Do Occupational Therapists in New York Need an LLC or PLLC for a Private Practice?

When it comes to starting your own private practice, navigating the legalities of business formation can sometimes be as intricate as diagnosing a complex medical condition. For Occupational Therapists (OTs) in New York, establishing the right legal entity is the first step to ensuring compliance with state regulations, while still protecting your personal assets. The choice between a Limited Liability Company (LLC) and a Professional Limited Liability Company (PLLC) is mostly a non-choice, because if the nature of your business involves the utilization of your professional skills (i.e., whether you are engaging in services that are within the scope of practice for OTs) then you must form a PLLC.

Why do OTs in New York Need a PLLC Instead of an LLC?

New York State law mandates that professionals licensed by the New York State Education Department (NYSED) must form a PLLC or Professional Service Corporation (PC) if they are looking to set up a private practice. This requirement is rooted in safeguarding the public by ensuring that professionals are held to a higher standard and that there are additional layers of oversight from the State.

In order to even form a professional entity, you must go through the NYSED (vs. going directly to the NYS Department of State for LLCs). Ultimately, by funneling professionals looking to set up a private practice through the NYSED, there is a greater degree of accountability, oversight and transparency. When it comes to occupational therapists, since all OTs are licensed by the NYSED, if you’re interested in setting up a private practice, forming a PLLC (or PC) is a necessity.

PLLC vs. LLC: What's the Difference?

1. Professional Limited Liability Company: A PLLC is specifically designed for licensed professionals who offer services requiring specialized knowledge or skills, such as healthcare providers, lawyers, accountants, and architects. In a PLLC, individual members are shielded from personal liability for malpractice claims against other members, but they remain personally liable for their own negligence or misconduct. Likewise, members cannot be held personally liable for debts or obligations of the business itself. This legal structure provides a balance between personal asset protection and professional accountability.

2. Limited Liability Company (LLC): On the other hand, an LLC is a flexible business structure suitable for a wide range of businesses. While an LLC offers the same liability protection to its members, it is just simply not an option for professionals. The only circumstance where a professional can set up an LLC is if the business is completely unrelated to the professionals skills, expertise or abilities. For example, if an architect wanted to open a laundromat, they could do so by using an LLC and would not be required to go through the NYSED.

Conclusion

For Occupational Therapists embarking on the journey of setting up a private practice in New York, a PLLC (or PC) will be the best option from a personal liability and legal compliance perspective. Unfortunately, New York State law does not allow occupational therapists, or any professional for that matter, to set up a regular LLC and circumvent the requirements of the NYSED. However, this certainly should not deter you from setting up your business!

How We Can Help

At Carbone Law, we are experienced in assisting licensed professionals with setting up their private practices. We can help assess your situation and guide you through any issues related to the PLLC filing process. If you are interested in setting up a PLLC, please do not hesitate to give us a call at (212) 547-8857 or schedule a consultation online and we'd be happy to work with you. Our experienced business attorneys are here to provide the advice you need. Contact us today and take the next step towards setting up your private practice!

Disclaimer: This blog post and similar posts are not to be considered as providing legal advice. The discussion here is meant for educational and informational purposes only and shall not create an attorney-client relationship with the readers of this content.