Difference Between an LLC and a PLC

By Laura Payet

Difference Between an LLC and a PLC

By Laura Payet

A limited liability company (LLC) is a business entity established under state law and recognized in all states. PLC is an abbreviation accepted in some states for a professional limited liability company, which is usually abbreviated PLLC, and should not be confused with a public limited company in the United Kingdom, which is similar to a U.S. corporation.

Smiling businesswoman

An LLC and a PLLC are similar in most respects, but only licensed professionals practicing their profession can create a PLLC. These businesses usually must use the designation "LLC" or "PLLC" as part of their company name, but some states allow PLLCs to use "PLC" instead.

LLC Characteristics

An LLC is easy to establish and manage. Like a corporation, an LLC has its own legal existence separate from its owners, which means that the LLC shields its owners from responsibility for the business's debts. But an LLC doesn't have to observe all a corporation's formalities, such as having officers and directors, holding annual meetings, and filing detailed annual reports. An LLC also enjoys pass-through taxation, meaning that the LLC itself does not pay taxes on its income. Instead, that income passes through to the company's owners, who report it and pay taxes on it through their own personal income tax returns.

An LLC's governing document is its operating agreement, which is a contract among its owners (called members) setting out each one's share of the business and management responsibilities. An LLC can be member-managed, meaning managed by all its members, or manager-managed, meaning managed by one or a few appointed members or nonmembers.

An LLC is created by filing articles of organization with the appropriate state agency, usually the Secretary of State's office. Any member can prepare, sign, and file the necessary documents. In most states, an LLC's members can include individuals, corporations, other LLCs, and foreign entities, but some states prohibit members of certain licensed professions, such as attorneys, doctors, and architects, from forming an LLC to practice that profession. Some of these states allow these professionals to form a PLLC instead. In other states, professionals can only form a professional corporation (PC).

How a PLLC Differs from an LLC

The principal difference between an LLC and a PLLC is membership. Generally, only licensed professionals may form a PLLC, although the rules do vary by state. Every PLLC is at heart an LLC, enjoying the same pass-through taxation, liability protection, and management flexibility.

A PLLC is slightly more complicated than an LLC to set up, though. Its articles of organization must be signed by a member who is a licensed professional and must include either that professional's license number or a certified copy of her professional license. The state licensing board must also approve the articles before they can be submitted to the state business authority.

While a PLLC's members are not responsible for the company's debts, this protection doesn't extend to liability for individual malpractice. Each member of a PLLC remains liable for his own individual malpractice but not for any malpractice by the other members.

If you think an LLC may be for you, an online service provider can help you set up your company. Alternatively, you can consult a business attorney.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.