How to Form a Professional LLC in Texas

As a licensed professional in Texas, you can structure your business as a Texas professional limited liability company (PLLC). Electing this business ownership structure will protect you from several important types of liability. PLLs can also provide tax advantages compared to other business entity types.

What Is a Texas PLLC?

A Texas PLLC is a limited liability company (LLC) formed specifically by people who provide professional services licensed by the state of Texas. In general, LLCs are businesses registered with the state that consist of one or more people—called "LLC members"—who own the business. Like other LLCs, PLLCs protect their individual members from claims for many (but not all) types of financial debts or personal injuries.

Texas PLLCs are governed by Title 7 of the Texas Business Organizations Code: Tex. Bus. Org. Code §§ 301.001 and following (2024).

What Is a Professional Service?

Under Texas's professional entities law, a professional service is a service provided by:

• architects
• attorneys
• certified public accountants
• dentists
• physicians
• public accountants,
• or veterinarians.

More generally, the law defines a professional service as any service where you're required to obtain a Texas state license before providing the service. (Tex. Bus. Org. Code § 301.003 (2024).)

Anyone who's licensed to perform a professional service can form a Texas PLLC. If you're unsure whether your Texas-licensed profession is considered a professional service for the purpose of forming a PLLC, check with a local business attorney.

What Are the Requirements for a PLLC in Texas?

PLLCs must meet several requirements under Texas law.

PLLC Naming Restrictions

Your PLLC's business name must follow Texas's special naming laws for PLLCs. Specifically, the name of a Texas PLLC must contain the phrase "professional limited liability company" or an abbreviation of that phrase—like "PLLC." (Tex. Bus. Org. Code § 5.059 (2024).)

Also, a PLLC's name can't be contrary to any law or regulation that governs a person who provides a professional service through the PLLC. The laws and regulations include rules of professional ethics. (Tex. Bus. Org. Code § 5.060 (2024).)

Membership and Service Restrictions

Texas's professional entities laws set certain restrictions on who can own and participate in a PLLC and what services a PLLC can provide.

All PLLC members must be licensed. Only persons who are licensed through the state to perform the services the PLLC provides can be LLC members. (Tex. Bus. Org. Code § 301.007 (2024).)

Moreover, if someone gains an ownership interest in a PLLC but isn't properly licensed, they must give up their ownership and financial interest in the PLLC. (Tex. Bus. Org. Code § 301.008 (2024).)

Only licensed individuals can provide professional services through the PLLC. A Texas PLLC can only provide services through its members, managers, employees, or agents, all of whom must be licensed through the state to perform the services the PLLC provides. (Tex. Bus. Org. Code § 301.006 (2024).)

A PLLC can provide only one kind of professional service, with two major exceptions. The default rule is that a PLLC can provide only one kind of professional service. However, Texas law allows two major exceptions:

• A PLLC can provide services ancillary (secondary or supportive) to its singular professional service. (Tex. Bus. Org. Code § 2.004 (2024).)
• PLLCs can provide certain specified combinations of professional services, primarily associated with the health care industry. (Tex. Bus. Org. Code § 301.012 (2024).)

For example, licensed doctors of medicine and licensed podiatrists can form a PLLC and provide both kinds of licensed services.

And, finally, remember that Texas PLLCs and their members must follow the regulations of the relevant state professional licensing authorities. Your profession might have additional requirements.

How Do I Form a Texas PLLC?

Forming a PLLC in Texas is very similar to forming a regular LLC in Texas.

1. Choose a Name for Your Texas PLLC

As discussed earlier, your PLLC needs to include the phrase "professional limited liability company" or an abbreviation of that phrase. In addition, your PLLC must follow the same naming requirements as a Texas LLC.

Specifically, the name of your PLLC must be distinguishable from the names of other business entities already on file with the Texas Secretary of State (SOS). (Tex. Bus. Org. Code § 5.053 (2024).)

You can see which names have already been registered with the state by searching:

• the taxable entity database on the Texas Comptroller of Public Accounts (CPA) website, and
• the business and trademark databases via SOSDirect.

Before registering your PLLC, you can reserve a business name for 120 days with the SOS. You can reserve the name online through SOSDirect or by mailing Form 501 to the SOS. (Tex. Bus. Org. Code §§ 5.101 and following (2024).)

As of 2024, the fee to reserve a name is $40.

2. File a Certificate of Formation With the SOS

To form your Texas PLLC you'll need to:

• have the state license for each professional who will be a member of the company
• check with the state licensing board for your profession to see if its prior approval is required, (and, if so, obtain the necessary documentation showing that approval), and
• file a certificate of formation (called "articles of organization" in other jurisdictions) with the SOS.

