Choosing the right business structure for your company can be complicated. Especially if you are a licensed professional such as an architect, accountant, physician, or attorney. In addition to the usual considerations like taxes, ownership, and management structure, professionals often face extra legal requirements tied to their licenses. While many business owners choose a limited liability company (LLC) for its liability protection and operational flexibility, not all states allow licensed professionals to operate through a standard LLC. In those states, professionals may be required to form a professional limited liability company (PLLC) instead. This article explains the key differences between a PLLC and an LLC
What is an LLC?
First, let us start by understanding all the characteristics of the limited liability company (LLC). Business owners usually choose the LLC structures since they offer the same protection from personal liability that a corporation does.
LLCs are much simpler and only need to file the articles of the organization with the state. Moreover, the management structure is much more flexible in nature than the corporation. The LLC owners are called the members, and the LLC can be managed daily either by the members (called Member-managed LLC) or by the non-members (called manager-managed LLC). For professional service businesses, the advantages of the LLC help a lot.
However, in some states, businesses that provide licensed professional services—such as accounting, tax preparation, legal counsel, or medical treatment—are not permitted to operate under the standard LLC structure. Because these services are regulated by state licensing boards, professionals in these fields are often required to form a professional limited liability company (PLLC) instead.
A PLLC shares many similarities with an LLC, including offering liability protection for its owners and members. This structure helps shield their personal assets from business debts or legal judgments related to the company.
What is PLLC?
A PLLC, or professional limited liability company, is a specialized form of a limited liability company created for licensed professionals. Like a standard LLC, it offers limited liability protection and flexible management. However, it is specifically designed for individuals whose professions are regulated by state licensing authorities.
In some states, certain licensed professionals are not allowed to form a standard LLC to provide their services. Instead, they must form a PLLC. Typically, all members of a PLLC must hold the required professional license for the services the company provides. This often includes professions such as architects, chiropractors, attorneys, and certified public accountants (CPAs). In most cases, the PLLC is also limited to offering services related to that licensed profession.
What are the differences between PLLC and LLC?
Although most of the basic things between the PLLC and LLC are the same, there are some distinctions as well. When you are about to form a PLLC, a lot of the states would require proof of professional licensing before they approve your articles of organization. There are also some critical considerations when it comes to the scope of the limited protection. Here are the main differences between the PLLC and LLC:
- Personal guarantees: Due to the licensed risks associated with the PLLCs, lenders may be more likely to require a personal guarantee before they approve any loan. This subjects the PLLC members to more personal liability as compared to the LLC members.
- Malpractice: A PLLC does not protect its members from malpractice claims related to their own professional actions. However, the PLLC members do have protection from lawsuits resulting from malpractice by the other company members. For instance, if you are a doctor in a PLLC and the patient sues another doctor who is practicing with your company, your personal finances would be protected. The finances of the business, including the percentage that you own, would be at risk. Moreover, the PLLC members also need to carry malpractice insurance that would cover the claims made against them personally.
Requirements of a PLLC & Forming a PLLC
Requirements and rules for the PLLC licensed owners are different and vary in every state. A few of the states require all the company members to hold specific licenses for the services offered. The other states allow you to form a PLLC that has as low as 50% professional ownership. Just like a corporation, the LLC is considered an entity that is separate from the owners. So, even after the owners retire, leave, or die, the business would still exist.
But when it comes to the PLLC, since it is a professional service company based on the members’ licenses, this type of business would not have any continuity if the members leave, retire, or die. Moreover, if you are in a state where all the members of the PLLC have to hold their own licenses for the services they offer, transferring ownership would also be restricted. And when the licensed member leaves or dies, the PLLC would have to be reformed or dissolved.
How do I form a PLLC?
Step 1. Check your state’s requirements
Start by reviewing the rules for forming a professional limited liability company in your state. You can find this information through the Secretary of State’s office or your state’s professional licensing board. These agencies will outline the specific requirements for your profession.
Step 2. Confirm eligibility for a PLLC
Make sure your profession is eligible—or required—to form a PLLC in your state. Many states require licensed professionals (such as attorneys, architects, physicians, or CPAs) to use this structure instead of a standard LLC.
Step 3. Obtain approval from the licensing board (if required)
In many states, you must first submit your proposed Articles of Organization to the relevant state licensing board for review and approval. This is an additional step that typically does not apply to standard LLC formations.
Step 4. Provide proof of professional licenses
States often require documentation showing that all members of the PLLC hold valid licenses in the profession that the company will practice. Some states may also require one or more licensed members to sign the formation documents.
Step 5. File the Articles of Organization with the Secretary of State
After receiving approval from the licensing board (if applicable), submit your Articles of Organization and any required supporting documents to the Secretary of State’s office to officially register the PLLC.
Step 6. Use the proper business designation
Once the company is formed, many states require the business name to include a designation such as “PLLC” or “Professional Limited Liability Company” so that the public can clearly identify the entity type.
PLLC Taxation
The IRS does not recognize either LLCs or PLLCs. So, it does not matter if you choose the LLC or the PLLC. At the end of the day, you will have to choose the way you want your business to be taxed from the options: C corporation, S corporation, partnership, or sole proprietorship. A lot of these options treat the business as a “pass-through” entity unless they decide to have their company taxed as a corporation.
This means that the business owners report their share of profits and losses on their personal income tax returns. The members of the PLLC are also allowed flexibility in allocating profits or losses in proportion to the amount of ownership interest each member has. The members of the PLLC can only be investors, just like in an LLC. Moreover, the member can have as little or as much say in running the business as they choose. But all this has to be noted in the operating agreement. And the PLLC investors, just like owners, also have to report their share of the company’s profits and losses on their income tax returns.
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Last updated: March 2026
