Key Takeaways

  • A Professional LLC (PLLC) is a limited liability company formed by licensed professionals to provide services in their specific field.
  • A Domestic Professional Corporation (PC) is a business entity formed by professionals in their home state to offer licensed services with more formal corporate structure requirements.
  • PLLCs provide pass-through taxation and management flexibility but do not protect members from personal liability for malpractice.
  • PCs may offer stronger protection from malpractice by co-owners and have different tax treatment—most are taxed as personal service corporations.
  • Both entity types are governed by state-specific laws regarding formation, ownership, and naming conventions.
  • Some professionals are legally required to form PCs instead of PLLCs or LLCs depending on state rules.
  • UpCounsel connects you with experienced business attorneys who can help you choose the right entity.

Understanding domestic vs. domestic professional LLC is helpful when creating a new business.

An LLC, or limited liability company, is a business entity recognized under state law to create a valid company. In an LLC, owners of the company, known as members, donate to the company but aren't held personally liable for its debts. Each member is only responsible for the amount of debt equal to their ownership share in the company and can't be held responsible for anything above that. LLCs have partnership pass-through taxation, which means the LLC itself, not the members, takes care of the taxes.

Although LLCs can be formed for any kind of business, each state has unique laws about how LLCs are formed. In some states, certain kinds of professions aren't allowed to form LLCs.

What is a Professional LLC?

A professional limited liability company, or PLLC, can only be created by certain types of licensed professionals who only offer services directly related to their field. Because some states don't allow licensed professionals to create regular LLCs, they instead form PLLCs.

The types of professions that are allowed to create PLLCs vary by state, but typically include doctors, lawyers, engineers, and accountants.

In terms of function and organization, LLCs and PLLCs aren't very different. The main difference is that a PLLC doesn't protect members from malpractice claims made against them. However, a PLLC provides the same protection against liabilities as an LLC in all other areas. Because members are vulnerable to malpractice claims, malpractice insurance is critical. Each member is only responsible for his or her own malpractice, not for claims made against other members.

In some states, licensed professionals aren't allowed to create PLLCs and instead must form professional corporations, or PCs.

What is a Domestic Professional Corporation?

A domestic professional corporation (PC) is a corporate structure created under state law by licensed professionals to provide services in their field—such as law, medicine, accounting, or engineering. "Domestic" means the business is incorporated in the state where it primarily operates. PCs are subject to both corporate law and specific regulations from professional licensing boards.

Unlike PLLCs, which offer a more flexible and informal structure, PCs operate similarly to standard corporations, with directors, officers, annual meetings, and corporate formalities. States may require that all shareholders in a domestic professional corporation hold valid licenses for the services provided by the corporation. This entity type is often chosen when state law prohibits professionals from forming regular LLCs or when professionals want liability protection from their partners’ malpractice.

How are PLLCs Formed?

Each state has its own requirements for creating a PLLC. In general, you need to file forms and articles of organization, just as you must do with an LLC. You must also file documentation that each member of the PLLC is properly licensed. At least one member is required to sign the articles of organization as a licensed professional.

Before a PLLC can be formed, it must be approved by the state licensing board. Requirements vary depending on the state—some require that all members must be licensed professionals, and others do not. Some states allow only half of the members to be professionals, and some allow heirs of a deceased member to carry on with ownership of the PLLC.

After the PLLC is officially created, some states require the business to add “PLLC” after the company's official name.

State-Specific Rules and Restrictions

State laws govern who may form a domestic professional corporation or PLLC. While most states allow a choice between these entities, others limit the options for specific professions. For example:

  • In California, licensed professionals cannot form PLLCs and must use a professional corporation or registered limited liability partnership (RLLP).
  • In New York, professionals must obtain pre-approval from licensing authorities before forming either a PLLC or a PC.
  • Some states restrict ownership to fully licensed individuals, while others permit non-licensed individuals to hold minority interests.

Because the rules vary widely, it is essential to consult your state’s Secretary of State or a business attorney to ensure compliance.

