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.
What is a limited liability company?
A limited liability company (LLC) is a business structure that combines the personal liability protection of a corporation with the flexibility of a partnership. Unlike a sole proprietorship or partnership, an LLC shields owners—called members—from personal liability for business debts. And unlike a corporation, an LLC avoids strict management formalities and record-keeping requirements.
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.
What is a professional limited liability company?
A PLLC is a type of LLC specifically designed for licensed professionals such as doctors, lawyers, and accountants. It offers the same management flexibility and tax advantages as a standard LLC, but with restrictions on who can be a member and different liability protections for professional malpractice.
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.
What are the requirements to form 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, while others simply refer to "licensed professionals" without naming specific fields. Check with your state's licensing agency to determine whether PLLC laws apply to your profession.
Professions commonly allowed to form PLLCs include:
- Physicians and dentists
- Attorneys
- Accountants
- Architects and engineers
- Veterinarians
- Real estate agents
- Psychologists
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 requires filing documents with the appropriate state agency.
- Articles of organization: Similar to LLC filings, listing the PLLC name and members
- Licensing verification: Documents proving each member's active professional license
- Licensing agency filings: Some states require separate filings with your professional board
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, but only licensed professionals (like doctors, lawyers, or accountants) can own a PLLC. Additionally, PLLCs don't protect members from their own malpractice claims.
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.
Do LLCs and PLLCs pay taxes the same way?
Yes, both default to pass-through taxation, meaning profits and losses flow to owners' personal tax returns. Both can also elect to be taxed as a corporation if it's more advantageous.
Can I change my LLC to a PLLC later if I become a licensed professional?
It's usually not simple, because most states treat them as different entity types, so you'd likely need to dissolve your LLC and start fresh with a new PLLC. Consult an attorney before filing any paperwork if you anticipate needing a professional license in the future.
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, PLLCs are not uniformly available across the country. Some states, like California, don't allow PLLCs and require professional corporations (PCs) instead. Rules about eligible professions and ownership requirements vary by state, so check your local laws or consult an attorney.
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