A PLLC is a Professional Limited Liability Company. It is a distinct business entity, formed by filing Articles of Organization with the Arizona Corporation Commission. In many states, people in certain professions like lawyers, doctors, or real estate agents, who want to form Limited Liability Companies (LLCs) for their business, can do so using PLLCs. In Arizona, pursuant to Title 29, Chapter 4 of the Arizona Revised Statutes, a PLLC is organized for the purpose of rendering a service that is lawfully rendered only by a person licensed by a licensing authority. For Real Estate agents, this licensing authority is the Arizona Department of Real Estate.
PLLCs operate like LLCs in all major respects. They share the same legal and ownership structure. For example, both are owned by a member or members, not shareholders. They both provide limited liability protection to the member, thus insulating personal assets from any claim initiated by an adverse party. As an Arizona real estate agent, you are required to form a PLLC, not an LLC.
The Arizona Department of Real Estate (ADRE) has specific requirements for naming and ownership of PLLCs. We prepare and file your documents in accordance with these requirements.
A single member PLLC is classified by the IRS as a sole proprietorship and files a Schedule C on the member's personal income tax return. Profits from a sole proprietorship are subject to regular income tax AND self-employment tax at a rate of 15.3%. In Year 2018, the self-employment tax (15.3%) is imposed on the first $128,400 of business profits and 2.9% thereafter. Half the self-employment tax you pay is allowed as a deduction.
Your PLLC can avoid self-employment tax by filing IRS Form 2553, Subchapter S Election. This election changes the tax status of your PLLC from a sole proprietorship to an S Corporation. The PLLC classified as an S corporation files an annual Corporate Income tax return, Form 1120S. S corporation profits or losses are reported on Form 1120S and pass through to the sole member's personal income tax return, avoiding the self-employment tax. MyPLLC.com makes this S Election for you.
Please note the IRS requires reasonable compensation be paid from the PLLC if profitable. Be sure to discuss this with your CPA or Tax Advisor.