What Is a Professional Limited Liability Company?

By Edward A. Haman, J.D.

What Is a Professional Limited Liability Company?

By Edward A. Haman, J.D.

Licensed professionals may be restricted on how to structure their professional business. In many states, it may be necessary to organize businesses involving professional services as professional limited liability companies (PLLCs).

Learn what PLLCs are, how they are created, and how they differ from a traditional LLC.

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Business Structures for Professionals

The structure of any business entity is governed by state law. All states allow businesses to be organized as a sole proprietorship, some form of partnership, a corporation, or a limited liability company (LLC). However, many states have limitations on how a business may be structured when it involves certain professions. Some states prohibit professionals from forming any type of business entity other than a sole proprietorship or a general partnership, some allow a special type of corporation called a professional corporation (PC), and some allow PLLCs.

A PLLC is a special type of LLC that is designed for certain professions that are not allowed to form a traditional LLC. The list of professions subject to such special limitations varies from state to state. For this reason, you need to check with your state's laws to find out if there is such a limitation for your profession.

Depending on the state, these limitations may typically apply to:

  • Accountants
  • Architects
  • Attorneys
  • Chiropractors
  • Dentists
  • Engineers
  • Physicians
  • Psychologists
  • Real estate agents
  • Veterinarians

This is not a complete list, nor are all of the professions listed above included in all states. Some states simply refer to "licensed professionals" without naming specific professions. To determine the requirements in your state, check with the agency that regulates business entities, with the agency that licenses your profession, or with any professional organization to which you belong.

Depending on the state, a professional in solo practice may need to use a different business structure than a group of professionals. Some states will allow a single licensed individual to form a PLLC, while others may only allow two or more professionals to create a PLLC.

In some states, you may be able to form a professional corporation (PC)—sometimes called a Professional Services Corporation (PSC). Generally, this is a type of corporation specifically designed for professionals.

Forming a PLLC

Creating a PLLC is similar to forming any other business entity, such as a corporation or LLC. One or more forms need to be filed with the appropriate state agency. For a PLLC, this typically involves completing a form called Articles of Organization, which will include certain basic information such as the name of the PLLC, name and address of a registered agent, and the name of the organizer. A filing fee will also need to be paid. The state agency that licenses the particular type of profession may also need to approve the registration.

States that allow PLLCs typically require the business to clearly identify itself as a PLLC by including in its promotional materials the words "Professional Limited Liability Company," or the initials "PLLC" or "P.L.L.C."

Difference Between a PLLC and an LLC

There are two main differences between a traditional LLC and a PLLC.

Limitation of Liability

One difference between a traditional LLC and a PLLC concerns the extent of the personal liability of a member. A member of a PLLC does not have as much personal liability protection as a member of an LLC.

In a traditional LLC, a member has limited personal liability for the debts of the company. However, in the case of certain licensed professionals, states will not allow a professional to avoid personal liability for malpractice or professional liability claims by forming an LLC.

In a PLLC, a member remains personally liable for their own acts of negligence or malpractice, the same as if they were operating as a sole proprietor or in a general partnership. However, the PLLC does shield a member from personal liability for the malpractice of other members, and from general business debts.

For example, if a group of doctors forms a PLLC, each doctor is still personally liable for their own malpractice claims. However, one doctor is not personally liable for the malpractice of any of the other doctors, or for the general debts of the business.

Membership Limitation

With both an LLC and a PLLC, the owners of the business are called members and those who manage the operation of the business are called managers.

With a traditional LLC, any individual can be a member or manager of the LLC. However, a PLLC can only be formed by two or more individuals who are members of the same profession. This means that all members and managers of the PLLC must be licensed in the same profession and a PLLC is prohibited from combining services from more than one profession.

Tax Benefits of a PLLC

A PLLC provides the same tax advantages as a traditional LLC. This means that you have the choice of being taxed as a partnership or as a corporation.

Generally, a PLLC offers more tax benefits than a PC, just as an LLC offers more tax benefits than a corporation.

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.