A professional limited liability company (PLLC), sometimes known as a professional service limited liability company (PSLLC), is an LLC organized for the specific purpose of providing some type of professional service. These professional services are typically the fields of:
- law
- accounting
- architecture
- engineering
- dentistry
- veterinary
- medicine
The formation of a PLLC starts off similarly to a normal LLC; but unlike a basic LLC, a PLLC requires more tangential documents, licenses and paraphernalia in addition to the certificate of formation and company agreement. In addition to those extra documents, a PLLC must state that it is a PLLC in its certificate of formation and contain “PLLC,” “P.L.L.C.;” or something else that specifically denotes to the public it is a professional limited liability company.
SPECIFICS AND EXCEPTIONS OF A PROFESSIONAL LIMITED LIABILITY COMPANY
Because a PLLC is a group of lawyers, dentists, accountants and the like, Texas law requires that each organizer has the requisite licenses, permits and/or other forms of professional authorization. Although it is normal and expected for “professionals of the same feather to flock together,” the law carves out a narrow exception for a little bit of intermingling under certain professional umbrellas, so long as the services can be considered “ancillary” to the main practice.
For example, doctors are not required to organize with other doctors who practice in the exact same field. Texas law will not forbid doctors of similar practices related to prescription, surgery, therapy and the like from forming together. Similarly, architects and engineers could be able to group together under the same PLLC. However, that is the extent of the exception. A lawyer cannot form a PLLC with a dentist because these professional services are too different.
For questions regarding the nuances of PLLC formation, it is best to consult an attorney. You do not want to risk attempting to form a PLLC that would not be recognizable under Texas law.
LIABILITY FOR PLLC AND PLLC MEMBERS
It is important to note the relevant state agencies who oversee these professionals still retain their authority over professionals who form a PLLC, individually. However, the professionals of a PLLC, much like a basic LLC, maintain their limited liability status within the company.
In other words, each member of a PLLC is shielded from liability thanks to the PPLC if someone rendered professional service in a negligent manner for the company; but each member is not shielded from their own personal malpractice, professional negligence or the actions of those employees under their supervision.
For example, a doctor who owns part of a PLLC is sued for his personal medical malpractice may be subject to a judgment if successful, but the other doctors belonging to the same PLLC are safe under their limited liability thanks to the PLLC. Additionally, if the PLLC were to be sued as a whole, while the PLLC’s assets would be subject to a judgment, the members of the PLLC and their personal assets would also be shielded from personal liability. Only one’s personal actions of malpractice or professional negligence are still vulnerable.
Even though limited liability exists for members and officers of a PLLC, the individual confidential relationships between professionals and their clients remain unaffected. Unless there is some overwhelming legal order to disclose, the confidential information between you and your client(s) remain confidential.
PROFESSIONAL LIMITED LIABILITY COMPANY MEMBERSHIP
In a traditional LLC, transfer of membership can happen to any inside or outside party with the necessary approval under the company agreement. However, a PLLC operates differently. Only another professional of the same (or similar under certain exceptions) service can receive membership into a PLLC.
Reasonably speaking, one would want a PLLC of doctors to all actually be doctors, right? Not only is this requirement enforced for members of a PLLC, but also the officers of a PLLC, even if the officers take a more passive role within the organization.
This licensure requirement for PLLC membership also applies to resignations and transfers. If a lawyer within a PLLC retires, he must resign from the PLLC because he no longer “provides professional services as required by the PLLC.” He must additionally relinquish his financial interest within the PLLC. This is to maintain strict adherence to ensuring that every PLLC is fully equipped with individuals who are fully licensed to practice within the professional field of their PLLC. It sounds strict, but it promotes and maintains an environment of the highest form of service for those that are served by a PLLC.
WHAT’S NEXT?
Be sure to take the time to ask legal counsel as much as possible in order to better understand what your PLLC can and cannot do for you, should you consider forming one with other professional colleagues. Consider reaching out to our business law attorneys and allow us to walk with you as you form your PLLC.
