How to Form a Texas PLLC (Professional Limited Liability Company)
Establishing a Professional Limited Liability Company (PLLC) in Texas can be a critical step for individuals in licensed professions such as architects, attorneys, CPAs, dentists, physicians, and veterinarians. A PLLC in Texas is designed to provide professional services that require a state license, offering limited liability protections similar to an LLC but with restrictions fitting to professional entities.
Step 1: Determine Eligibility
Before starting the process, ensure your profession qualifies for a PLLC under Texas law. Typically, professions requiring a state license like law, accounting, dentistry, or architecture are eligible. The Texas Secretary of State has released a helpful list that can help you determine whether a PLLC or a different entity type is right for your practice. You can find that list here: https://www.sos.state.tx.us/corp/forms/entitychart.pdf.
Step 2: Name Your PLLC
When preparing your certificate of formation to apply for your PLLC, make sure to include the organizational designation “PLLC” or “Professional Limited Liability Company” at the end of the company name. It’s important to note that if you apply to use a business name that an existing Texas business entity is already using, your application will be denied. For this reason, it’s important to run a name clearance search through the Texas Secretary of State’s SOSDirect portal prior to filing.
Step 3: Appoint a Registered Agent
Texas mandates every PLLC to designate a registered agent—an individual or business entity authorized to accept legal documents on behalf of the PLLC.
Step 4: File the Certificate of Formation
File the Certificate of Formation (Form 205) with the Texas Secretary of State. This document contains key information about your PLLC such as its name, registered agent's details, management structure, and names of initial members.
Step 5: Develop a Company Agreement
While Texas does not legally require a company agreement for PLLCs, having one is strongly advised. This agreement stipulates the operation of your PLLC and sets clear roles and responsibilities for members. If your business is ever caught up in a lawsuit, having a strong operating agreement can help prevent the opposing party from accessing your personal assets.
Step 6: Secure an Employer Identification Number (EIN)
Obtain an EIN from the Internal Revenue Service (IRS) for taxation purposes. The EIN application is available online on the IRS website here: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
Step 7: Comply with Licensing Requirements
A PLLC in Texas must adhere to professional licensing or regulatory requirements. This includes maintaining an active professional license for the service the PLLC provides, if such a license is required by your specific area of practice.
Bear in mind, a PLLC can be owned by a single licensed professional or multiple licensed professionals. It cannot be governed by an unlicensed professional. If your business is currently an LLC but should be operating as a PLLC, it can be converted to a PLLC through appropriate filings with the Texas Secretary of State and potential amendments to the company agreement.
While the PLLC structure doesn't offer additional legal benefits compared to an LLC, it becomes a necessity when mandated by professional licensing requirements. Consequently, if your business does not require a PLLC, forming an LLC is often the preferred choice due to its less restrictive ownership requirements. As always, forming a PLLC is just the first step—operational needs, regulatory compliance, and adaptability are essential for longevity and success.
