LLC vs PLLC: Know the Difference and Choose the Right Business Structure

One of the most significant concerns you will encounter at the onset of running a business is deciding between an LLC and PLLC, and it’s a choice that matters. The structure of your business may affect the taxation system, the protection of your assets, as well as the scope of the business activities.

In this guide, we will assist you in understanding the difference between LLC vs PLLC and when each option is appropriate, along with preliminary considerations regarding professional entities, and help you choose the right business structure.

What Is a Limited Liability Company (LLC)?

An LLC is a type of business structure that incorporates the key advantages of both corporations and sole proprietorships. This structure seeks to be adaptable, less cumbersome to administer, and, most importantly, offer limited liability protection. This indicates that your assets, such as real estate, vehicles, and financial accounts, are relatively safeguarded when a business encounters legal or financial hardships.

In other words, your business operates independently of you as an individual. This is very crucial in terms of self-defense from risks.

Common Industries That Use LLCs

• E-commerce businesses
• Marketing and design agencies
• Real estate investors
• IT consultants and software developers
• Health and wellness coaches

If you’re not in a licensed profession and want to keep your finances separate from your business, an LLC might be your best bet.

What Is a Professional Limited Liability Company (PLLC)?

A Professional Limited Liability Company (PLLC) is a distinct type of business entity tailored for use by licensed professionals. It affords many of the same features as a regular LLC, such as limited liability protection and pass-through taxation, but is customized for individuals in regulated industries.

If you are a licensed professional in healthcare, legal services, financial services, or other similar professions, you may be required to establish a PLLC instead of a standard LLC. This is one method that ensures that professionals undergo particular vetting processes when starting an organization.

Who Needs to Use a PLLC?

• Chiropractors               • CPAs                              • Dentists
• Engineers                     • Psychologists                  • Physicians
• Real estate agents        • Social workers                  • Veterinarians
• Attorneys                      • Accountants                   • Architects

LLC vs PLLC: Key Differences Explained

Let’s differentiate LLC vs PLLC:

LLC vs PLLC: Key Similarities at a Glance

While LLCs and PLLCs serve different purposes, they have more in common than you might think. Let’s take a quick look :

Both Provide Limited Liability Protection

Owners, referred to as members in the business structure of LLCs and PLLCs, enjoy protection from personal liability for almost all of the business’s debts and legal claims. This indicates that, usually, personal property such as houses, cars, etc, is secured if the business runs into financial problems.

Pass-Through Taxation Policies

Taxation for both LLCs and PLLCs works using a pass-through method, which means that the company does not pay any federal income tax. Rather, profit and loss allocations are passed on to the members’ tax return, thus avoiding the double taxation policy.

Flexible Management Structure

LLCs and PLLCs give the owners the freedom to decide who manages the business, whether it is the members themselves or hired managers. This flexibility fits different sizes of businesses and professional teams.

Profit Sharing Flexibility

Members of both LLCs and PLLCs have the discretion to determine how to allocate the profits between themselves. This is an advantage for businesses with more than one owner, and who require specific arrangements in profit-sharing.

Ongoing Compliance Requirements

Both of the business types are subject to the same compliance obligations, such as submitting yearly filings, tax declarations, and license or permit renewals. These compliance obligations enhance the overall standing of the business within the state.

LLC vs PLLC: Tax Implications

How LLCs and PLLCs Are Taxed by Default

Single-Member (Owned by One Person)

• The IRS treats your business like a sole proprietorship
• All business profits/losses go directly on your tax return (Schedule C)
• No separate business tax return needed
• You pay income taxes and self-employment taxes on profits

Multi-Member (Owned by Two or More People):

• The IRS treats your business like a partnership
• The business files an informational return (Form 1065)
• Each owner reports their share of profits/losses on their return (Schedule K-1)
• No separate business income tax – taxes flow through to members

Remember: While the tax treatment is similar, PLLCs still have the professional licensing requirements we discussed earlier. The main tax difference comes from whether you’re single-member or multi-member, not from the LLC/PLLC distinction.

Multi-State Tax Consideration

Your business may pay tax in multiple states if it operates in several locations. This means that you may have to file income tax returns for multiple states depending on the locations of your business activities.
Also, if you render services or sell goods, then you might have to collect and remit sales tax for all the states where you have clients.
The record keeping is more intricate when many states are involved, and each business must pay attention to the policies and reporting requirements of each state.

