Key Takeaways

  • A PLLC, or Professional Limited Liability Company, is a business entity designed for licensed professionals such as doctors, lawyers, engineers, or accountants.
  • Unlike a traditional LLC, a PLLC must be formed by professionals who hold valid state licenses in their fields.
  • The state licensing board must approve the formation, and all members typically need to be licensed in the same profession.
  • PLLCs offer limited liability protection for business debts but do not shield members from personal malpractice claims.
  • Formation requirements vary by state, but most involve filing Articles of Organization and often an operating agreement.
  • PLLCs can elect pass-through taxation or choose to be taxed as an S corporation for potential tax benefits.
  • States like New York and Illinois have specific PLLC rules and additional compliance steps, such as name requirements or certificate filings.

What Does PLLC Mean in Legal Terms?

PLLC is an acronym of a legal term that stands for professional limited liability company. Professional members who provide professional services own and operate this type of limited liability company (LLC). A PLLC is specifically for services that require professional licensure, including dental, medical, real estate, engineering, nursing, accounting, or law. For example, a law firm owned by lawyers could be structured as a PLLC to offer legal services. Some states require independently practicing lawyers to form a PLLC.

PLLC vs. LLC: Understanding the Key Differences

While both structures offer liability protection, the PLLC meaning differs significantly from a standard LLC. A PLLC is reserved for licensed professionals—such as attorneys, physicians, or engineers—who must meet strict state licensing requirements.

An LLC can be owned by anyone engaging in lawful business activity, but a PLLC restricts ownership to individuals holding professional licenses. This distinction ensures that professional standards and ethics are upheld under the supervision of the relevant licensing board.

In addition:

  • A PLLC’s name usually must include “PLLC” or “Professional Limited Liability Company.”
  • State boards often require documentation verifying each member’s license before approving formation.
  • Some states, like New York, Texas, and North Carolina, specifically require PLLCs for licensed professionals rather than allowing standard LLCs.

How a PLLC Works

Like an LLC, a PLLC combines the taxation perks of a partnership structure with the limited liability of a corporate structure. In some states, the professionals delineated above are required to form a PLLC instead of an LLC. In other states, professionals can form an LLC if they are not required by the associated licensing board to form a PLLC. The licensing board for the profession in question must approve the formation of a PLLC and verify the licensure of its members.

LLCs and PLLCs share a legal structure. Both protect its members from personal liability for business debts or legal judgments. Owners of a sole proprietorship or general partnership are responsible for these costs and can have their personal assets seized to pay them. 

Corporations provided limited liability. This means shareholders can lose no more than the amount they invested. The limited liability of a PLLC does not extend to malpractice claims.

State-Specific PLLC Requirements

Each state has unique rules governing PLLC formation and operation. For example, New York mandates that professionals obtain a certificate of authority from the state’s Office of the Professions before filing with the Department of State.

Other examples include:

  • Illinois: Licensed professionals must confirm eligibility with their licensing board before forming a PLLC, and only licensed members can own shares.
  • Texas: Requires professionals to maintain their licenses in good standing for continued ownership.
  • Florida and California: Some states don’t formally recognize PLLCs, instead requiring professionals to form Professional Corporations (PCs).

Because of these variations, professionals should check with both the Secretary of State and the state licensing board to confirm the required structure for their field.

Forming a PLLC

To form a PLLC, you must file Articles of Organization with the secretary of the state where you are located. This document includes the name and address of the business along with a list of its owners. These are submitted to the correct agency with the filing fee, which varies by state. The Articles of Organization must be signed by a person licensed by the profession in question. This person is considered the organizer of the PLLC. Include his or her state license number. 

In some states, the PLLC must file an operating agreement delineating:

  • The company's financial management
  • Allocation of interests
  • Member rights and responsibilities. 

Some states require submission of a certified copy of the organizer's professional license. Contact the Secretary of State or your licensing agency to confirm state and professional requirements.

Steps to Create a PLLC

Creating a PLLC typically involves several specific steps beyond standard LLC formation:

  1. Confirm Eligibility: Verify that your profession qualifies under your state’s professional entity laws.
  2. Obtain Board Approval: The relevant licensing board must confirm that all proposed members or managers are duly licensed.
  3. Select a Compliant Name: The business name must include “PLLC” or “Professional Limited Liability Company” and meet state naming conventions.
  4. File Articles of Organization: Submit this document to your state’s Secretary of State office along with any required fees and license documentation.
  5. Create an Operating Agreement: Outline the management structure, profit distribution, and responsibilities of each member.
  6. Maintain Good Standing: Keep licenses current and file required annual reports or renewals.

