Most people have probably heard of an LLC (Limited Liability Company), but the term “PLLC” may be new to many. A PLLC is a “Professional Limited Liability Company” and, like traditional LLCs, it is a type of legal business entity formed officially through the Illinois Secretary of State.
Unlike traditional LLCs, PLLCs are required for businesses that perform certain professionally-licensed services. Any LLC that provides professional services requiring the individuals engaged in that profession to be licensed by the Illinois Department of Financial and Professional Regulation (“IDFPR”) must be registered as a PLLC. This includes mental health therapists, physical therapists, occupational therapists, architects, engineers, cosmetologists, home inspectors, salon owners, and many others.
The Illinois Professional Limited Liability Company Act (805 ILCS 185) governs PLLCs in Illinois. A 2018 amendment to the Act prohibits those working in a profession regulated by the IDFPR from providing services through an LLC. The Act requires those entities to instead be PLLCs, and those PLLCs must register with the IDFPR and obtain a Certificate of Formation. This allows the IDFPR additional oversight over entities that exist to perform licensed services.
Failure to obtain a Certificate of Formation from the IDFPR may lead to late fees and, in rare cases, disciplinary proceedings.
PLLCs v. LLCs
PLLCs provide the same liability protection as LLCs, and both entities can be manager-managed (meaning, as the term implies, that the manager manages the operations of the company) or member-managed (meaning only members can manage the company). Unlike LLCs, PLLCs must have a specific purpose clause in the formation document and in the Operating Agreement describing the professional services to be rendered.
How Do I Form a PLLC?
Like LLCs, PLLCs are formed by filing Articles of Organization with the Secretary of State. However, unlike LLCs, PLLC Articles of Organization cannot be filed online. The Articles of Organization must also contain specific language in the purpose clause regarding the services of the PLLC. Once the Articles are filed and the PLLC is officially formed, the PLLC must also register with the IDFPR.
What If I Already Have an LLC?
If you are in a regulated profession and you already have an LLC, you should convert your entity to a PLLC. A conversion requires filing a form (Articles of Amendment) with the Secretary of State and paying a filing fee. You will also need to update your Operating Agreement. Your bank account and tax ID will remain the same.
If you are a licensed professional and want to start your own business, or if you need to convert your existing LLC to a PLLC, the business attorneys at The Prinz Law Firm are ready to help. Contact us today.