What a PLLC is
A professional limited liability company is an LLC built for people who hold a professional license: physicians, dentists, lawyers, accountants, architects and the like. It's formed under the state's ordinary LLC act, with extra rules from the state's professional entity laws layered on top.
Florida's version is typical. Under section 621.051 of the Florida Statutes, people "duly licensed or otherwise legally authorized to render the same professional services" may form a professional LLC under the state's LLC act "for the sole and specific purpose of rendering the same and specific professional service." Washington's statute, RCW 25.15.046, opens the same way, and adds that a professional LLC is subject to the state's professional corporation act, chapter 18.100 RCW.
PLLC vs LLC at a glance
| Ordinary LLC | PLLC | |
|---|---|---|
| Who may own it | Anyone | Members licensed for the professional service it provides |
| What it may do | Any lawful business | Provide that professional service |
| Name | "LLC" or "Limited Liability Company" | "PLLC" or "Professional Limited Liability Company" where the state requires it |
| Shield from the company's debts | Yes | Yes |
| Shield from your own professional negligence | Not applicable | No: you stay liable for your own work |
| Federal tax | The IRS's LLC rules | The same rules |
The liability difference
An ordinary LLC's members aren't personally liable for the company's debts. A PLLC keeps that shield for business debts, such as a lease or a loan, but not for the professional's own work. Florida's section 621.07 says each officer, member, manager or employee "shall be personally liable and accountable only for negligent or wrongful acts or misconduct committed by that person, or by any person under that person's direct supervision and control, while rendering professional service." A member isn't liable for a colleague's malpractice merely for being a member, and the company itself answers for claims up to the value of its property.
Washington adds an insurance rule. If the PLLC's members must be licensed and it doesn't keep professional liability insurance, a bond or other financial responsibility of at least one million dollars (or more, where the insurance commissioner sets a higher amount for a profession), the members become personally liable to the extent that coverage would have paid.
What the name must say
States differ:
| State | Rule |
|---|---|
| Florida | A PLLC formed on or after January 1, 2014 must use "professional limited liability company," "P.L.L.C." or "PLLC" in place of the LLC ending (Fla. Stat. § 621.12) |
| Texas | The name must contain "professional limited liability company" or an abbreviation of it (Tex. Bus. Orgs. Code § 5.059) |
| Virginia | The company may, but doesn't have to, end its name with "P.L.C.," "PLC," "P.L.L.C.," "PLLC" or "professional limited liability company" (Va. Code § 13.1-1104) |
Your licensing board may have its own naming rules too, such as a ban on trade names for some professions.
Who has to form one
Whether a professional may use an ordinary LLC, must use a PLLC or can't use an LLC at all is a state-by-state, profession-by-profession question:
- California lets an LLC render a service that needs a state license only if that profession's licensing law authorizes an LLC to hold the license (Cal. Corp. Code § 17701.04(b)). Where it doesn't, the LLC route is closed.
- North Carolina lets an LLC render professional services only to the extent a corporation could, under its Professional Corporation Act, chapter 55B (N.C. Gen. Stat. § 57D-2-02).
- Virginia has a separate Professional Limited Liability Company Act (Va. Code §§ 13.1-1100 and following). It lists the professions it covers, from attorneys and accountants to the healing arts, and requires every member to be licensed for the company's service, except that a PLLC of architects, professional engineers, land surveyors or landscape architects needs licensed holders for only two-thirds of its membership interests (§ 13.1-1102).
- Florida and Washington let licensed professionals form PLLCs under their LLC acts, with the rules above.
Before you file, ask your licensing board whether it must approve or register the company, and whether every member and manager must hold the license.
Taxes
A PLLC is an LLC under state law, so the IRS treats it as any LLC: a one-member PLLC is disregarded and its profit reported on the owner's own return; one with two or more members files as a partnership; and either can elect to be taxed as a corporation, or as an S corporation if it qualifies. See LLC vs S corp for how that election works.
Forming a PLLC
- Confirm with your licensing board that your profession may practice through an LLC in your state, and what it requires of the company and its members.
- Choose a name that carries the designator your state requires and that the state register doesn't already hold. Search the name first.
- File articles of organization with the state, stating the professional service the company will provide where the state asks for it, and any licensing board approval it requires.
- Write an operating agreement that keeps membership to licensed professionals and says what happens when a member loses a license, retires or dies.
Sources
- Florida Statutes § 621.051, § 621.07 and § 621.12
- RCW 25.15.046, Washington State Legislature
- Texas Business Organizations Code § 5.059
- Code of Virginia § 13.1-1102 and § 13.1-1104
- California Corporations Code § 17701.04
- N.C. Gen. Stat. § 57D-2-02
- Limited liability company (LLC), IRS
Common questions
What is a PLLC?
A professional limited liability company: an LLC whose members are licensed to provide one professional service, such as medicine, law or accounting, and that is formed to provide it. Florida, for one, lets licensed professionals form one under its LLC act for the sole and specific purpose of rendering their professional service.
What's the difference between a PLLC and an LLC?
Who may own it, what it may do and what its name says. Anyone can own an LLC and run any lawful business through it. A PLLC's members are licensed for the service it provides, it provides that service, and in states such as Florida and Texas its name must say it is a professional limited liability company or PLLC.
Does a PLLC protect me from malpractice claims?
Not from your own. Florida's statute keeps each professional personally liable for their own negligent or wrongful acts, and those of people under their direct supervision, while rendering professional services. What the PLLC shields you from is the company's other debts and your colleagues' malpractice.
Is a PLLC taxed differently from an LLC?
No. It is an LLC under state law, so the IRS classifies it as it does any LLC: a single-member PLLC is disregarded unless it elects otherwise, one with two or more members is a partnership, and either can elect to be taxed as a corporation or an S corporation.
Can a professional just form a regular LLC?
It depends on the state and the profession. California lets an LLC provide a licensed service only where that profession's licensing law allows an LLC to hold the license, and North Carolina lets an LLC provide professional services only as far as a professional corporation could. Check with your licensing board before you file.