to your state’s Secretary of State.
  • Include specific wording to indicate the corporation’s professional nature.

3. Create Corporate Bylaws

  • Outline the operational procedures and governance of the firm.
  • Include provisions for ownership transfer and ethical compliance.

4. Obtain Necessary Permits and Licenses

  • Secure a Certificate of Registration from your state’s bar association.
  • Ensure compliance with any additional local regulations.

5. Set Up Financial Accounts

  • Open a business bank account separate from personal accounts.
  • Establish clear financial procedures to maintain transparency.

6. Purchase Professional Liability Insurance

  • Protect the corporation from malpractice claims.
  • Ensure coverage aligns with the firm’s scope of services.

FAQs About Professional Law Corporations

What’s the difference between a professional law corporation and a general corporation?

While both structures offer limited liability, a PLC is specifically tailored for licensed professionals and adheres to stricter regulatory standards.

Can non-attorneys own shares in a professional law corporation?

No, ownership is typically restricted to licensed attorneys to maintain professional integrity and compliance.

Is malpractice liability covered by the corporation?

No, malpractice liability remains a personal responsibility. However, purchasing professional liability insurance can mitigate risks.

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What states allow professional law corporations?

Most U.S. states permit PLCs, but the regulations and requirements vary. It’s essential to check with your state’s bar association for specific guidelines.

Can a PLC operate under a trade name?

Yes, as long as the trade name complies with state laws and clearly identifies the firm’s professional nature.

Benefits of Incorporating as a PLC

Operating as a professional law corporation comes with numerous perks. Here are some highlights:

Enhanced Credibility

Clients often perceive incorporated firms as more professional and reliable.

Simplified Succession Planning

With clear bylaws, ownership transitions become straightforward, ensuring the firm’s longevity.

Streamlined Operations

Incorporating allows for better organization of administrative and financial responsibilities.

Challenges to Consider

As great as a PLC sounds, it’s not without challenges. Here are some factors to keep in mind:

1. Strict Regulatory Oversight

  • Compliance with both corporate and professional laws can be daunting.

2. Limited Ownership

  • Only licensed professionals can participate, which restricts funding opportunities.

3. No Shield from Malpractice Claims

  • Unlike general liability, malpractice liability cannot be transferred to the corporation.

Despite these hurdles, the benefits often outweigh the drawbacks, especially for those who prioritize professional integrity and operational efficiency.

How Does a PLC Compare to Other Business Structures?

When deciding on a business structure, it’s essential to compare options. Let’s see how a professional law corporation stacks up:

Business Structure Ownership Liability Protection Tax Flexibility Ideal For
Professional Law Corporation Licensed professionals only Limited liability (except malpractice) Yes Licensed attorneys
General Corporation Open to anyone Full limited liability Yes Large businesses
Limited Liability Company (LLC) Flexible ownership Limited liability Yes Small to medium firms
Sole Proprietorship Single owner No liability protection No Solo practitioners
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Conclusion

A professional law corporation is more than just a business structure—it’s a strategic choice for legal professionals looking to combine operational efficiency with compliance and professionalism. While it comes with its share of challenges, the benefits—ranging from limited liability to enhanced credibility—make it an attractive option for many attorneys.

If you’re considering forming a PLC, start by researching your state’s regulations and consulting with a professional to ensure a smooth setup. After all, your law firm deserves a solid foundation for success.

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