The exact definition of a professional limited liability company (PLLC) may vary from state to state. Some states require that people forming a professional services business, such as lawyers, accountants, doctors and engineers, form a PLLC rather than a limited liability company (LLC). Many states do not allow licensed professionals to limit their liability for malpractice. However, the PLLC structure may protect them from negligent acts of other members in the PLLC.
An LLC is a business entity that combines features of corporations, sole proprietorships and partnerships. Like a corporation, an LLC is a legal entity separate from its owners (called members) that, in most cases, protects owners’ personal assets from the debts and liabilities of the company. In other words, if someone sues an LLC, except in cases involving fraud and misrepresentation, that person can only go after the assets of the LLC, not the members’ personal assets. Members, however, can elect to manage the corporation like a partnership or sole proprietorship. In addition, members can elect to be taxed as a sole proprietorship or partnership instead of being taxed like a corporation. In many states, PLLCs share these same basic characteristics with some slight restrictions.
Additional Filing Requirements
To form an LLC, most states require that the prospective LLC members file articles of organization with the secretary of state for the particular state. However, for professional service companies, states may require the professional licensing body (like the state’s bar organization for lawyers) to approve the PLLC articles. In addition, the state may require that a licensed professional in the LLC's field of business sign the documents. The signatory may have to include a copy of her license or other proof of licensing.
Many business owners choose an LLC when deciding what type of business entity to file because it limits the owner’s personal liability while providing flexibility for taxes and management. However, many states do not permit licensed professionals to limit their professional liability for acts of professional malpractice. In other words, an attorney found liable for legal malpractice may be subject to personal liability even where the attorney is a member of a PLLC. In most cases, however, the PLLC business entity does protect one attorney from liability for the negligent acts of another member. In addition, a member of a PLLC may be protected from personal liability for issues unrelated to professional services, like the PLLC’s debts.
Please contact a qualified attorney licensed to practice in your jurisdiction to find out whether a PLLC is the right business entity for you. This article should not be construed as legal advice. It is for educational purposes only.