Updated October 18, 2023
If you have ever heard of a Professional Limited Liability Company (PLLC), then you have probably wondered about the differences between it and a regular Limited Liability Company (LLC). This article will briefly discuss the key differences and help you determine whether your state requires you to open a PLLC or a LLC.
LLCs and PLLCs are both popular business structures that provide limited liability protection to their owners, also known as members. However, they serve different purposes and are subject to distinct regulations.
Key Differences Between PLLCs and LLCs:
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Professional Purpose:
- LLC: An LLC is a versatile business structure that can be formed for almost any legitimate business activity. This includes retail businesses, service providers, and more. Generally, we have our clients open LLCs for the purpose of holding their risky business assets such as real estate, collectible cars, etc.
- PLLC: A PLLC, on the other hand, is specifically designed for licensed professionals who require a state-issued professional license to practice their occupation. This includes lawyers, doctors, accountants, architects, chiropractors, and many others. Depending on the state, it may be required that a professional opening a business to practice their occupation do so under a PLLC. Therefore, you may not even have the option between a LLC and PLLC in some states.
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Member Requirement:
- LLC: LLC members really have no restrictions other than the ones listed in the Operating Agreement. Unlike PLLCs, LLC members are not required to hold professional licenses, and they can include individuals, corporations, or other LLCs.
- PLLC: In a PLLC, all members must hold the necessary professional licenses related to the business’s field. This ensures that the business is providing professional services in compliance with state regulations. Again, a PLLC may be required in your state if you are a professional seeking to open a business to provide your professional services.
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Liability Protection:
- LLC: LLC members benefit from limited liability protection, meaning their personal assets are generally protected from business debts and lawsuits.
- PLLC: Members of a PLLC receive the same limited liability protection as LLC members, specifically within the scope of professional malpractice claims. However, personal assets may still be at risk for non-professional business debts.
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State Regulation:
- LLC: LLCs are regulated by state laws that apply uniformly to all types of businesses. These regulations often include formation requirements, annual reports, and taxes.
- PLLC: PLLCs are subject to additional state-specific regulations that pertain to the practice of professional services, ensuring that members adhere to professional standards and ethics.
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Naming Requirements:
- LLC: The naming requirements for an LLC generally involve using a variation of “Limited Liability Company” or its abbreviation (e.g., “LLC”).
- PLLC: A PLLC must include “Professional Limited Liability Company” or its abbreviation (e.g., “PLLC”) in its name, indicating its professional nature.
States Allowing or Requiring PLLCs:
PLLCs are recognized in many states across the United States, and some states even require licensed professionals to form PLLCs. Here is a list of states allowing or requiring PLLCs:
States Requiring PLLCs if you are a licensed professional looking to open a business to provide your professional services:
- Alabama
- Arizona
- California
- Florida
- Illinois
- Kentucky
- Nevada
- New Jersey
- New York
- North Carolina
- Oklahoma
- Pennsylvania
- Tennessee
- Texas
- Virginia
In the following states, you have the choice between an LLC and a PLLC if you are a licensed professional looking to open a business to provide your professional services. These States are as follows:
- Colorado
- Connecticut
- Delaware
- Georgia
- Idaho
- Indiana
- Iowa
- Kansas
- Louisiana
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Missouri
- Nebraska
- New Hampshire
- New Mexico
- Ohio
- Oregon
- Rhode Island
- South Carolina
- Utah
- Washington
- Wisconsin
- Wyoming
In some states, PLLCs are not even recognized. These states typically require professionals to form alternative entities, such as professional corporations (PCs). These states include:
- Alaska
- Arkansas
- Hawaii
- Maine
- Mississippi
- North Dakota
- South Dakota
- Vermont
- West Virginia
It’s important to note that state regulations can change over time, so be sure to ensure you are kept up with the latest state laws and statutes. Here, at Lodmell & Lodmell, we can help you set up your LLC and/or PLLC after determining which is best for your specific situation and state. If you have any questions about your specific situation, or you are ready to create your LLC or PLLC, we invite you to contact us at 602-230-2014 or support@lodmell.com.
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