Deciding between forming an LLC (Limited Liability Company) or a PLLC (Professional Limited Liability Company) is more than just a simple choice. It determines ownership options, liability protections, and the rules you need to follow. Let’s review the differences between LLCs and PLLCs so you can select the best structure for your business.
What is an LLC?
An LLC is a hybrid business structure that combines key features of corporations, partnerships, and sole proprietorships. An LLC offers the limited liability protection of a corporation, shielding the owner’s personal assets from business debts and lawsuits. Pass-through taxation is similar to that of a partnership, so profits and losses are reported on the individual members’ tax returns.
LLCs are commonly considered the ideal blend of corporate asset protection and flexible tax advantages for their owners.
What is a PLLC?
A PLLC is a business structure designed for licensed professionals like doctors, attorneys, accountants, and architects, and the members must be of the same profession. A PLLC provides protection similar to an LLC, shielding you from the business debts and malpractice claims of other members. However, it does not protect you from liability for your own malpractice.
Forming a PLLC requires valid professional licenses, an EIN, and state-specific filing forms and processes.
What Are the Main Distinctions Between an LLC and a PLLC?
While LLCs and PLLCS share many of the same features, here are a few of the differences at a glance:
- PLLCs are designed for professionals, as discussed, while LLCs have no professional licensing requirements.
- Not all states recognize PLLCs.
- In certain states, licensed professionals cannot establish a standard LLC for their practice and are required to use a PLLC or another type of professional entity.
- Both LLCs and PLLCs protect the members’ personal assets from the business’s general debts and obligations.
- LLCs and PLLCs do not protect individual owners from malpractice claims related to their own professional conduct.
In general, an LLC is usually best for regular businesses without licensing requirements. A PLLC is designed for regulated professions seeking limited liability and a structure to comply with their state licensing requirements.
How Does Ownership Differ?
Ownership structures in LLCs are more flexible than in PLLCs. In a typical LLC, members can include a wide range of entities, such as individuals, corporations, other LLCs, and even foreign or trust entities, often without requiring specific professional credentials. On the other hand, PLLCs are normally limited to licensed professionals in the relevant field, such as licensed attorneys for a law firm PLLC. Many states also require that a majority or all owners hold the appropriate license, and some may restrict non-licensed spouses, investors, or entities from voting membership rights.
What are the Formation Requirements for an LLC or PLLC?
Forming an LLC is usually straightforward, typically completing the state’s filing form and appointing a registered agent. By contrast, forming a PLLC tends to be more time‑consuming and costly because it normally requires proof of professional licensing, compliance with additional industry‑specific regulations, and approval from the appropriate state licensing board. It’s also important to note that not all states recognize PLLCs in their statutes; for instance, Wyoming does not currently allow domestic PLLCs, though it does permit foreign PLLCs to register.
Do LLCs and PLLCs Need a Registered Agent?
A registered agent is an individual or entity that receives service of process, tax notices, and other necessary correspondence. All states require an LLC and PLLC to appoint and maintain a registered agent. However, in New York State, the Secretary of State serves as the entity’s registered agent by default. Companies must provide a physical address in New York state to receive correspondence, including service of process and other official notices.
Can an LLC Convert to a PLLC?
Converting an LLC to a PLLC is available in many states, but the process may depend on state laws and the PLLC’s profession. Some states do not recognize PLLCs at all. While many states allow conversion, some, like New York, do not because PLLCs require specific licensing credentials. Some key points to consider:
- Check to see if your state recognizes PLLCs for your profession.
- Make sure all owners meet the licensing requirements.
- You will need approval from your state licensing board.
- Follow state statutes for statutory conversion or merger, depending on the state.
- Be sure to update all necessary paperwork, including banking, contracts, and operating agreements, to reflect the new name.
Always seek counsel from an attorney and accountant for professional advice.
Ready to Form an LLC or Professional LLC?
Selecting between an LLC and a PLLC shouldn’t be difficult, and forming either shouldn’t be stressful. At Corp1, we have expertise in assisting small business owners and licensed professionals in establishing the appropriate structure and guiding them through state regulations and filing procedures.
If you’re ready, we’ll handle the paperwork, deadlines, and details, including serving as your registered agent, so you can stay focused on what you do best. Contact one of our Success Partners today to get your LLC or PLLC formed quickly and correctly, putting you on the path to success in your new business!
This blog post is for informational purposes only. Please contact an attorney or accountant for legal and financial advice.
Resources: Nerdwallet, SoFi.com, IRS.gov,