A professional limited liability company, or PLLC, is a specialized type of LLC used by certain licensed professionals in many states. A limited liability company, or LLC, is a particular way of organizing the structure of a business. In general, the LLC combines some of the best features of a partnership with those of a corporation.
Limited liability companies
Operating a business as a sole proprietorship or partnership exposes a business owner to personal liability for the debts of the business. Forming a corporation limits an owner's personal liability, but imposes certain formalities on management, as well as reporting and record-keeping requirements. The LLC was created to maintain the personal liability protection of a corporation while allowing for more flexible business management. A person with an ownership interest in an LLC is called a member.
An LLC also permits the business to choose how it will be taxed. An LLC with only one member can be taxed as either a sole proprietorship or a corporation. Similarly, an LLC with two or more members can be taxed as either a partnership or a corporation.
Limited liability companies are governed by state law. Some states do not allow certain licensed professionals to form LLCs.
Some of those states have created the PLLC for those professionals. Some states only allow professionals to form corporations, which may be referred to as a professional corporation or professional service corporation.
Professional limited liability companies
Regarding the management flexibility and taxation, a PLLC has the same advantages of an LLC. The difference between the two is that the PLLC has some restrictions on who may be a member of the PLLC and the limitation of liability of the members.
With an LLC, anyone can be a member, or owner, of the business. State PLLC laws often provide that only licensed professionals can be members, or that a certain number of members must be licensed professionals.
A PLLC cannot be used to shield the members from claims for malpractice. However, the malpractice of one member cannot create liability for the other members.
Forming a PLLC
Your state law will determine whether you can form a PLLC, and set forth the requirements for formation. These requirements are found in the statutes that allow for a PLLC, but in some states the particular profession's licensing agency also has rules governing PLLCs.
Some states list the professions that may form a PLLC. The list varies from state to state, but typically includes professionals such as physicians, dentists, attorneys, accountants, architects, engineers, veterinarians, real estate agents, and psychologists. The law in other states simply refers to "licensed professionals," without naming specific professions. Therefore, you will need to determine whether your state has PLLC laws that apply to your profession. The licensing agency for your profession may be able to help you make this determination.
A common requirement is that the name of the PLLC must clearly indicate it is a PLLC, but including the words "Professional Limited Liability Company," or the initials "PLLC" or "P.L.L.C."
Forming a PLLC will require that certain documents, such as Articles of Organization, be filed with the appropriate state agency. These documents will be tailored to a PLLC, but will be similar to those filed for an LLC, setting forth the name of the PLLC, the names of the members, etc. In addition, other documents may also be required to verify the members' licensing status. You may also need to file documents with your licensing agency.
If you are a licensed professional and plan to open your own office, either alone or with other professionals, you need to find out whether your state limits how you can structure your business. You may discover that you need to form a PLLC rather than a standard LLC.
LegalZoom can help you file your state's formation paperwork for as little as $0 + state filing fees.
LLC vs. PLLC business structure FAQs
What's the main difference between an LLC and a PLLC?
The biggest difference is who can own the business. Anyone can own an LLC—individuals, other companies, or even groups of people. But a PLLC can only be owned by people who have professional licenses, like doctors, lawyers, or accountants.
Think of it like this: If you want to start a regular business like a restaurant or online store, you'd use an LLC. But if you're a dentist who wants to start a dental practice with other dentists, you'll want a PLLC because dentistry requires a professional license. PLLCs also have different rules about liability. While both protect your personal property (like your house and car) from business debts, PLLCs don't protect you from mistakes you make in your professional work.
Do I need a professional license to start a PLLC?
Yes, you absolutely need a professional license to start or own a PLLC. Most states require that all owners have active licenses in the same profession that the PLLC practices. For example, if you want to start a medical PLLC, everyone who owns part of it must be a licensed doctor. You'll also need to prove your license is current and in good standing when you file the paperwork.
Some states are a bit more flexible and allow a small percentage of non-licensed people to own part of a PLLC, but the majority must still be licensed professionals.
Will a PLLC protect me if I make a mistake in my professional work?
No, a PLLC won't protect you from your own professional mistakes or malpractice claims. However, a PLLC does protect you from other people's professional mistakes. If your business partner in a medical PLLC gets sued for malpractice, your personal assets are protected in the event of a settlement.
This is different from regular business liabilities. If your PLLC gets sued for things like unpaid bills, employee issues, or accidental injury, your personal assets are protected just like with a regular LLC.
Is it harder to set up a PLLC than a regular LLC?
Yes, setting up a PLLC is more complicated and takes longer than forming a regular LLC. You have to jump through extra hoops because you're dealing with professional licensing rules. For a PLLC, you typically need to get approval from your professional licensing board before you can even file the paperwork with the state.
Some states require you to publish a notice in local newspapers for several weeks. The name of your PLLC also has stricter rules—it usually has to include "PLLC" or "professional limited liability company" in the name, and sometimes it needs to show what type of professional service you provide.
Do LLCs and PLLCs pay taxes the same way?
Yes, both LLCs and PLLCs pay taxes exactly the same way by default. The business itself doesn't pay taxes—instead, all the profits and losses "pass through" to the owners' personal tax returns. This means if your LLC or PLLC makes $100,000 in profit and you own half of it, you'd report $50,000 as income on your personal tax return.
Both types of businesses can also choose to be taxed like a corporation if that saves money, but most small businesses stick with the pass-through option because it's simpler.
Can I change my LLC to a PLLC later if I become a licensed professional?
It depends on your state's rules, but it's usually not a simple process to convert an LLC to a PLLC. First of all, not all states recognize PLLCs. In states that do, they are often treated as completely different types of businesses, so you'd likely need to dissolve your LLC and start fresh with a new PLLC. This process can be complicated because you'd need to transfer all your business assets, contracts, and licenses from the old LLC to the new PLLC.
You might also face tax consequences and need to notify clients, vendors, and banks about the change. It's much easier to choose the right business structure from the beginning. If you're planning to get a professional license soon, or if your business might need one in the future, talk to a lawyer or accountant before you file any paperwork. They can help you figure out the best structure for your long-term plans.
Are PLLCs available in all states?
No, not all states allow PLLCs. Some states, like California, don't have PLLC laws at all and require licensed professionals to form professional corporations (PCs) instead. Each state also has different rules about which professions can form PLLCs. Most states allow doctors, lawyers, accountants, and architects to use PLLCs, but some states include other licensed professionals like engineers, pharmacists, or therapists.
The rules about ownership also vary by state. Some require 100% of owners to be licensed professionals, while others allow up to half the owners to be non-licensed people. Before you decide on a PLLC, check your state's specific laws or ask a local attorney who knows the rules in your area.
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