When you decide to create your own law firm, you’re not only tasked with finding clients and cases, you’ll need to decide how to run your business. The main considerations you’ll have to make concern cost and liability.
What are my options for forming a NY law practice?
It depends on whether you plan to start a practice on your own or with a partner (or partners). But generally, your options include:
1.) Sole Proprietorship
Benefit: no start-up costs, and you won’t have to file any paperwork with the state.
Downside: business finances will be integrally tied to your personal finances.
Read more about Sole Proprietorships.
2.) Limited Liability Partnership (LLP)
Benefit: each partner receives liability protection from one another.
Downside: if the LLP is sued as a whole, each partner’s assets are at stake.
Read about LLPs vs. Partnerships.
3.) Professional Corporation (PC)
Benefit: limited liability protections for all corporate employees, and tax advantages
Downside: expensive to set-up and maintain
4.) Professional Limited Liability Company (PLLC)
Benefit: limited liability protections
Downside: more oversight than an LLP
Learn more about PLLCs.
Why can’t I form a New York LLC for my law practice?
Some states, New York included, require certain licensed professionals—like doctors, lawyers, and accountants—to set-up their businesses as “professionals.” (Instead of an LLC, for example, they would set-up a PLLC.) Both LLCs and PLLCs offer limited liability protections when it comes to business matters. The main distinction is that employees of PLLC’s are still liable for malpractice or negligence as a licensed professional.
Wait, what does it mean to be a “professional”?
According to NY LLC L § 1201, a “professional” is any individual duly authorized to practice any of the professions included in this list from the New York State Education Department. This includes licensed physicians, attorneys, and counselors at law.