Introduction

Limited Liability Companies (“LLCs”) are among the most popular business types for individuals looking to start their own business. However, Professional Limited Liability Companies (“PLLC”) are a type of LLC available to certain licensed professionals, such as dentists, lawyers, doctors, etc., that offer the same limited liability but have some additional aspects that distinguish PLLCs from LLCs.

This article will briefly overview what LLCs and PLLCs are and their differences. Whether you are a licensed professional looking to start your practice or someone looking to learn the difference between an LLC and a PLLC, this guide will provide a baseline understanding of how both business structures work generally and in Virginia.

What is A Limited Liability Company (LLC)?

An LLC is a business structure that is organized under state statutes. Therefore, each state may regulate LLCs in slightly different ways, so it is essential to always check with your state if you plan to start an LLC. LLCs have grown in popularity in recent years, with individuals creating LLCs for multiple purposes; from dog-walking businesses to noteworthy businesses such as Blockbuster L.L.C. and Google LLC.

As an LLC owner, you hold the title of a “member.” This title is not limited to individuals; it can also be held by corporations, other LLCs, or foreign entities. The beauty of an LLC is its flexibility; there’s no maximum limit on the number of members, and most states even allow “single-member” LLCs (LLCs with one owner).

While many businesses can operate as LLCs, there are exceptions such as banks and insurance companies. Understanding your state’s requirements and federal tax regulations is crucial before creating an LLC. This knowledge will ensure you operate within the law and avoid potential issues. Additionally, there are special rules for foreign LLCs that you should be aware of which an attorney can help with.

Lastly, depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a: (1) corporation, (2) partnership, or (3) a disregarded entity (as part of the LLC’s owner’s tax return). A domestic LLC with two or more members is classified as a partnership for federal income tax purposes unless it files Form 8832 and elects to be treated as a corporation. An LLC with one member is treated as a disregarded entity for income tax purposes unless it files Form 8832 and elects to be treated as a corporation. Further, an LLC with one member will be considered a separate entity for employment tax and certain excise taxes.[1]

What is a Professional Limited Liability Company (PLLC)?

A PLLC is also a business structure that is organized under state statutes. Each state may regulate PLLCs in slightly different ways, so it is essential to always check with your state if you plan to start a PLLC. Further, the state licensing board must verify each owner’s professional license and approve the articles of organization.

PLLCs are business structures that offer personal asset protection for business owners in licensed occupations. They operate largely similarly to LLCs in their management structure and taxing scheme.

In Virginia, PLLCs may be:

1. Architects
2. Attorneys at Law
3. Audiologists
4. Certified Interior Designers
5. Certified Public Accountants
6. Clinical Nurse Specialists
7. Dentists
8. Insurance Consultants
9. Land Surveyors
10. Landscape Architects
11. Nurse Practitioners
12. Optometrists
13. Pharmacists
14. Physical Therapists and Physical Therapist Assistants
15. Practitioners of the Behavioral Science Profession
16. Practitioners of the Healing Arts
17. Professional Engineers
18. Public Accountants
19. Speech Pathologists
20. Surgeons
21. Veterinarians[2]

Virginia PLLCs are prohibited from engaging in “any business other than the rendering of professional services.”[3] Thus, a PLLC set up to provide dental services cannot change its business model to selling coffee.

Further, the states that allow for PLLCs are:

1. Arkansas
2. Arizona
3. Colorado
4. District of Columbia
5. Florida
6. Idaho
7. Iowa
8. Kentucky
9. Maine
10. Massachusetts
11. Michigan
12. Minnesota
13. Mississippi
14. Montana
15. Nevada
16. New Hampshire
17. New York
18. North Carolina
19. North Dakota
20. Oklahoma
21. Pennsylvania
22. South Dakota
23. Tennessee
24. Texas
25. Utah
26. Vermont
27. Virginia
28. Washington
29. West Virginia[4]

Lastly, one of the most critical aspects distinguishing a PLLC from an LLC is that a member of a PLLC can be held liable for any claims brought against them for the member’s malpractice. For example, if a doctor commits malpractice, the patient can sue the doctor and attempt to claim the doctor’s personal assets. Thus, PLLC members must carry professional liability insurance (malpractice insurance).

What are the Differences between an LLC and a PLLC?

LLCs and PLLCs both allow business owners to keep their personal assets separate from their company’s assets. However, the main difference between LLCs and PLLCs is that PLLCs are limited to specific professions and are somewhat limited in terms of protection from individual member liability.

PLLCs are only for professionals recognized in a state through licensing. In Virginia, any business type not enumerated in the Virginia Code cannot form a PLLC. PLLCs also typically require more documentation than LLCs for filing because people generally must provide proof of licensing for each member. In Virginia, members must be duly licensed or otherwise legally authorized to render the same professional services as those professionals enumerated in the Code section.

To be sure, both LLCs and PLLCs provide limited liability protection. However, unlike LLCs, PLLCs will not protect you from individual claims of malpractice or wrongdoing in performance of your profession.  One PLLC member’s wrongdoing does not create personal liability for the other members; instead, individual members within the PLLC are each responsible for their own adherence to the standards governing their given profession.

Conclusion

In conclusion, it is essential to talk to a business attorney to determine whether an LLC or a PLLC is the appropriate entity for your business. By carefully considering the purposes of your business and the proper structure (i.e. LLC or PLLC), you can make a well-informed decision that will set your business up for success.

This blog post is intended to overview LLCs and PLLCs. Individuals who have questions about what type of structure may be best for their business, questions about business law, or seek experienced outside counsel for their business should contact Briglia Hundley, P.C., at 703-883-0880.

The information in this blog post may not reflect the current law in your jurisdiction. No information in this blog post should be interpreted as legal advice, and the blog post is not intended to substitute for legal counsel.

About The Author

Jacob DeRue is an associate attorney supporting BrigliaHundley, P.C.’s business litigation and corporate law practice groups. He joined the firm the summer after his first year of law school as a summer associate, then transitioned to a law clerk until passing the Virginia Bar after graduation and becoming an attorney. Mr. DeRue primarily practices in the firm’s corporate law practice group, commercial and business litigation practice group, and civil litigation practice group.

Briglia Hundley represent individuals and corporations throughout the Mid-Atlantic region, including Alexandria, Annandale, Arlington County, Ashburn, Burke, Centreville, Chantilly, Clifton, District of Columbia, Dulles, Fairfax County, Falls Church, Great Falls, Herndon, Leesburg, Loudoun County, Manassas, Manassas Park, McLean, Middleburg, Montgomery County, Oakton, Prince George’s County, Prince William County, Reston, South Riding, Springfield, Sterling, Tysons Corner, Vienna, Winchester and Woodbridge.

Contact the Author

Jacob C. DeRue

Briglia Hundley, P.C.

Tysons Corner Office

1921 Gallows Road, Suite 900

Tysons Corner, Virginia 22182

Telephone: 703.883.0880

Fax: 703.833.0899

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[1] Limited Liability Company (LLC), IRS (Jan. 25, 2023), https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc.

[2] Va. Code Ann. § 13.1-1101.2(A).

[3] Va. Code Ann. § 13.1-1110.

[4] Lisa Crocco, PLLC vs. LLC: Which One is Right for Your Business?, bizee, https://bizee.com/blog/post/pllc-vs-llc; Priyanka Prakash, PLLC: The Complete Guide to a Professional Limited Liability Company, Nerdwallet (Oct. 28, 2020), https://www.nerdwallet.com/article/small-business/professional-limited-liability-company.