Jake Lawson here. In 15+ years helping professionals structure their businesses, I’ve watched countless doctors, lawyers, accountants, and other licensed professionals make costly mistakes with their business entities. Professional LLCs (PLLCs) are often required for licensed professionals, but most don’t understand what they’re getting—or missing. Think of it as specialized armor for specialized risks.
A Professional LLC (PLLC) is a specialized business entity designed specifically for licensed professionals who provide services that require state licensing. If you’re a doctor, lawyer, architect, CPA, or other licensed professional, your state probably requires a PLLC—and regular LLC formation won’t work.
After helping over 1,200 entrepreneurs structure their businesses, including hundreds of licensed professionals, let me break down everything you need to know about PLLCs, when you need them, and how they protect (and don’t protect) your practice.
What Is a Professional LLC (PLLC)?
A Professional LLC is a limited liability company specifically designed for licensed professionals. It provides the same basic liability protection as a regular LLC but comes with additional requirements and restrictions tailored to professional services.
Key characteristics:
- Purpose: Exclusively for providing licensed professional services
- Ownership: Usually requires all members to hold appropriate professional licenses
- Liability protection: Shields personal assets from general business liabilities
- Professional liability: Does NOT protect against malpractice claims
- Regulation: Subject to both state LLC laws and professional licensing board oversight
Important distinction: A PLLC protects your personal assets from general business debts (rent, supplies, employee issues), but it cannot protect you from professional malpractice liability. That’s what professional liability insurance is for.
Who Needs a PLLC?
The answer depends entirely on your state’s laws and your profession. Here are the licensed professionals who typically must or can form PLLCs:
Commonly required professions:
- Doctors and physicians
- Lawyers and attorneys
- Certified Public Accountants (CPAs)
- Architects
- Engineers
- Dentists
- Veterinarians
- Psychologists
- Physical therapists
- Chiropractors
- Optometrists
- Licensed clinical social workers
State-by-state variations: Each state has different rules. For example:
- California: Doesn’t allow PLLCs for most professionals (they must use corporations)
- Texas: Requires PLLCs for most licensed professionals
- New York: Has complex rules about which professions can mix within a single PLLC
- Florida: Allows some professionals to choose between LLCs and PLLCs
My recommendation: Never assume—always verify with your state’s licensing board and Secretary of State before forming any entity.
PLLC vs. Regular LLC: The Key Differences
Here’s what makes PLLCs different from regular LLCs:
Ownership Requirements
Regular LLC: Anyone can be a member
PLLC: Usually requires all members to be licensed in the relevant profession
Real-world example: Two doctors and a business manager want to form a practice. In most states, they can’t all be members of a PLLC because the business manager isn’t licensed. The doctors would need to form the PLLC and hire the manager as an employee or contractor.
Service Limitations
Regular LLC: Can provide any legal service or product
PLLC: Can only provide services for which members are licensed
Example: A PLLC formed by physical therapists typically cannot provide occupational therapy services unless they also have licensed occupational therapists as members.
Professional Liability
Both entities: Provide the same protection against general business liabilities
Neither entity: Protects against professional malpractice claims
Important note: Whether you have an LLC or PLLC, you still need professional liability insurance for malpractice protection.
Regulatory Oversight
Regular LLC: Governed by state LLC laws
PLLC: Governed by both state LLC laws AND professional licensing board regulations
State-by-State PLLC Requirements
Since PLLC rules vary dramatically by state, here’s what you need to research:
Questions to Ask Your State
- Does my profession require a PLLC? Some states mandate PLLCs for certain professions
- Can I choose between LLC and PLLC? Some states give professionals options
- What are the ownership requirements? Must all members be licensed?
- Can different professions practice together? Can doctors and dentists form a PLLC together?
- What are the ongoing compliance requirements? Additional reporting or licensing requirements?
Who to Contact
Your professional licensing board: They regulate your profession and often have specific entity requirements
Secretary of State office: They oversee business entity formation and can explain state-specific rules
Business attorney: Particularly one familiar with professional entity formation in your state
Pro tip: Call each source twice and speak to different people. I’ve seen too many professionals get conflicting information from the same office.
PLLC Formation Process
The basic formation process is similar to regular LLCs but with additional steps:
Step 1: Verify PLLC Requirements
- Confirm with licensing board that PLLC is required or allowed
- Understand ownership and practice limitations
- Review any special compliance requirements
Step 2: Choose Your State
- Most professionals should form in their practice state
- Some professionals practice across state lines and need careful planning
- Consider where you’re licensed and where you’ll provide services
Step 3: Name Your PLLC
- Must typically include “PLLC” or “Professional Limited Liability Company”
- Must comply with professional naming requirements
- Cannot be misleading about services or qualifications
Step 4: File Formation Documents
- Articles of Organization (similar to regular LLCs)
- May require additional professional certifications
- Higher filing fees in some states
Step 5: Obtain Professional Approvals
- Some states require licensing board approval before or after formation
- May need to update professional licenses to reflect new entity
- Notify professional liability insurance carrier
Step 6: Complete Ongoing Requirements
- Maintain professional licenses for all members
- File required reports with both state and licensing boards
- Maintain professional liability insurance
PLLC Taxation
Good news: PLLCs are taxed exactly like regular LLCs.
Single-member PLLC: Taxed like sole proprietorship (Schedule C)
Multi-member PLLC: Taxed like partnership (Form 1065) by default
Election options: Can elect corporate taxation (S-Corp or C-Corp) if beneficial
Important consideration: Professional income is always subject to self-employment taxes, regardless of entity type. This is different from some other business income.
