PLLC: Meaning, Requirements and How it Compares to an LLC

PLLC, which we will break down more in depth below, is a type of specialized business entity that is specifically created for licensed professionals, such as accountants, lawyers and doctors. It differs from an LLC, which stands for Limited Liability Company, and it is applicable to nearly anyone, including individuals and corporations, while the PLLC is for licensed professionals only. In addition, the PLLC is only available in 29 states, and professional licensing for members is required for a valid PLLC. 

When it comes to forming a PLLC, you must have a professional license and register with state authorities, often the state’s Secretary of State. This involves filing Articles of Organization (which proves all members hold professional licenses) and obtaining the state’s licensing board approval, which means creating an operating agreement, appointing a registered agent, and obtaining an EIN. Read on to learn more about a PLLC and how it compares to an LLC among other factors.

What is a PLLC?

A PLLC is one of many types of LLC. It is a business structure that is created for a specialized purpose, for certain licensed professionals. It is similar in structure to an LLC, but it has extra steps and rules that are tied to professional licensing and state requirements. It is properly defined as “a professional limited liability company for licensed individuals,” such as architects, doctors, and attorneys. It also provides a type of corporate liability protection, similar to LLC, offering pass-through taxation. However, it requires another added step of requiring the existence of a current professional licensure for the owners. 

What does PLLC stand for?

PLLC stands for Professional Limited Liability Company. It’s worth noting that “professional” in this regard doesn’t merely mean “professionalism,” which could characterize many professionals like plumbers or roofers. Instead, it refers only and specifically to licensed professionals like doctors, lawyers, dentists, etc. 

What is a PLLC company used for? 

While a PLLC will not protect you as a licensed professional from all liability that exists, it still serves a valid purpose, making it worthwhile to check into. It is sometimes required by the state in which you operate to comply with state licensing laws.

In addition, it can help you shield yourself a bit from malpractice suits aimed at other members of your company. This doesn’t protect you, though, from a malpractice suit aimed at you personally, just those involving your partners. It can also be used to create flexible taxation, or corporate taxation, which can make managing the business’s financial side easier.

Having a PLLC can also offer a measure of professional credibility, since getting one requires completing specific steps involving registration and complying with state regulations. It can serve as a moniker of validity for businesses that have it as part of their formation.

States that allow PLLC formation

State / District	PLLC Formation Fee*	Comments
Arizona	$50	Standard LLC filing fee used for PLLC; publication may be required in some counties.
Arkansas	$45	One of the lowest formation fees; PLLC uses the standard LLC filing.
Colorado	$50	Low filing fee; PLLC formed through standard LLC filing process.
District of Columbia	$99	PLLCs are permitted and use the standard LLC filing fee.
Florida	$125	Standard LLC filing fee applies to PLLCs.
Idaho	$100	PLLC uses the standard LLC formation filing.
Iowa	$50	Standard LLC fee used for PLLC registration.
Kentucky	$40	One of the lowest formation fees among PLLC states.
Maine	$175	Higher-than-average filing fee for formation.
Massachusetts	$500	One of the highest formation fees for PLLCs.
Michigan	$50	Standard LLC formation fee applies to PLLCs.
Minnesota	$155 online ($135 by mail)	PLLCs file through the standard LLC formation process.
Mississippi	$50	Standard LLC filing used for professional entities.
Montana	$35	Lowest formation fee among states that allow PLLCs.
Nevada	$425 total startup	Includes Articles of Organization, initial list, and state business license.
New Hampshire	$100	Standard LLC filing fee used for PLLCs.
New York	$200	Formation fee does not include mandatory publication requirement.
North Carolina	$125	Standard LLC filing fee used for PLLC formation.
North Dakota	$135	PLLC formation uses the standard LLC filing.
Oklahoma	$100	Standard LLC filing fee applies to PLLCs.
Pennsylvania	$125	PLLC formation uses the LLC filing process.
South Dakota	$150	Standard LLC filing fee applies.
Tennessee	$300 minimum	Filing fee calculated at $50 per member (minimum $300).
Texas	$300	Standard LLC filing fee used for PLLCs.
Utah	$59	Low filing fee for PLLC formation.
Vermont	$125	Standard LLC filing fee applies.
Virginia	$100	PLLC formation uses the LLC filing process.
Washington	$200	Standard LLC filing fee applies.
West Virginia	$100	PLLC formation uses the LLC filing fee.

*In most states, a PLLC is formed by filing standard LLC formation documents, along with proof of professional licensure or board approval depending on the profession.

Who needs a PLLC? And what professions qualify?

PLLC rules do vary by state and among various professions. This means there is no list of professions that do qualify. Instead, as a licensed professional, you should check your own area’s local requirements and specific state regulations. Some states do require licensed professionals to form a PLLC instead of an LLC. Examples of some professionals that are most associated with this type of licensing include:

• Counselors or Therapists (varies)
• Accountants or CPAs
• Dentists and Doctors
• Architects
• Attorneys (when allowed)
• Engineers

Keep in mind, not every state uses PLLC classification. Some states use Professional Corporation (PC) instead. 

