Choosing Limited Liability for Your New York Law Firm
Limited liability is a smart choice for any law firm. It shields owners’ personal assets from the firm’s contractual debts and other liabilities and from liability for malpractice by other partners or owners in the firm. The forms of limited-liability entities available for law firms differ from state to state.
In New York, a law firm seeking a limited-liability structure is not permitted to organize as an ordinary LLC or standard business corporation but can organize as:
- a professional corporation (PC) under Article 15 of the N.Y. Business Corporation Law;
- a professional service limited liability company (PLLC) under Article 12 of the N.Y. Limited Liability Company Law; or
- a limited liability partnership (LLP) under N.Y. Partnership Law § 121-1500.
Some firms even combine these forms—for instance, a PC might be a member of an LLP—for tax and financing purposes.
Choosing among these forms—and sometimes even combining them—requires analyzing several important factors. First, from a practical perspective, an LLP requires more than one owner, so it is not available to single-owner law firms. Beyond that, you’ll want to also consider other important factors. For example:
- corporate formalities tend to be stricter in PCs, while PLLCs and LLPs typically offer more flexibility in governance;
- federal and state tax treatment can vary significantly between entities; and
- each form requires different agreements and registrations with state authorities.
Before you choose a law firm limited-liability structure, analyze your firm’s needs and operations and determine which form best fits your firm.