What Is a PLLC?


Quick Answer

A PLLC is a professional limited liability company. Many states disallow the formation of a limited liability company if the company requires licensed professionals; instead, professionals must form a PLLC to gain the same benefits. Examples of professions faced with this situation include lawyers, architects and physicians.

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Full Answer

The PLLC enjoys many of the same benefits of an LLC, especially when it comes to the limited liability of the company. Because the PLLC has limited liability, the owners cannot be sued for losses incurred. Owners can, however, be sued for malpractice, so a PLLC open to such litigation must obtain malpractice insurance to cover such an event. One disadvantage to a PLLC is that most banks do not loan funds to the PLLC without a personal guarantor. This guarantor is then responsible for the loan should the PLLC be unable to pay.

While the requirements for the formation of a PLLC differs from state to state, there are a few general requirements for creating one. The articles of organization for the company must be approved by the state licensing board. After approval, the paperwork related to the PLLC must be filed with the state's LLC filing board or the Secretary of State, depending on state regulations. Some states also limit formation of a PLLC by requiring that a licensed professional has to actually form the PLLC, or by demanding that only licensed professionals have ownership stakes.

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