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

If you are a licensed physical therapist in New York and you’ve been thinking about opening your own private practice, one of the very first questions you need to answer is what type of business entity you should form. Unlike many other states, New York has very specific rules about how licensed professionals can structure their businesses, and getting it wrong can have serious consequences.

In this post, we will walk through why physical therapists in New York are required to form a Professional Limited Liability Company (PLLC) (or a Professional Service Corporation (PC)) when setting up a private practice. We’ll also touch on some components of the formation process and some of the key distinctions between these entity types and a standard LLC.

Why Physical Therapists in New York Cannot Use a Standard LLC

New York State law contains a strict prohibition on what is known as the "corporate practice of professions." This means that individuals who hold a professional license issued by the New York State Education Department (NYSED) are not permitted to practice their profession through a regular LLC or a general business corporation. Physical therapy is one of over 36 professions licensed and regulated by NYSED.

Because physical therapy falls under the umbrella of NYSED-regulated professions, PTs who want to open a private practice must form either a PLLC or a PC. These are the only entity types (along with a registered Limited Liability Partnership, or LLP, for multi-member arrangements) that are authorized to provide professional services to the public in New York. A standard LLC simply cannot be used if the nature of your business involves practicing your licensed profession.

The only scenario in which a licensed physical therapist could form a regular LLC is if the business has absolutely nothing to do with physical therapy services. For example, if a licensed PT wanted to open a coffee shop or a retail store, they could do so using an LLC. But the moment the business involves the delivery of physical therapy services, a PLLC or PC becomes mandatory.

What Is a PLLC and How Does It Differ From an LLC?

A PLLC is a special type of LLC that is specifically designed for licensed professionals. It is formed under the same New York Limited Liability Company Law that governs regular LLCs, but it comes with additional requirements and a different formation pathway.

Like a regular LLC, a PLLC offers its members limited liability protection, meaning that the members' personal assets are generally shielded from the debts and obligations of the business. However, there is an important distinction when it comes to malpractice. In a PLLC, individual members are still personally liable for their own professional negligence or misconduct. What the PLLC does protect against is the malpractice of other members. So, if you are in a multi-member PLLC with another physical therapist and they are sued for malpractice, your personal assets would not be at risk because of their actions. Your personal assets would only be at risk based on your own professional conduct.

From a tax perspective, PLLCs function in much the same way as regular LLCs. They are treated as pass-through entities by default, meaning that the income of the PLLC flows through to the individual members and is reported on their personal tax returns. Members of a PLLC can also elect to be taxed as an S corporation or C corporation if that structure is more advantageous from a tax planning standpoint.

Going Through the NYS Department of Education & Naming Concerns: What Physical Therapists Should Expect

One of the biggest differences between forming a PLLC and forming a regular LLC in New York is that the PLLC formation process requires approval from the NYSED before the entity can be officially filed with the NYS Department of State. This additional step is what makes the PLLC formation process significantly longer and more involved. Understanding the NYSED’s rules governing the formation of PLLCs is crucial to a successful filing.

When it comes to naming your PLLC, you must comply with both the Department of State's naming rules and the NYSED's specific naming guidelines for professional entities. Not only must your PLLC name end with “PLLC,” but the name must also appropriately describe the profession to be practiced. For physical therapists, this typically means the name should include "physical therapy,” “physical therapist,” or “PT.” Importantly, the NYSED prohibits the use of words that could be considered misleading or that suggest claims of superiority. Additionally, if the entity name references a "group," there must be more than one professional member. These naming rules catch many applicants off guard, and a rejection based on the entity name can add weeks or even months to the formation process.

Final Thoughts for Physical Therapists Starting a Private Practice in New York

For physical therapists who are ready to take the leap into private practice, understanding the entity formation requirements in New York is a foundational step. The bottom line is simple: if your practice involves the delivery of physical therapy services, you must form a PLLC (or PC). A regular LLC is not an option, and using one could expose you to serious legal consequences. The formation process does take longer and involves more steps than forming a standard LLC, but with proper planning and the right legal guidance, it is a manageable process. Taking the time to get it right from the beginning will save you from headaches, delays, and potential compliance issues down the road.

Looking to Set Up a Private Practice as a Physical Therapist in New York?

If you are a licensed physical therapist considering opening a private practice in New York and have questions about the PLLC formation process, please do not hesitate to give us a call at (212) 547-8857 or schedule a consultation online. Our experienced attorneys are here to help guide you through the process and ensure your practice is set up correctly from day one.

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.