Professional LLC

What is a professional LLC?

A professional LLC is a limited liability company formed by licensed professionals. Like professional corporations, professional LLCs are required in many states for professional practices and impose ownership restrictions to licensed individuals. They combine the liability protection of LLCs with the regulatory oversight appropriate for licensed professions. Tax treatment can be flexible, defaulting to pass-through.

Professional LLC vs professional corporation

Both entity types serve licensed professionals. LLCs offer more flexibility in management structure and profit allocation. Corporations have more established case law and governance patterns. LLCs default to pass-through taxation while corporations are taxed as C corps unless they elect S status. Some states favor one form over the other for certain professions. Review your state's specific rules and preferences.

Operating a professional LLC

Draft an operating agreement covering ownership, management, profit sharing, and exit provisions. Obtain professional liability insurance since the LLC does not shield you from malpractice claims. Comply with continuing licensing requirements in your profession. File annual reports as required by your state. Maintain separate finances from personal accounts. The operating agreement is especially important for multi-member practices.