Part 2: Professional Limited Liability Companies
By Robert L. Bolick, Esq.
This article is the second in a six-part series on tax, estate and asset protection planning for physicians. This issue focuses on the asset protection tool of professional limited liability companies. Upcoming issues will address generation-skipping trusts, captive insurance companies and asset protection trusts.
In order to practice medicine as a physician, you must do business as a (1) sole practitioner, (2) partnership, (3) professional corporation (“PC”) or now as of two years ago, a (4) professional limited liability company (“PLLC”). Practicing under a PLLC offers more protection than the other three options.
Is a professional entity better?
Yes. A PC and PLLC are both preferable to practicing as a sole practitioner or in a partnership. In a partnership, you are liable for the acts of any other partner. Not good. As a sole practitioner or partner, you can also be liable for the acts of employees that are unrelated to the practice of medicine. For example, an employee leaves the office for lunch and is in an accident, seriously injuring someone. You can be held liable as a sole practitioner or as a partner. PCs and PLLCs can protect you from this type of liability.
Is a PLLC better than a PC?
Yes. If you are sued personally on a matter unrelated to the practice of medicine (for example, you are in an accident and seriously injure someone), a creditor can gain control of your PC and access all its assets such as cash, equipment and receivables. No creditor can gain control of your PLLC or access its assets.
Can I still protect myself from claims against partners in a group practice?
Yes. The ultimate for asset protection in a professional context is to have each individual doctor have his or her own PLLC. All of the PLLCs then join together to form a limited-liability partnership (“LLP”). No individual physician or PLLC is liable for any claim against the LLP (the group practice).
It simply makes sense to protect yourself as much as you possibly can. Fortunately, it’s easy and inexpensive to do. A PLLC can be established for about $1,800 including the articles of organization, operating agreement, organizational meeting minutes, membership certificates, federal tax identification number and all filing fees and costs.
Robert L. Bolick is the senior partner in the law firm of Durham Jones & Pinegar in Las Vegas, where he has practiced for over 24 years. His primary areas of practice are asset protection and estate planning. Mr. Bolick has an “A/V” rating from Martindale-Hubbell, the highest professional rating for an attorney. He is listed in “Nevada Super Attorneys” (top 5% in his field). He was named Outstanding Estate Planning Attorney of the Year by the Nevada Business Journal. He has authored numerous articles and publications on asset protection and estate planning, and is a frequent lecturer on these topics. Mr. Bolick is a member of the State Bars of Nevada, California, Arizona, Utah and Hawaii.