Key Takeaways

  • A PLLC (Professional Limited Liability Company) is a specialized type of LLC designed for licensed professionals, such as lawyers, doctors, and architects.
  • PLLCs offer liability protection from the actions of other members, but each member remains personally liable for their own professional misconduct.
  • States often regulate which professions can form PLLCs, and requirements such as proof of professional licensing and board approval may apply.
  • Unlike general LLCs, PLLCs are limited to providing professional services within the scope of members' licensure.
  • Formation procedures, naming rules, and compliance requirements for PLLCs vary by state.

A PLLC lawyer is a legal professional who is a part of an organization that allows them to work with others while maintaining liability protection from the deeds of others. A PLLC, or a professional limited liability company, is a highly-specialized version of the regular limited liability company, or LLC. But unlike a normal LLC, the laws governing a PLLC function in ways specifically designed for how liability affects people working in professions like medicine or law. By joining up with or starting a PLLC, a lawyer can set themselves up for professional success.

What Is An LLC?

There are many ways to set up a business. The simplest is the sole proprietorship or partnership, in which the business is owned wholly by one person or a small group. These companies have a serious problem when it comes to liability, because the business is treated as an extension of the owners, leaving the owners' assets as fair game when legal penalties are assessed against the business.

A corporation, on the other hand, is owned by a group of people, called shareholders, who hold certificates entitling them to a certain ownership percentage. A corporation counts as a legal person, and as such has to be sued separately from the shareholders, but pays a separate corporate tax and is unduly complicated for certain business types.

Limited liability companies are a state level company organization status wherein the company gets some of the liability protection of a corporation without having to file as one. The LLC is its own legal person, but allows its income to “pass through” to the owners, thus evading the corporate tax and double taxation. Since the LLC is a local status, the company will need to file separately for the IRS for federal purposes, as a sole proprietorship, partnership, or a kind of corporation. LLC laws also vary a bit from state to state; some states may be more advantageous to file some kinds of LLCs in than others.

What Does PLLC Mean for Licensed Professionals?

A PLLC, or professional limited liability company, is a legal business entity formed specifically by licensed professionals to offer services within their field of expertise. Common professions that use this structure include lawyers, doctors, dentists, architects, and accountants. The key feature of a PLLC is that while it provides liability protection from the acts of other members, it does not protect individuals from their own malpractice or negligence.

To form a PLLC, members typically must:

  • Hold valid licenses in their professional field.
  • Submit formation documents to the state.
  • Obtain approval from the relevant licensing board.

Because of these requirements, PLLCs are often seen as a hybrid between a traditional partnership and an LLC, tailored to regulated industries.

PPLCs vs LLCs

As mentioned above, a PLLC is a specific form of an LLC tailored to the needs of professional groups like an architecture company or a law firm. Such companies have some significant differences from a standard LLC, especially around the practice of law.

  • A PLLC's liability limitation is far more specific, protecting members of the PLLC from liability for the actions of another in the company but offering no liability shield for the malpractice of the member. In essence, each PLLC member is liable for their own actions and not those of others in the company — unless, of course, a particular case involves the actions of several members at once. This contrasts with partnerships, in which all partners are liable for the malpractice of all other partners. As a result, members of PLLCs will probably need to carry malpractice insurance to make sure they can meet their legal obligations.
  • Some states require that professionals, often defined as those in occupations requiring professional licensing, form PLLCs to create certain kinds of businesses, like law firms. This varies from state to state, so if you are looking to set up a firm somewhere, you will want to find out what the local requirements are.
  • Some states disallow the formation of regular LLCs by people in professional occupations, forcing those who want some form of LLC benefits to form PLLCs instead.
  • California requires professionals to form registered limited liability partnerships (or RLLPs) instead of LLCs or PLLCs.
  • All PLLC members need whatever licensing the practice of their profession in that state would normally require. Upon formation, the state board in charge of such things will examine and verify this licensing.

PLLCs are also very similar to LLCs in many key ways. For instance, they allow the “pass though” taxation of an LLC, where income is counted as personal income of the owners on their yearly taxes. Moreover, both LLCs and PLLCs are persistent, meaning they continue to exist until dissolved, which allows members to leave the company without a problem. This ensures a smooth transfer of power and responsibility should something happen to one member.

State Requirements for PLLCs

PLLC formation and governance is highly state-specific. Some states mandate that professionals form a PLLC instead of a standard LLC if they are offering regulated services. In these states, the formation documents often must be accompanied by certification from the state licensing board. Other states, like California, prohibit PLLCs entirely and instead require professionals to form professional corporations (PCs) or registered limited liability partnerships (RLLPs).

Professionals should verify the following before forming a PLLC:

  • Whether their profession is eligible under state law.
  • If their state permits PLLCs or requires another business form.
  • What supporting documentation, such as licensing verification, must be submitted.
  • Naming conventions that may require inclusion of “PLLC” in the business name.

Naming and Compliance Rules for PLLCs

Most states impose specific rules on naming PLLCs. The name generally must:

  • Include the phrase "Professional Limited Liability Company" or the abbreviation "PLLC."
  • Reflect the licensed nature of the services provided.
  • Avoid misleading terms that imply unlicensed services or noncompliance with professional standards.

Ongoing compliance is also crucial. States may require:

  • Annual reports or renewals.
  • Maintenance of professional licenses for all members.
  • Clear delineation between professional and non-professional services in company operations.

Failure to meet these requirements can result in administrative dissolution or disciplinary action by the relevant licensing authority.

Frequently Asked Questions

  1. What does PLLC mean in law?
    A PLLC in law refers to a professional limited liability company that allows attorneys to form a business entity offering legal services while maintaining individual responsibility for their own conduct.
  2. How is a PLLC different from an LLC?
    A PLLC is designed for licensed professionals and offers liability protection from other members’ actions but not from one’s own malpractice. An LLC is a more general business structure without these professional restrictions.
  3. Do all states allow PLLCs?
    No. Some states, like California, do not permit PLLCs and instead require professionals to use alternatives like professional corporations or registered limited liability partnerships.
  4. Can a PLLC have non-professional members?
    No. Only licensed individuals in the relevant profession may be members of a PLLC. This ensures that the company exclusively provides services within the licensed scope.
  5. Do PLLCs offer tax benefits?
    Yes. Like standard LLCs, PLLCs typically enjoy pass-through taxation, meaning income is taxed at the individual level rather than at the corporate level, avoiding double taxation.

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