What is a PLLC?
When forming a business, many business owners will try to decide between forming as a corporation, an LLC, or a partnership. Many people, however, don’t give much thought to the Professional Limited Liability Company (PLLC). What is a PLLC, and how does it differ from the more common Limited Liability Company?
A Professional Organization
Unlike an LLC, which is generally an option for anyone who wants it, a PLLC is a bit more specialized. As the name implies, a PLLC is for professionals or professional service providers. Generally, any profession that requires any type of licensing from the state, can incorporate as a PLLC. The company has to use the letters “PLLC” in its title.
To incorporate as a PLLC, you’ll need to demonstrate you have the required licenses for your given profession. This doesn’t just apply to you, it applies to every member or manager of the PLLC. So if you are an architect, and want your lawyer buddy to also have an ownership interest in the company, you could have a problem forming a PLLC (although those outside of the stated PLLC profession can still work for or in the LLC).
This limitation also restricts transfer. Whereas in a normal LLC, you can transfer or sell your interest to anyone that you want (subject to the member agreement or managing documents), in a PLLC, you can only sell or transfer your interest to someone with the proper professional licenses.
Your PLLC can only operate in the field or profession that they are registered for or in. In this way, a PLLC is a bit more limited than an LLC. Although an LLC may have a stated purpose, these purposes can be broad and sweeping (for example, “all legal business”), whereas in a PLLC, the scope or purpose of the company has to be related to your profession or licensure.
Like an LLC, a PLLC gives the benefit of pass through taxation, and PLLCs are highly customizable based on your company’s needs.
The main difference between a PLLC and an LLC is liability. An LLC carries the traditional corporate veil protections that any corporation carries—the owners, managers or officers are generally immune to being sued individually, for the wrongs or actions of the company.
But a PLLC does not carry that same protection, in part because of the recognition that professionals carry people’s livelihoods (and sometimes their lives) in their hands every day. For example, owners of a PLLC can still be sued for malpractice.
However, members of a company can’t be held liable for the wrongs or malpractice of other members of the company (although any money or assets that those non-wrongdoing members put into the company, may be at risk if and when the company is ever sued).
Forming a business? Making the right choices early, can avoid legal problems later on. Call the West Palm Beach business litigation lawyers at Pike & Lustig for help today.