Texas law requires licensed professionals—including physicians, dentists, veterinarians, CPAs, and attorneys—to use a Professional Limited Liability Company (PLLC) or Professional Corporation (PC) rather than a standard LLC. Understanding these requirements is essential for compliance and protection.
Why PLLCs for Professionals?
- Texas regulations require licensed professionals to practice through a professional entity
- PLLCs can only be owned by licensed professionals in the same or similar profession
- The 'professional' designation ensures that owners maintain proper licensing
- Standard LLCs are not permitted for licensed professional practices
Liability Protection—What It Does and Doesn't Cover
- DOES protect against business debts, contracts, and general premises liability
- DOES NOT protect against your own professional malpractice
- DOES protect against malpractice claims against other professionals in the practice
- Professional liability insurance remains essential for malpractice coverage
Formation Requirements
- File Certificate of Formation designating the entity as a PLLC
- Include the professional services the PLLC will provide
- All owners must be licensed to provide the services offered
- Some professions require board approval before formation
- File a Certificate of Formation fee of $300
Ongoing Compliance
- Maintain current professional licenses for all members
- File annual Public Information Report with the Texas Comptroller
- Pay franchise tax if above the no-tax-due threshold
- Update state records if ownership or services change
- Maintain required professional liability insurance
Tax Planning Considerations
Medical practices often benefit from S-Corp tax election to reduce self-employment taxes. Work with both an attorney and CPA to structure your PLLC for optimal liability protection and tax efficiency.