Entity Formation Guide
PLLC vs PA for Texas Physicians
Texas law is unambiguous — physicians cannot form a Professional Corporation (PC). Your only two options are a PLLC or PA. Here's how to choose.
Side-by-Side Comparison
| Factor | PLLC | PA |
|---|---|---|
| Formation Filing | Certificate of Formation (Form 206) | Articles of Association (Form 204) |
| Governing Document | Company Agreement (Operating Agreement) | Bylaws |
| Owners Called | Members | Shareholders / Members |
| Managers Called | Managers or Member-Managed | Officers & Directors (President required) |
| Annual Requirements | Texas Franchise Tax Report | Texas Franchise Tax Report |
| Taxation (Default) | Pass-through (single-member = disregarded; multi = partnership) | Pass-through (similar to partnership) |
| S-Corp Election | Yes — File IRS Form 2553 | Yes — File IRS Form 2553 |
| Liability Protection | Members shielded from entity debts (not personal malpractice) | Shareholders shielded similarly |
| Operational Flexibility | Very high — customizable via Operating Agreement | Moderate — statutory governance structure required |
| Ownership Transfer | Governed by Operating Agreement (can restrict or allow) | Share transfer governed by Bylaws |
| Number of Owners | One or more licensed members | One or more licensed shareholders |
| Best For | Solo practitioners, small groups, maximum flexibility | Larger multi-physician groups, traditional corporate structure |
PLLC
Professional Limited Liability Company
Advantages
- Maximum operational flexibility via Operating Agreement
- Simpler formation and ongoing compliance
- No required officer positions (President, Secretary, etc.)
- Easier to add/remove members
- Default pass-through taxation (no double taxation)
- Most popular choice for Texas physicians
Considerations
- Less familiar corporate structure for some physicians
- Operating Agreement drafting is critical — don't use templates
- Some hospitals/payers may be less familiar with PLLC structure
PA
Professional Association
Advantages
- Traditional corporate governance (familiar board/officer structure)
- Well-understood by hospitals and insurance payers
- Share-based ownership simplifies multi-owner equity splits
- Established body of case law and precedent
Considerations
- More rigid governance requirements (President, Secretary required)
- Annual meeting and minutes requirements
- Less flexibility in profit/loss allocation
- More complex to modify ownership structure
The Bottom Line
For most Texas physicians, a PLLC is the better choice. It offers greater flexibility, simpler governance, and is the most common entity type used by medical practices in Texas. PAs make sense for larger, multi-physician groups that prefer a traditional corporate governance structure.
The right answer depends on your specific situation — number of owners, growth plans, tax goals, and personal preferences. As a dually licensed Attorney and CPA, Darryl V. Pratt can analyze your circumstances and recommend the optimal structure.
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