PLLC vs LLC

An LLC Limited Liability Company and PLLC Professional Limited Liability Company have several similarities as well as some key differences. An LLC is a business structure that protects owners from various financial hardships that occur as part of owning a business. A PLLC, as we have outlined above—and will get even more in depth about below—is also a business structure but is specifically designed for licensed professionals and can be required by the state to own and operate a professional business. The following information will look more in depth at these specific similarities—how they compare—and consider how they differ: 

Similarities between an LLC and a PLLC

• Limited Liability: Limited liability structure for business obligations is applicable with both LLCs and PLLCs. They might involve differences in terms of what is protected or who is protected, but both offer a form of limited liability protection.

• Taxation: Pass-through taxation by default, in most cases.

• Management: Flexible management structure, meaning its member-managed instead of being manager-managed.

• Operating Agreement: With both the PLLC and LLC format, the operating agreement is still relevant. This is a legal document that outlines financial and functional decisions, member roles, management structure, and operational rules. 

Key differences between a PLLC and an LLC

• Not All Companies Qualify: A PLLC is designed specifically for licensed professionals and isn’t open to all business owners. An LLC is much more open in terms of most businesses. 

• Licensure Requirements: A PLLC often requires proof of licensure to form, for all members, not just the owner. An LLC doesn’t always involve having professional licensing. 

• Board Approval: A PLLC can require board approval and additional paperwork to verify professional licensing and overall professionalism. This means there is an additional step to qualify a business when forming a PLLC when compared to an LLC. 

• Name Rules Vary: Naming rules are stricter when forming a PLLC as opposed to the LLC naming process. There are many rules associated with naming a PLLC that are not applicable when you create an LLC. 

Does a PLLC protect you from malpractice liability?

To put it simply, no, a PLLC does not protect you as an individual from your own malpractice liability. Instead, it will protect you from some general business debts and obligations. It can also provide a level of protection against malpractice liability aimed at another business member, not yourself. Therefore, as a licensed professional, you still need malpractice or professional liability insurance above and beyond forming a PLLC. 

PLLC requirements

Exact requirements vary by state, but most PLLCs will follow a similar setup process. To determine your specific PLLC requirements, check with your own local government, regulatory sources and organizations. The following are some typical requirements to keep in mind, followed by a deeper look at the requirements for forming a PLLC:

• State approval is sometimes required.
• Business name rules are different and stricter.
• An active professional license is required.
• Operating agreement is recommended, even if not required.
• Articles of organization or similar filing required.
• A registered agent is part of the process.
• EIN is often needed for banking and/or hiring. 

How to form a PLLC

Now, we will go over in more detail the pathway to take to form a PLLC to give you a good idea of what is required and how to get started: 

Choose a PLLC name

Unlike an LLC filing, a PLLC has specific requirements when it comes to naming your company when forming a PLLC. Usually, this requires working the letters PLLC into the name itself. It is also affected by licensing board rules, which vary. Some states have even more requirements, such as North Carolina requiring the inclusion of a surname of one or more members, or Virginia requiring a professional designation at the end.

Confirm licensing and state eligibility

When forming a PLLC, you must check the licensing board rules for your area. You also need to find out if a PLLC is required or is merely optional for where you plan on doing business. 

File formation documents

The next aspect of the PLLC formation process is submitting state paperwork correctly and paying any subsequent filing fees. 

Create an operating agreement

This means clarifying business ownership, general responsibilities and who is in charge of decision-making. This is especially important when forming a PLLC with several members.

Get an EIN and open a business bank account

Last but not least, when forming a PLLC, you should get an Employer Identification Number (a unique 9-digit number assigned by the IRS) and open a business bank account. This will help you keep your business and your personal finances separate and is often a requirement for hiring and payroll purposes. 

PLLC taxes 

Most PLLC businesses are taxed similarly to LLCs, which are, by default, a pass-through entity when it comes to federal tax purposes. This basically means the entity or the business will not pay income taxes itself.

Consequently, owners may not pay self-employment taxes, but this is based on the structure of the business. In addition, profits and loss will pass through members who report them as part of their personal returns. Some PLLCs can choose a different tax treatment, but this is not as common.

Generally, if you are considering a PLLC, you want to speak with an accountant to learn professional-specific tax situations, so you know what to expect when forming this type of entity. 

When a PLLC makes sense

There are many professional scenarios which make a PLLC the right fit for your business. The following are some indicators that this type of entity or business structure could be a good idea for you:

• You are forming a group practice with several members, making it multi-member.
• You are a licensed professional and your state requires you to form a PLLC to practice.
• You want a formal structure for client contracts and would appreciate the additional credibility the PLLC distinction offers.
• You want to separate your business finances. 

Getting set up the right way before you form a PLLC

Forming a PLLC is one part of building a legitimate business foundation. You will need to choose the right structure for your specific needs based on your state and profession to determine what makes the most sense for you, a PLLC or LLC. You will also need to get an EIN as mentioned earlier in order to pay employees. It’s also a good idea to keep your business information organized from the outset, as this will make whatever process you choose to take more streamlined.

Tailor Brands can help you—as a founder—to get set up properly and continue to stay organized throughout the process and beyond. While this assistance does not guarantee the state will approve of your business, ensure licensing or promise any overall success in business, it can help make this confusing process much easier. 

Conclusion

A PLLC is a professional version of the LLC and is applicable to many licensed professions. Sometimes, it’s even required by the state. Keep in mind that PLLC vs LLC differences matter most when it comes to eligibility and compliance. Be sure to check out state rules and licensing boards before filing. Contact us at Tailor Brands to learn more about how forming a PLLC could be the right next move for your business. 

FAQ