Professional Limited Liability Company (PLLC)

What is a Professional Limited Liability Company?

A Professional Limited Liability Company, or PLLC, is a special type of LLC that’s designed for licensed professionals, such as accountants, lawyers, and doctors. Typically, professions who require a professional license. Some states do not allow licensed professionals to form an LLC since they don’t want them to escape personal responsibility for professional malpractice by “hiding behind” the personal liability protection of an LLC. Instead, they allow professionals to form an LLC. But, specific rules vary by state.

They differ from regular LLCs in that only a license holder (doctor, lawyer, others) may register the company and there may be limitations on ownership. Some states require all of the members have the specific license for the service offered while in others it may be as low as 50% professional ownership.

In all states that require PLLCs, notification, and approval of the State regulatory board for that profession must be obtained. For instance, a physician partnering with other doctors in a PLLC would have to get approval from the State Medical Board before filing with the Secretary of State.

Difficulties arise when a licensed member dies, loses their license, or wishes to exit the PLLC. In some cases, the company has to be dissolved (and perhaps recreated). Transfer of ownership in a sale may also have restrictions at the State level.

PLLC FAQs

If I’m a licensed professional, how can I find out if my state allows me to form an LLC, PLLC, or something else?

The LLC and PLLC are state constructs; as such, rules vary widely by state. For example, professionals in New York cannot form an LLC, but may form a PLLC. Professionals in California cannot form an LLC or a PLLC, but can form a RLLP (Registered Limited Liability Partnership) or PC (Professional Corporation). And professionals in Arizona can choose between an LLC or PLLC. And the specific rules within a state may also depend on the type of profession as well.

The easiest way to determine your business entity options is to give us a call at 1.888.449.2638 and we’ll discuss which entities are available for your profession in your state.

How do I form a PLLC?

As expected, the process to form a Professional Limited Liability Company is more involved than forming an LLC. You’ll typically need to have your state licensing board approve your articles of organization first (again, this requirement varies by state). As a result, it takes longer to form a PLLC than an LLC. After the proper state licensing board has approved your articles of organization, then you will need to file the articles of organization and other formation paperwork with the state. Most states require a signature and license number of a licensed professional to form the LLC.

Our small business experts can help you with each stage of the process. First, we’ll ensure that your particular business needs to file a PLLC in your state. Then, we’ll help obtain the necessary approvals and file your paperwork.

Who can be an owner/member of a PLLC?

While specifics vary by state, many states limit who can be an owner/member of a PLLC. In some states, only licensed professionals of the specific service can be members of a Professional Limited Liability Company.

How does limited liability work with a PLLC?

Like an LLC, the PLLC creates a separation between the individual owners and the business. But there’s a very important distinction. You will still be personally liable for malpractice claims related to your own actions. For this reason, you’ll need to have a good malpractice insurance policy even if you form a PLLC. However, a PLLC will typically protect you from personal liability for the business debts, as well as the malpractice of other owners within the company.

CorpNet Can Help

Do you need help registering a PLLC or have questions regarding the process? Call the CorpNet.com team today for a free business consultation at 888.449.2638.