You make a lot of important decisions when you start a business. One of the most important choices you will make is your business structure. Having the right structure from the beginning will help provide the kind of protection your business needs to thrive.
An LLC or PLLC is the best choice for many businesses because of the protections an LLC provides. However, you also need to know which of those is best for your business. Texas has specific rules governing which professionals can form a PLLC and how that structure works, and the decision between an LLC and a PLLC isn’t purely optional for some practitioners.
There are general differences between a PLLC vs LLC, and it is good to understand that background. This article covers who qualifies for a Texas PLLC, how liability works, and when it makes more sense than a standard LLC.
Who needs a PLLC in Texas?
Texas statute limits PLLC formation to “Professional Individuals.” Only those licensed to provide a specific professional service in Texas or another jurisdiction are allowed to form a PLLC.
The Texas Secretary of State publishes a chart of permissible entity types by licensed profession that spells out which professions require a PLLC or PC, which can choose between an LLC and a PLLC, and which are LLC-only. Because the chart hasn’t been updated since 2017, confirm with a Texas business attorney or the Secretary of State that nothing has changed for your specific profession before filing.
Here are some examples of professions recognized under Texas law as being required to use a PLLC:
- Attorney
- Athletic trainer
- Real estate or home inspector
- Medical Physicist
- Psychiatrist
- Veterinarian
Here are some professions where Texas law allows either an LLC or a PLLC:
- Architect
- Chiropractor
- Insurance Agent/Broker
- Pharmacist
- Physical therapist
- Private investigator
And here are some professions where Texas only allows an LLC:
- Real estate appraiser
- Cosmetologist
- Electrician
- Landscape architect
- Surgical assistant
Qualified professional organizations can also be members of a Texas PLLC. These entities render the same professional services through licensed members. Even though a profession is licensed, it may not qualify to have a PLLC. Texas PLLC statute determines what professions are authorized. A Texas business attorney can confirm whether a specific profession qualifies before filing.
LLC vs. PLLC in Texas: the key differences
There are important distinctions between a Texas LLC and PLLC.
Ownership eligibility
A Texas LLC is open to any individual or entity, and has no licensing requirements.
A PLLC is restricted to licensed professionals or professional organizations as defined by Texas statute. (Even some licensed professionals will not qualify for a PLLC.)
Scope of business
Texas PLLCs are strictly limited to the professional services for which they are formed. Texas law does not allow a PLLC to branch out into unrelated business activities.
This limitation can actually be a benefit, because it prevents any member from binding the PLLC to obligations outside the professional scope.
Standard LLCs have no such restriction and can add completely unrelated services, as long as those are allowed by law.
Malpractice liability
Both structures shield members from the general debts and liabilities of the entity. That means that if your business suffers a financial loss, you will not be personally liable. Personal assets like your home are protected.
With a Texas PLLC, malpractice claims arising from one member’s professional negligence generally attach to the PLLC and don’t pass through to other members personally, provided those other members had no supervisory role in the negligent work.
A member who directly supervised the person who committed the malpractice can still be personally exposed. That’s a meaningful reason many practitioners no longer choose a general partnership, where one partner’s malpractice can create personal liability for all partners regardless of supervision
Each PLLC member remains personally liable for their own malpractice. Note that the PLLC does not shield a member from claims arising from their own professional errors. That is where errors and omissions insurance will protect you.
Formation requirements
Both the TX LLC and the PLLC require filing with the Texas Secretary of State.
With an LLC, there is certain information you need to provide, such as the name and legal contact. A PLLC must state a “professional purpose” in the filing and provide evidence of licensure, something that is not required with a standard LLC formation.
You can find all the business forms on the Texas Secretary of State website.
What is the advantage of a PLLC over an LLC in Texas?
If given a choice, many choose a PLLC over an LLC. There are 4 major advantages of a PLLC over an LLC in Texas:
- Malpractice protection from other members’ claims. This protection is particularly valuable in multi-practitioner settings like law firms, medical groups, or dental practices.
- Restricted business scope as a structural safeguard. It may feel limiting, but this restriction prevents rogue members from committing the entity to outside obligations.
- Professional credibility. Being able to use the term “PLLC” in the business name signals a formally structured professional practice to clients and patients.
- Locking out unlicensed owners. Where a PLLC exists, unlicensed investors can’t come in and take control.
Don’t forget that the PLLC does not protect a member from their own malpractice. Professional liability insurance remains essential.
Joint practice PLLCs in Texas
Under Texas BOC § 301.012, specific combinations of licensed professionals can jointly form and own a PLLC together, rather than any complementary professions generally. The statute currently permits: doctors of medicine, doctors of osteopathy, podiatrists, and chiropractors to jointly form a PLLC; and physicians together with physician assistants (though a physician assistant may not serve as an officer of the entity). Combinations outside these specific pairings aren’t automatically authorized just because the professions are related.
When there is a joint PLLC, no member of the joint practice has authority over another member’s clinical decisions. Each practitioner maintains complete authority over their own professional judgment regardless of ownership stake.
PLLC vs. LLC taxes in Texas
There are no significant tax differences between PLLCs and LLCs in Texas.
- Both are pass-through entities by default; both can elect S corp or C corp taxation.
- Both are subject to the Texas franchise tax.
It is vital to consult a tax professional before making any tax elections.
Which is right for your Texas practice?
Ultimately, it may or may not be a choice. If you do have a choice, there are important things to consider:
- If the profession is listed under the Texas PLLC statute and the practice involves malpractice risk, PLLC is likely the right choice.
- If the profession doesn’t qualify under Texas statute, a standard LLC is the only option.
- If operating as a solo practitioner with no partners, the malpractice protection benefit of a PLLC is less significant, though other benefits may still apply.
Texas rules are specific, so you will need to confirm eligibility with a Texas business attorney before filing.
You can get help with all the normal tasks when it comes to forming and setting up your business in Texas. Tailor Brands helps business owners handle the filing and formation process so you can focus on building the company instead of learning the ins and outs of laws and procedures.
Conclusion
The LLC vs. PLLC decision in Texas is shaped by statute. Who qualifies and what services can be offered are determined by law. Even the way liability is allocated is specifically defined by Texas law.
Rules are specific to a profession, and failure to comply can lead to problems down the road. Never hesitate to speak with a Texas attorney to make sure you are following the rules correctly.