Common PLLC Mistakes I See
After helping hundreds of licensed professionals, these errors come up repeatedly:
Mistake 1: Assuming PLLC Provides Malpractice Protection
The reality: PLLCs protect against general business liabilities, not professional negligence
The solution: Maintain adequate professional liability insurance regardless of entity type
Mistake 2: Mixing Licensed and Unlicensed Members
The reality: Most states require all PLLC members to hold appropriate licenses
The solution: Structure carefully—unlicensed partners may need to be employees or work through separate entities
Mistake 3: Practicing Outside Licensed Services
The reality: PLLCs can only provide services for which members are licensed
The solution: Either obtain additional licenses or structure multiple entities for different services
Mistake 4: Ignoring State-Specific Rules
The reality: PLLC rules vary dramatically between states
The solution: Research thoroughly and consult local professionals familiar with your state’s requirements
Mistake 5: Inadequate Operating Agreements
The reality: Professional practices need specialized operating agreements addressing licensing, malpractice, and succession issues
The solution: Use attorney-drafted agreements specific to your profession and state
PLLC vs. Professional Corporation (PC)
Many licensed professionals can choose between PLLCs and Professional Corporations. Here’s how they compare:
Taxation
PLLC: Pass-through taxation by default (like partnership or sole proprietorship)
PC: Corporate taxation by default (double taxation unless S-Corp election)
Liability Protection
Both: Protect personal assets from general business liabilities
Both: No protection from professional malpractice
Formalities
PLLC: Fewer formal requirements (no board meetings, corporate resolutions)
PC: More formal corporate structure required
Professional Requirements
Both: Usually require licensed professional ownership
Both: Subject to professional licensing board oversight
My general preference: PLLCs offer more flexibility and simpler taxation for most professional practices, but verify what’s allowed in your state.
Multi-State Professional Practices
If you practice across state lines, PLLC formation becomes more complex:
Considerations
- Where to form: Usually where you have your primary practice
- Foreign registration: May need to register in other practice states
- Licensing requirements: Must maintain appropriate licenses in all practice states
- Tax compliance: Multi-state tax filing requirements
Common scenarios:
Example 1: Dentist practices in border towns of two states
Solution: Form PLLC in primary practice state, register as foreign entity in secondary state
Example 2: Consultant provides services to clients nationwide
Solution: Form PLLC in home state, evaluate foreign registration requirements based on practice locations
Professional Liability Insurance: Still Essential
This cannot be overstated: PLLCs do not replace professional liability insurance.
What PLLCs protect: Personal assets from business debts, employee claims, general accidents
What PLLCs don’t protect: Personal assets from professional malpractice claims
Real example: A doctor’s PLLC provides excellent protection when a patient slips and falls in the waiting room. It provides zero protection when that same patient sues for medical malpractice.
Bottom line: Maintain appropriate professional liability insurance regardless of your entity structure.
PLLC Succession Planning
Professional practices need specialized succession planning:
Key considerations:
- License requirements: New members must obtain appropriate licenses
- Buy-sell agreements: What happens when a licensed member dies, retires, or becomes disabled?
- Practice continuity: How does the practice continue if key licensed members leave?
- Client relationships: How are professional relationships transferred?
Planning strategies:
- Draft comprehensive buy-sell agreements
- Establish clear valuation methods for practice interests
- Plan for temporary practice coverage during transitions
- Consider disability and life insurance for key members
When to Hire Professionals
Given the complexity of professional entity formation, here’s when to get help:
Always hire an attorney for:
- Multi-member professional practices
- Multi-state practice operations
- Complex succession planning
- Regulatory compliance questions
- Malpractice or licensing board issues
Consider an accountant for:
- Tax planning and entity elections
- Multi-state tax compliance
- Professional practice financial planning
- Retirement planning strategies
Look for professionals who:
- Specialize in your profession
- Understand your state’s specific requirements
- Have experience with professional entities
- Can provide ongoing compliance guidance
The Bottom Line on PLLCs
Professional LLCs serve an important purpose for licensed professionals, but they’re not one-size-fits-all solutions. Here’s my guidance:
Form a PLLC if:
- Your state requires it for your profession
- You want liability protection for general business risks
- You prefer pass-through taxation
- You plan to practice with other licensed professionals
Consider alternatives if:
- Your state allows LLCs for your profession
- You prefer corporate structure and taxation
- You need more complex ownership structures
- You practice across multiple states with different requirements
Remember:
- PLLCs don’t replace professional liability insurance
- State requirements vary dramatically
- Professional compliance remains essential
- Succession planning is more complex than other businesses
My strong recommendation: Don’t go it alone. Professional entity formation involves both business law and professional regulations. The cost of getting it wrong—through regulatory violations, tax problems, or inadequate liability protection—far exceeds the cost of professional guidance.
Considering a PLLC for your professional practice? I’ve helped hundreds of licensed professionals navigate entity selection across all 50 states. The right structure protects your practice and personal assets while supporting your professional growth—but the wrong structure can create years of expensive problems.
About Jake Lawson: LLC Formation Strategist and Tax Advisor with 15+ years helping entrepreneurs and licensed professionals choose appropriate business structures. Extensive experience with professional entities across all 50 states including healthcare, legal, accounting, and other licensed professions. Independent analysis, no affiliate pressure, just honest guidance based on real client outcomes and state-specific requirements.