What is the Difference Between an LLC and a PLLC?

LLCs and PLLCs are similar because they both serve the same general purpose, which is to protect the personal assets of the owners. The main difference between the two entities is who is allowed to become a member.

Here are a few other differences:

  • Company membership - certain professionals aren't legally allowed to establish their company as an LLC. Some professions, including doctors, lawyers, and accountants, are required to form PLLCs in some states. The licensing board for each state can tell you that state's requirements for PLLCs and LLCs.
  • Legal requirements - the basic requirements to create an LLC are articles of organization and a few other forms that are set forth by the state laws. Some states require LLCs to submit operating agreements before they can be officially created. Starting a PLLC requires the same general paperwork, but with the added requirements of approval by the state licensing board. If the PLLC has members from multiple professions, it may need to get approval from each professional board.
  • Liability protection - in both LLCs and PLLCS, legal action taken against the company or any debt it incurs can't impact the personal assets of the members. Exceptions to this rule include if a member personally guarantees that payment can be made. In that case, the member is held responsible if the company can't pay. PLLC members are also liable for malpractice claims. Some states require PLLCs to have malpractice insurance, but the same isn't required for LLCs.

Naming Conventions and Compliance Requirements

Both domestic professional corporations and PLLCs must include specific designations in their names to comply with state law. Typical naming rules include:

  • A PC must include terms like “Professional Corporation,” “P.C.,” or “Chartered.”
  • A PLLC must include “Professional Limited Liability Company” or “PLLC.”

Additionally, most states require that the name clearly reflects the professional services offered and that the name is not misleading or already in use by another business.

Some jurisdictions also require evidence of licensing for each professional named in the formation documents or business filings.

Domestic Professional Corporation vs. PLLC: Key Comparisons

When deciding between a domestic professional corporation and a PLLC, it's essential to consider the distinctions in legal structure, taxation, and liability:

1. Formation and Ownership:

  • PCs require strict adherence to corporate formalities such as issuing stock, appointing directors, and holding regular board meetings.
  • PLLCs offer a more flexible setup, with fewer administrative requirements and more informal governance through operating agreements.
  • Both entities typically require all members or shareholders to be licensed professionals.

2. Liability Protection:

  • Both PCs and PLLCs protect owners from business debts and liabilities unrelated to malpractice.
  • PCs offer stronger separation between individual malpractice and business liability. Owners are not liable for malpractice committed by others in the firm.
  • In PLLCs, each member is liable for their own malpractice but not for that of their colleagues.

3. Taxation:

  • PLLCs are typically taxed as pass-through entities by default, meaning profits and losses pass through to the members’ individual tax returns.
  • PCs are taxed as corporations. Most are treated as personal service corporations and are subject to a flat 21% federal corporate tax. Double taxation may apply unless the PC elects S corporation status.

4. Flexibility and Maintenance:

  • PLLCs are often easier and less expensive to maintain, making them attractive to small practices or solo professionals.
  • PCs must adhere to stricter governance rules and are generally suited to larger professional groups or those anticipating significant growth.

Frequently Asked Questions

  1. What is the difference between a professional corporation and a domestic professional corporation?
    There is no difference in structure—the term "domestic" simply refers to a professional corporation formed in the business’s home state, as opposed to a "foreign" corporation formed out-of-state.
  2. Can a professional corporation be taxed as an S corporation?
    Yes, a domestic professional corporation may elect S corporation status to avoid double taxation, provided it meets IRS requirements including limits on shareholder types and number.
  3. Are PLLCs allowed in all states?
    No. Some states, such as California, do not allow PLLCs. Professionals in these states must use a professional corporation or another permitted entity type.
  4. Who can own shares in a domestic professional corporation?
    Generally, only licensed professionals in the same field may be shareholders. Some states also allow minority ownership by other professionals or non-licensed individuals under strict rules.
  5. Do PCs and PLLCs provide protection from malpractice claims?
    Both structures protect owners from liability for other members’ malpractice but not from claims related to their own professional negligence. Malpractice insurance is strongly recommended.

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