Should you elect “Professional” status when you form an LLC or a Corporation?

Should you elect “Professional” status when you form an LLC or a Corporation?

Should you elect “Professional” status when you form an LLC or a Corporation?

Electing “Professional” status when you form an LLC or corporation creates either a Professional Limited Liability Company (PLLC) or Professional Corporation (PC). PLLC’s and PC’s are reserved, and sometimes required, for businesses that provide a service in which the owner must hold a state license in order to practice (like an attorney). PLLC and PCs are restricted to providing only the specific licensed service that the owner holds, and the business can only be owned by individuals that hold such a license (so a law firm must be owned entirely by licensed attorneys). In other words, if you form a PLLC based on being a licensed mental health counselor, you cannot pivot from performing those mental health counseling services, and any co-owners of your business must also be licensed by the state.

With a regular LLC or corporation, business owners do not need to hold any specific licenses and you can do any legal business activities you want (i.e. a single LLC could run a barbershop and an ice cream parlor).

In Maine, there are 12 professions that are required by law to elect professional status (MRSA Title 13 Chapter 22 Section 731). Those professionals are: 

  • accountants,
  • advanced practice registered nurses,
  • attorneys,
  • chiropractors,
  • dentists,
  • optometrists,
  • osteopathic physicians,
  • physicians and surgeons,
  • physician assistants,
  • podiatrists,
  • registered nurses, and
  • veterinarians.

Maine law does allow you to form a PLLC or PC if you are not one of those 12 listed professions so long as you are required by the state to be licensed as a precondition to engaging in your specific practice (like a cosmetologist or barber in Maine, for example). So the question is, if a state license is required to operate your business, BUT you are not one of those 12 professions that are mandated to make the election, should you optionally elect Professional status?

This can vary by state, but typically, the answer to that question is “no.” This is because electing the Professional status will subject your business to the constraints of (at least in Maine) the Maine Professional Service Corporations Act. This includes the inability to being in unlicensed individuals as owners of your business, and the inability to provide more diversified services under a single company.

As you navigate the Professional company election and structure, we strongly recommend speaking with your attorney before moving forward.  If you live in Maine, schedule a consultation with us!

Andrew Kraus

Andrew strives to provide clients with the tools they need to succeed in the creative economy. His trademark practice engages business owners and their marketing teams to ensure the value of their creations are protected. His business practice advises clients on how to protect themselves while creating a sustainable and compliant business endeavor. Andrew sits on the board of the Maine Coast Fisherman’s Association, and his involvement in the startup community has him serving as an organizer for 2 Degrees Portland and Startup Maine.