PC or LLC: Which is better?

When you start your new Georgia professional practice, the business form you choose will have long-lasting effects on your taxes and how much, if any, personal asset protection you will have if and when someone sues you for malpractice. Most professionals choose to establish a professional corporation, a/k/a a PC, or a limited liability company, a/k/a LLC.

TaxSlayer.com explains that both a PC and an LLC give you limited liability with regard to your personal assets. Both also limit the amount of corporate income tax your professional practice will pay to a maximum of 21%. Despite these commonalities, however, PCs and LLCs represent two distinctly different business entities, each with its own advantages and disadvantages.

Professional Corporations

Should you choose to form a professional corporation, you can expect the following benefits:

  • No personal liability for yourself and your other shareholders
  • Ease of ownership transfer if and when one or more shareholders decide to leave the practice for whatever reason
  • Larger contributions to your retirement plan
  • Your choice of cash basis or accrual basis

On the other hand, a PC requires that all shareholders hold the same professional licenses. In other words, your PC cannot encompass both professional people and nonprofessional people. Nor can your PC encompass, for instance, both a doctor and an office manager.

Limited Liability Companies

Should you choose to form a limited liability company, you can expect the following benefits:

  • A simple, straightforward process of formation
  • No requirement that all shareholders hold the same license to practice
  • No requirement for annual meetings or for minutes of any meetings you hold, whenever you hold them
  • Separation of personal assets from corporate assets
  • Your choice of how you want your professional practice taxed; i.e., as a partnership, corporation or, if you are the only shareholder, as a sole proprietorship

This is general educational information and not intended to provide legal advice.

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