A professional limited liability company, or PLLC, is a type of limited liability company that is owned and operated by members of the same profession and can only offer services related to its profession. Lawyers, for example, would be the members of a law firm structured as a PLLC, and a lawyer’s PLLC can only offer legal services. Some states require that any lawyers who operate a legal business must form a PLLC.
How a PLLC Works
An LLC is a hybrid business that combines the liability shield of a corporation with the tax benefits of a partnership. Some states, however, do not let people with professional licenses, such as doctors, lawyers, or engineers, form an LLC. Instead, these people must form PLLCs. A PLLC has the same legal structure as an LLC. However, the state licensing board must verify the licenses of all owners of a PLLC and approve its formation.
Forming a PLLC
For a lawyer to form a PLLC, he must file articles of organization with his state’s business department. This is a basic document that includes his business name, address and the name of its attorney members, or owners. Some states require that PLLCs also create an operating agreement that details how the finances will be managed and interests allocated and what each member’s rights and responsibilities will be. The lawyers should also make sure they are licensed by their state bar and have obtained any other business permits their state requires.
Advantages of a PLLC
A PLLC brings many advantages for lawyers. One advantage is that the owners of the PLLC are shielded from liability; if the business is sued or if an employee is negligent, the owners’ assets are protected from the suit. Because lawyers are vulnerable to malpractice suits, this benefit is especially important. A PLLC can also elect for pass-through tax status, meaning that only the owners will be taxed and not also the company itself. PLLCs can create retirement plans for employees with higher contribution limits than are available to sole proprietorships or partnerships.
A PLLC, like other LLCs, enjoys perpetual existence. Many lawyers choose to form partnerships instead, if their states allow, but partnerships legally dissolve when the partner dies or leaves the business. In contrast, a PLLC will continue operating without interruption even if one of the owners leaves. This is especially helpful for lawyers, as the field is always changing and lawyers often leave one firm to work at another.