Some states also require publication of a notice of formation, such as in New York, within a designated period after approval.

Advantages of a PLLC

There are several advantages in forming a PLLC:

  • Professionals' personal assets are protected from business liability. 
  • A PLLC can opt for pass-through taxation status. This means the owners will report profits and losses on their individual tax returns.
  • A PLLC can provide their employees with retirement plans that have higher contribution limits than those for partnerships or sole proprietorships.
  • PLLCs are subject to few corporate requirements, such as annual meetings and reporting.
  • A partnership structure becomes void if one partner leaves the business or dies. In contrast, a PLLC remains a valid legal entity even in those instances, a benefit known as perpetual existence.

Why Professionals Choose a PLLC

Forming a PLLC offers several benefits beyond liability protection:

  • Professional Credibility: Operating under a PLLC adds legitimacy to your business in fields where professional standards are legally mandated.
  • Flexible Management: Members can choose between member-managed and manager-managed structures.
  • Tax Options: PLLCs may elect S corporation status for potential self-employment tax savings.
  • Perpetual Existence: The entity continues even if one member leaves or retires, which helps ensure continuity of service.
  • Simplified Compliance: Compared to a corporation, PLLCs often have fewer administrative requirements.

However, a PLLC doesn’t protect members from personal malpractice claims—it only shields them from business debts and the malpractice of other members.

PLLC Ownership

The majority ownership of a PLLC must consist of individuals who are licensed in that profession. The required percentage varies by state, but is usually about half. In most states, this counts retired members of the profession who were once licensed. 

In some states, unlicensed individuals can be transferred ownership for a period of two years, usually in the case of a member's death. This allows for the sale or transfer of the ownership stake to a person who is licensed while the estate is being settled. 

Ownership Restrictions and Transfer Rules

PLLC ownership rules ensure that only qualified professionals control the business. Generally, members must hold active licenses in the same field as the PLLC’s practice area. Some states allow a small percentage of ownership by non-licensed individuals for estate or transfer purposes, usually capped at 49% or less.

If a member loses their professional license or passes away, states may grant a short window—typically 60 to 120 days—for ownership transfer to another licensed professional. This ensures the entity remains in compliance while protecting client or patient interests.

Malpractice in PLLCs

The limited liability afforded to a PLLC member does not extend to personal malpractice. Other PLLC members are also not held responsible for that member's malpractice.

PLLC Taxation

PLLCs can opt to be taxed as a disregarded entity (sole proprietorship) or an S corporation. Both are subject to pass-through taxation. However, you may still need to submit an informational tax return for the PLLC.

Maintaining Compliance and Renewing Licenses

To remain in good standing, a PLLC must comply with both state tax and licensing regulations. This includes:

  • Renewing professional licenses annually or as required.
  • Filing annual reports or biennial statements with the Secretary of State.
  • Paying any applicable state franchise taxes or filing fees.
  • Ensuring that the PLLC’s registered agent and principal address remain current.

Failure to comply can result in administrative dissolution or license suspension. Members should maintain accurate records and consult an accountant or attorney familiar with professional entity laws to avoid penalties.

Frequently Asked Questions

  1. What is the main difference between a PLLC and an LLC?
    A PLLC is designed specifically for licensed professionals, while an LLC can be owned by anyone conducting lawful business. PLLCs must often get state board approval before formation.
  2. Who can form a PLLC?
    Only individuals who hold a professional license—such as attorneys, doctors, engineers, or accountants—can form a PLLC, and all members usually must be licensed in the same field.
  3. Does a PLLC protect against malpractice claims?
    No. A PLLC protects members from liability for business debts and other members’ malpractice, but each member is personally liable for their own professional negligence.
  4. Can a PLLC have non-licensed owners?
    Some states allow limited ownership transfer to non-licensed individuals, typically for estate or temporary purposes, but licensed professionals must retain majority control.
  5. How is a PLLC taxed?
    A PLLC can choose pass-through taxation (default) or elect to be taxed as an S corporation to reduce self-employment taxes, depending on state and federal rules.

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