Professional Corporations and PLLCs Explained

If you're a doctor, lawyer, accountant, architect, dentist, veterinarian, or another licensed professional starting your own practice, many states won't let you use an ordinary LLC or regular corporation. Instead, they require a professional entity — usually called a professional corporation (PC) or professional limited liability company (PLLC) (some states use "professional association" or "PA" instead). These entities work almost like a regular LLC or corporation for everyday business purposes, but with two important twists: only licensed people can usually own a piece of them, and they do not protect you from liability for your own malpractice.

Why professionals can't just form a regular LLC

States regulate licensed professions — medicine, law, accounting, architecture, engineering, dentistry, veterinary medicine, and others — through licensing boards that exist to protect the public. Many states worry that if anyone could own a piece of a law firm or medical practice, non-professionals could control clinical or professional judgment, or professionals could hide behind an ordinary business entity to avoid accountability. So a state's business-entity statute, together with the applicable licensing-board rules, often requires licensed professionals in certain fields to organize as a PC or PLLC rather than a standard LLC or corporation, and restricts who can own an interest.

This varies a great deal by state and by profession. Some states require a professional entity only for a short list of fields (often medicine, law, accounting, and a few others). Others require it for a much longer list, including chiropractors, physical therapists, psychologists, optometrists, and more. A handful of states have relaxed these rules or allow ordinary LLCs for some licensed fields. There is no substitute for checking your own state's Secretary of State business-formation rules and your profession's licensing board rules before you file anything — do not assume the rule in a neighboring state applies to you.

The core structural differences from an ordinary LLC or corporation

Who can own it

In most states that require a PC or PLLC, ownership (shares or membership interests) is limited to people who hold an active license in the relevant profession. Some states allow limited exceptions — for example, letting a small percentage of owners be licensed in a closely related field — but as a general rule you cannot simply bring in a non-licensed business partner or outside investor as an owner of a PC or PLLC the way you could with an ordinary company. Some states also restrict who can serve as an officer or director. Check your state's rules and your licensing board before assuming a particular ownership structure is allowed.

What it's called and how it must be named

States typically require the entity's name to include a designator like "P.C.," "PLLC," "P.A.," or the profession's name, and some professions have additional naming rules (for example, restrictions on using a deceased partner's name, or requirements that the name not be misleading about who provides the services). Naming rules vary by state and by licensing board, so confirm the exact requirement before you file paperwork or start marketing under a name.

Licensing-board involvement

Forming the entity with your state's Secretary of State (or equivalent business-filing agency) is usually only half the job. Many states also require you to notify, register with, or get a certificate from your profession's licensing board, sometimes before the Secretary of State will accept your filing and sometimes afterward. If you add or remove an owner, that can trigger a new filing or notice requirement with the board as well. These steps, and any deadlines attached to them, vary by state and by board — confirm the current requirement and any filing window directly with your state licensing board and Secretary of State.

The most important thing to understand: malpractice liability isn't shielded

This is the point people misunderstand most often. An ordinary LLC or corporation generally shields its owners from the business's debts and from another owner's misconduct. A PC or PLLC does something narrower for licensed professionals:

• It generally protects you from the ordinary debts of the business — a lease you didn't personally guarantee, a vendor contract, a business loan taken out by the entity — the same way an ordinary LLC or corporation would.
• It generally protects you from another owner's or employee's malpractice — if you're one of several professionals in the practice and a colleague is sued for negligence in a matter you had nothing to do with, your personal assets are typically not on the line just because you're a co-owner of the entity.
• It does NOT protect you from your own malpractice. If you personally provide negligent medical, legal, accounting, or other professional services, you remain personally liable for that negligence no matter what kind of entity you formed. The entity is not a shield for your own professional conduct — that liability follows you individually.

This is true whether you're a PC or a PLLC — the professional-liability treatment is essentially the same idea in either form; the difference between the two is mostly about the underlying corporate-law versus LLC-law rules that apply to the entity (how it's governed, taxed by default, and operated), which is a separate question from professional-liability protection. As with any LLC or corporation, the liability shield you do get can also be lost through commingling personal and business funds, ignoring the entity's own formalities, personally guaranteeing a debt, or committing fraud.

Because your own malpractice liability isn't something any entity can shield, professional liability (malpractice) insurance is not optional in practice — it's the real protection. Many states and licensing boards actually require it, or require proof of insurance (or an equivalent financial-responsibility showing) as a condition of practicing or of maintaining your entity's status. Talk to a qualified insurance broker who works with your profession about the right type and amount of coverage; this article can't tell you what coverage you need.

What to do

1. Check your license first. Contact your state's licensing board for your profession and ask what entity type is required or permitted, and whether the board requires its own filing, certificate, or notice.
2. Check your state's business-formation rules. Your Secretary of State's website (or equivalent state business-filing agency) will say whether a PC, PLLC, PA, or another form is required for your profession and what the filing involves. Formation and any ongoing fees vary by state — do not assume a number you saw for another state or another year is still correct; confirm the current fee directly with the agency.
3. Confirm who can own, manage, or hold a license-related title in the entity before you bring on partners, and before you promise an equity stake to anyone who isn't licensed in the field.
4. Line up malpractice insurance appropriate to your profession before you begin practicing, and confirm whether your state or board requires a minimum amount or proof of coverage.
5. Track ongoing compliance. Most states require an annual or periodic report and fee to keep the entity in good standing, and your licensing board may have its own renewal or reporting duty. Exact deadlines and fees vary by state and by board — confirm both with your Secretary of State and your licensing board rather than relying on a general rule.
6. Get professional help for the filing itself. A business attorney or your state's free Small Business Development Center or SCORE mentor can help you get the formation and licensing-board paperwork right the first time, and a CPA can advise on tax treatment once the entity is set up. The U.S. Small Business Administration (sba.gov) is another free starting point.

A few related things this article doesn't cover

Choosing between the tax treatment options available to an entity is a separate decision from whether you need a PC or PLLC in the first place. Keep in mind that a PC or PLLC has no tax classification of its own: by default a single-member PLLC is taxed as a disregarded entity (reported on the owner's Schedule C), a multi-member PLLC is taxed as a partnership (Form 1065), and a professional corporation is taxed as a C corporation unless it elects otherwise — and either form can generally elect S-corporation or C-corporation tax treatment with the IRS. Forming a professional entity changes your liability posture and who may own it, not automatically your taxes, so it's worth a conversation with a CPA and a look at irs.gov before you assume any particular tax result. If your practice ever runs into serious debt trouble, business bankruptcy options are covered elsewhere on this site — the professional-entity liability rules described above don't change how a bankruptcy filing works. And if you're hiring staff for your practice, your general obligations as an employer are covered in our employment-law material, not here.

This article provides general information, not legal, tax, or financial advice. It does not create an attorney-client or accountant-client relationship. Confirm current rules with your state's Secretary of State, your professional licensing board, the IRS (irs.gov), and a qualified attorney or CPA before you form or rely on any entity.