A Professional LLC (PLLC) is a particular type of Limited Liability Company (LLC) designed for licensed professionals such as doctors, lawyers, architects, massage therapists, and tattoo artists. PLLCs are similar to traditional LLCs—both provide limited liability protection—but PLLCs typically have increased oversight and additional requirements for these high-liability professions, such as an occupational license from your state’s regulatory board.
What is a PLLC?
A Professional Limited Liability Company (PLLC) is a business entity that offers limited liability protection for licensed professionals.
A few states (such as Connecticut and Illinois) don’t allow licensed professionals to own a standard LLC. So, if you want to form an LLC that offers professional services, you may have to start a PLLC. Other states, such as Delaware and Oregon, don’t recognize PLLCs. Instead, Delaware licensed professionals can form Registered Limited Liability Partnerships (RLLPs) or Professional Corporations (PCs). In Oregon, licensed professionals are allowed to form traditional LLCs and corporations.
Typically, each owner (aka member) of a PLLC must be licensed under the same profession—meaning your business probably can’t be owned by an engineer and two podiatrists. In addition, most PLLCs can’t offer multiple services. However, there are a few exceptions. For example, chiropractors in Kansas and Texas can also provide pharmacy services.
PLLC vs LLC
The primary difference between a PLLC and an LLC is that only licensed professionals can form PLLCs. Also, LLCs are recognized business entities in every state—whereas PLLCs are not.
Both types of LLCs are considered tax-through entities, meaning you likely won’t have to pay a corporate tax—unless you choose to be taxed as a C-Corporation. Instead, annual profits go to the owners, who report their shares on personal income taxes. However, when it comes to liability protection, there are a few differences.
Unfortunately, a PLLC may not always protect your personal assets. For example, if you are sued for professional misconduct, your assets could be at risk. In addition, some states (such as Florida) could hold you personally liable if someone under your direct supervision is accused of wrongdoing. However, the PLLC will protect your assets if another member faces legal action.
Which states recognize Professional LLCs?
The following US jurisdictions (32 states and the District of Columbia) allow you to form PLLCs:
|District of Columbia
PLLCs aren’t the only option for businesses offering state-licensed professional services. Depending on your state, you may also be able to form a professional corporation (PC) or even a traditional LLC or corporation if permitted. For example, most licensed professionals can create a PLLC, PC, or traditional LLC in Washington state.
On the other hand, some states may limit your options based on your profession. For example, in Colorado, dentists must form a PLLC or a professional corporation. However, attorneys can form a PLLC, professional corporation, or standard LLC.
Who can form a Professional LLC?
Each state will vary, but generally speaking, a licensed professional will include one or more of the following:
|Motorcycle and ATV safety operator
|Property tax consultant
|Speech-language and audiology specialist
How to form a PLLC
Before you file business formation documents, you’ll need to obtain an occupational license from your state’s regulatory board.
Suppose you’re a speech pathologist in West Virginia. In that case, you’d need to get approval from the West Virginia Speech-Language Pathology and Audiology Licensing Board before filing your Articles of Organization with the Secretary of State. You’ll also need to attach a copy of your occupational license along with your business formation papers.
The process and cost of obtaining an occupational license will vary between states. You may have to pay registration fees as well as take state-specific exams.
Filing Articles of Organization
To form a PLLC, you’ll need to file Articles of Organization (or your state’s equivalent) with the state’s business filing office, typically the Secretary of State. Required information will vary among states, but most will (at minimum) require the following:
- Name of your PLLC. Most states (with the exceptions of Florida and South Dakota) require the name of your business to contain “Professional Limited Liability Company,” or the abbreviation “PLLC.” Plus, your PLLC’s name must be unique and distinct from current registered businesses.
- Registered agent information. Your registered agent is the person or business entity that accepts legal documents on behalf of your PLLC. This could be you, someone within the business, or a third party such as a registered agent company. Most states will require your registered agent to have a physical address within the state.
- Type(s) of professional service your PLLC will render. You’ll need to indicate what kind of service your PLLC will provide.
- Member/manager information. Members are owners of a PLLC. Members can choose to run the business themselves or hire managers to handle the business’s day-to-day operations. If you decide to hire managers, they must be licensed to perform the service your business offers.
- Signature and printed name of the organizer. Sign and print the name of the person filing your documents. Typically, this person isn’t required to be otherwise associated with your PLLC. However, some states, such as Nevada and New Hampshire, will require the signature of at least one member or manager.
Filing fees can range from $50 (Arkansas) to $500 (Massachusetts). However, most states charge between $100 and $180.
Once the state has approved your formation papers, you might need to submit your business information to your state’s professional regulatory department. For example, in Illinois, businesses offering state-licensed professional services must file their approved articles OR a written statement that includes the name of your business, primary address, and your registered agent’s information to the Illinois Department of Financial and Professional Regulation.
Frequently Asked Questions
Can a non-licensed professional be a member or manager of a PLLC?
Most states won’t allow unlicensed professionals to own a PLLC. However, this doesn’t mean your employees have to be licensed. For example, receptionists and other administrative staff won’t need to be licensed to provide the service your PLLC offers.
Do PLLCs have name requirements?
Sometimes. States such as Arkansas, Nevada, and Washington have provisions regarding the use of member/manager names in the name of your PLLC. For example, in Arkansas, you can’t use the name of a non-member or manager unless the individual is deceased. However, in Nevada, your business name must contain the last name of one or more owners—past or present. And, Washington requires dental offices to include the last names of all current members.
How are PLLCs taxed?
Traditionally, PLLCs aren’t taxed at the federal level—meaning, any revenue the business earns goes to the members, who then report their shares on their personal returns. However, you may choose to be taxed as a C Corporation by filing Form 8832 with the IRS. Your PLLC may also choose to be taxed as an S Corporation by filing Form 2553 with the IRS. For some PLLCs, an S Corporation election can help save on self-employment taxes.
Does my PLLC need a business license?
Probably. In addition to an occupational license, you’ll likely need to obtain a business license to operate within your specific state, city, or county. For example, businesses licenses are required to sell, manufacture, or import alcohol. Business licenses are also mandated for fishing and wildlife, aviation, and firearms. Some states also require general business licenses, commercial sign permits, or zoning permits.
You can check with your local Secretary of State and regulatory department to determine whether your PLLC needs additional licenses.
Can I form a professional corporation instead of a PLLC?
Maybe. Much like PLLCs, professional corporations (PCs) aren’t recognized in all 50 states. For example, Delaware, Massachusetts, and New Hampshire all recognize PCs; however, West Virginia does not. To see if your state recognizes PCs, you can check with your Secretary of State.
Can I form a Registered Limited Liability Partnership (RLLP) instead of a PLLC?
Maybe. Although all states recognize the RLLP (also called LLP) business structure, there are often restrictions on who may form them. Traditionally, they are specifically for licensed professionals only. However, each state will vary on what occupations qualify as a professional service. You can check with your Secretary of State to see if forming an RLLP is an option.