You can download a blank certificate of organization form (Form 206) from the SOS website. The form—which includes helpful instructions—is specifically for PLLCs (as opposed to regular LLCs). You can also file online at the Secretary of State's SOSDirect website. As of 2024, the filing fee for a certificate of formation for a PLLC is $300.

Your certificate of formation must include the following information:

• the name of your PLLC
• the type of entity being formed (a PLLC)
• the purpose the PLLC is being formed
• the duration (if the PLLC's existence isn't perpetual)
• the name and street address of the PLLC's registered agent in Texas
• the mailing address of the PLLC
• the name and address of each organizer
• a statement of whether the PLLC will be governed by its members or managers, and
• the names and addresses of each governing member or manager.

(Tex. Bus. Org. Code §§ 3.005 and 3.010 (2024).)

3. Create an Operating Agreement for Your PLLC

One of the first tasks after officially registering your PLLC should be to create an operating agreement. (Unlike most other states, Texas law refers to this document as a "company agreement.")

A PLLC's operating agreement governs:

• the relationships among the company and its members, managers, officers, and assignees of membership interests, and
• the internal affairs of the company.

(Tex. Bus. Org. Code § 101.052 (2024).)

A PLLC Will Not Protect You From All Liability

Forming your professional service business as a PLLC will protect you personally from:

• creditors seeking to collect unpaid debts owed solely by the PLLC
• liability for the malpractice of other PLLC members (technically known as "vicarious liability"), and
• people who are personally injured in connection with your PLLC because of things having nothing to do with your own professional malpractice or torts (for example, if someone slips and falls in your PLLC's offices).

Regarding protection from liability for the malpractice of fellow PLLC members, be aware that, for some professions in some states, PLLC members are required to have a minimum amount of malpractice insurance before they're eligible for such protection. Therefore, it's always a good idea to double-check your state's PLLC laws, as well as your state's rules for your particular profession, regarding minimum insurance requirements.

PLLCs give owners limited liability, meaning you'll still be liable in some instances, such as if:

• you personally guarantee repayment of a business loan
• you engage in professional malpractice (such as completely botching a patient's treatment or egregiously mishandling a client's case), or
• you intentionally or negligently commit a tort (such as assaulting someone).

Because you're not protected from your own malpractice, you should make sure you have professional liability insurance—and, if applicable, that your coverage meets any minimum insurance requirements.

PLLC vs. Professional Corporation

Every state has different rules for what kind of business entity professionals can form. Some states require professionals to form a special entity, while other states give professionals the option. The type of professional entity available also depends on your state. Some states recognize PLLCs and professional corporations (PCs). Other states recognize only one or neither.

It's important to note that a PLLC isn't the same as a PC. Here are some key differences:

• a PLLC, like other LLCs, is comprised of members, but a PC, like other corporations, is comprised of shareholders
• following from the previous point, PLLC ownership consists of so-called membership interests in the business, but PC ownership is based on shares of stock; and
• a PLLC, like other LLCs, is a so-called "pass-through tax entity", meaning that in most states (though not Texas) only the individual members have income tax obligations (and not the PLLC), while a PC, like other corporations, usually has its own, separate income tax obligations in addition to the shareholders' tax obligations.

The tax differences between PLLCs and PCs can become complicated. Unlike most other states, Texas imposes a franchise tax on LLCs that meet a certain revenue threshold. Moreover, a PC can elect a special tax status (S corporation status) that effectively makes it a pass-through tax entity like a PLLC. And, meanwhile, PCs that don't elect special status can be subject to double taxation—in other words, both the PC itself and its shareholders have to pay taxes on business income.

Texas allows professionals to form both PLLCs and PCs, and both PLLCs and PCs provide liability protection for, respectively, their members or shareholders. Because the protection is essentially the same for both PLLCs and PCs, but PLLCs are simpler to create and operate, many professionals prefer the PLLC structure.

Additional Information About Forming a Texas PLLC

Before forming a PLLC, make sure you understand the advantages and disadvantages as well as the requirements and restrictions of the business entity structure. Consider speaking with a local business attorney about your options.

The SOS has a helpful formation of Texas entities FAQ webpage that you can refer to. Within the FAQ webpage, you can find a link to a guide for determining permissible entity types. This guide includes a chart of professions and the types of entities that these professions can and can't form. The FAQ webpage also breaks down the specific requirements for professional entities, including ownership and governing person requirements.

You can find more information about forming, running, and dissolving your PLLC in the LLC section of our website.