Complete List of States That Allow PLLCs (2025)

Northeast                                    Midwest

✓ Massachusetts                         ✓ Iowa
✓ Maine                                      ✓ Michigan
✓ New Hampshire                       ✓ Minnesota
✓ New York                                 ✓ North Dakota
✓ Pennsylvania                            ✓ South Dakota
✓ Vermont

South                                           West

✓ Arkansas                                  ✓ Arizona
✓ Kentucky                                 ✓ Colorado
✓ Mississippi                               ✓ Idaho
✓ North Carolina                          ✓ Montana
✓ Tennessee                                ✓ Nevada
✓ Texas                                       ✓ Oklahoma
✓ Virginia                                     ✓ Utah
✓ West Virginia                             ✓ Washington
✓ Florida

Alternatives for States That Do Not Allow PLLCs 

As of 2025, a few states do not recognize PLLCs and instead require professionals to form alternative business structures, such as Professional Corporations (PCs) or traditional LLCs with additional licensing compliance and limitations.

Multi-State Practice Considerations: 

When licensed in several states, the business structure must adhere to each state’s laws. Normally, you will establish your PLLC (or its equivalent) in your main state and later register as a foreign entity in other states that allow it. Some have prerequisites for separate entities like PCs or LLPs.

A single PLLC with foreign registration works where allowed, but complex cases may need separate entities. Always verify rules with each state’s business and licensing boards.

LLC vs PLLC: Pros and Cons

LLCs vs PLLCs, both have their upsides and downsides. It all depends on your business needs. Let’s quickly compare the key pros and cons so you get the big picture.

PLLC (Professional Limited Liability Company)

✅ Pros:

• Required for licensed professionals in many states.
  
• Personal asset protection like an LLC, but tailored for regulated fields.
  
• Maintains compliance with state licensing boards.
  
• Credibility with clients, insurers, and institutions.

❌ Cons:

• Only for licensed professionals—non-licensed co-owners may not be allowed. 
• Stricter rules (e.g., all owners must hold active licenses in some states).
  
• Higher setup costs in some cases (extra filings, license verifications).

Regular LLC (Limited Liability Company)

✅ Pros:

• Open to any business (freelancers, consultants, online businesses, etc.).
  
• Simpler formation—no license requirements.
  
• Flexible ownership -no restrictions on who can be a member.
  
• Same liability protection for non-professional businesses.

❌ Cons:

• Not allowed for licensed professionals in many states; must use a PLLC instead.
• A less formal structure may not satisfy clients in regulated industries.

Wrapping up 

Choosing between PLLC Vs  LLC comes down to your profession, goals, and state rules. Mostly, professionals need a PLLC for compliance and liability, while other businesses prefer the flexibility of an LLC. Both types protect your personal assets.

Still not sure which structure is right for you? EasyFiling can help! Many business owners start with an LLC and switch to a PLLC later if needed.

The key is to pick the right structure now to avoid legal headaches down the road.
Book a free consultation with experts! 

Frequently Asked Questions: LLC vs PLLC

Q: What’s the main difference between LLC vs PLLC?
A: An LLC suits general businesses, owned by anyone, while a PLLC is for licensed pros like doctors and lawyers needing state board approval. Deciding which structure is right depends on the nature of your work and licensing requirements.

Q: How are profits distributed in LLCs vs. PLLCs?
A: Both LLCs and PLLCs allow flexible profit-sharing beyond just ownership percentage. Agreeing on how work contributes to the profits is a common strategy, leading to customized payout arrangements.

Q: Can I convert an LLC to a PLLC later?
A: Yes, an LLC can convert to a PLLC, demanding new filings and proving all owners hold licenses. Expect potential state fees and professional board oversight for professional businesses.

Q: Can a PLLC operate in multiple states?
A: Multi-state PLLC operations involve registering as a foreign PLLC and demonstrating valid licenses in each state. Legal guidance is recommended for seamless compliance and multi-state operations.

Q: Which is better for tax flexibility: LLC vs PLLC?
A: Both offer pass-through taxation with profits taxed on personal returns, making neither inherently superior from a tax perspective. Consulting a tax pro is essential to optimize within your state’s rules.

Q: Can PLLCs choose S Corp or C Corp taxation?
A: Yes, PLLCs can elect S Corp or C Corp tax status if they meet IRS criteria, potentially providing tax advantages. Consider consulting with financial experts to figure out what strategy fits your business goals.