What Is PLLC Stand For: Everything You Need to Know
A Professional Limited Liability Company (PLLC) is a business that is organized like an LLC and focuses on providing professional services.4 min read
What is PLLC stand for? A Professional Limited Liability Company (PLLC) is a business that is organized like an LLC and focuses on providing professional services. In many ways, it's like a professional corporation.
What Is a Professional Limited Liability Company (PLLC)?
A PLLC may only be organized by individuals who are in a profession that is licensed by the state in which they're operating. The members of the LLC must be from similar professions and may only offer services related to their licenses.
Most professions are allowed to form an LLC. Some states require business owners to form a PLLC if they've been issued a license from the state. These professions include:
How to Form a PLLC
A PLLC is organized in a similar fashion to an LLC. The main difference occurs when filing the state paperwork. It's important to make sure you check the "professional" box to indicate that you're filing as a PLLC instead of an LLC.
Additionally, the businesses Articles of Organization will need to be approved by your state's licensing board before being passed on to the appropriate state department, usually the Secretary of State (SOS). The Articles of Organization will typically include the:
- Business name
- Name of its attorney members or owners
Having to get your state's licensing board involved in the process will create an extra step for you and most likely will add additional time to organizing the PLLC.
Please keep in mind that all requests that a state imposes on an LLC will most likely also be requested from a PLLC. One significant difference between an LLC and PLLC occurs in the Articles of Organization. There is a specific section requiring a signature from the licensee of the business. The individual that signs this document must be one of the PLLC's organizers.
Most states carry no threshold as to who can be a member of an LLC. On the other hand, PLLCs may require the completion of additional requirements. In many states, a PLLC must have at least 50 percent of its members licensed in the profession in which the PLLC is requesting to do business. In some states, it is required that all members be licensed.
Professional Limited Liability Company Ownership
Retired individuals that have previously obtained a professional license are usually allowed to be members. In many states, following the death of a member, a two-year transferability of ownership period occurs where unlicensed individuals may be allowed to become a temporary member. This two-year timeframe allows the deceased heirs to transfer or sell their newly acquired ownership in the LLC.
A PLLC may be taxed as an S corporation or a disregarded entity. How a business owner elects to be taxed is a personal decision that should be chosen based on their specific situation.
A PLLC is known as a pass-through entity. In this format, net profits or losses from the business are passed to the owner level where they are recognized on the personal tax returns of the members. Double taxation is avoided because the income from the business is passed down to the member's personal tax returns.
Please keep in mind that an informational tax return may still be required if the PLLC is taxed like a partnership or S corporation. Additionally, a PLLC will be able to offer a retirement plan that is more comprehensive than the typical partnership or sole proprietorship.
A major benefit of organizing a PLLC is that it creates a barrier between the business and the individual. The most significant advantage relates to limited liability. Members of a PLLC are protected from creditors seizing their personal assets. Corporations also provide limited liability to shareholders. For example, shareholders can only lose their investment in the business, the amount of stock they've purchased, but no more. Additionally, PLLCs provide their members with the freedom to run their business as they like, instead of having to follow heavily burdensome corporate requirements.
Please keep in mind that limited liability is not 100 percent guaranteed. For example, if a judge rules that the actions you've taken were irresponsible, you may be subject to lose the protection of your personal assets. With this in mind, it's recommended to carry some form of business malpractice insurance.
Banks will often require business loans to be backed by a personal guarantee. Upon signing this contract, a member will open themselves up to repaying this debt from their personal capital.
If you need help determining if organizing a PLLC is appropriate for you, you can post your job on UpCounsel's marketplace. UpCounsel only accepts the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.