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What is the Difference Between a PLLC and an LLC?

Posted by Jonathan Krems | Sep 04, 2021 | 0 Comments

A while back in the Freedom Friday blog, I wrote a blog article called, “Five Steps to Forming an LLC in Oklahoma.”  Recently I was asked by a prospective client about forming a PLLC in Oklahoma.  What is a PLLC and how is it different than an LLC?

The main difference you may notice is that the abbreviation begins with the letter “P” which stands for the term “professional.”  A PLLC is a professional limited liability company.  It is very similar to a regular limited liability company, but there are some key differences.  Here are three (3) key differences between a PLLC and an LLC:

1.  Who Can Form a PLLC

A professional limited liability company (PLLC) can only be formed by licensed professionals of a given profession in the State of Oklahoma.  While it is not required to form a PLLC, all the “members” (owners) of the PLLC must be of the same profession.  For instance, all the “members” must be lawyers OR doctors OR architects OR some other profession.  You cannot form a PLLC with two lawyers plus one doctor, or some other combination.  This requirement also limits the kind of business or services performed by the PLLC.  For instance, a PLLC formed by a group of lawyers can only provide legal services, and a PLLC formed by a group of accountants can only provide accounting services.

2.  Oklahoma Requirements to Form a PLLC

In Oklahoma, it is not required for one or a group of professionals to form a PLLC instead of an LLC.  In addition to the basic requirements of forming a regular limited liability company, the Oklahoma Secretary of State requires some additional filing requirements.  The main additional requirement is that you must provide to the Oklahoma Secretary of State a certificate by the regulating board of the profession that each person who will be an owner or manager of the professional entity, and who are to engage in the practice of the profession is duly licensed according to the provisions of Oklahoma's licensing laws for the profession to practice such a profession.  “Regulating board” means the board which is charged with the licensing and regulation of the practice of the profession which the professional entity is organized to render.  For example, if a group of lawyers wish to form a PLLC for their law firm, then they will need certificates of good standing from the Oklahoma Bar Association.

The Oklahoma Secretary of State also has a distinct Articles of Organization form which must be signed in order to form a PLLC.  The form requires the organizers of a PLLC to state the profession to be practiced through the professional entity because Oklahoma law requires that a professional entity be formed only for the purpose of providing a specific type of professional service to the exclusion of other services.

3.  Liability Protection

Perhaps the biggest difference between a PLLC and an LLC is the scope of limited liability protection.  A PLLC will not protect members from malpractice claims related to their own professional actions.  However, PLLC members will have protection from malpractice claims alleged against other members of the PLLC.  For instance, if you're a doctor in a medical PLLC and a patient sues another doctor in your practice, then your personal finances will be protected.  Your liability will be limited to the percentage that you own of the finances of the business.  Nevertheless, PLLC members should always carry malpractice insurance coverage to cover claims made against them personally.

The other issue of liability protection with PLLCs (and sometimes LLCs and other business entities) is the possibility of personal guarantees.  Due to the increased risk associated with PLLCs, some lenders may require a personal guaranty before approving a loan made to the PLLC.  A member of the PLLC who gives a personal guaranty will become personally liable for the debt incurred by the loan or obligation.  This may also be a requirement by some landlords in the event the PLLC wishes to enter a commercial lease agreement.  Some landlords will require a personal guaranty for the lease in case of a default.  Again, the PLLC member who gives a personal guaranty becomes personally liable for the lease obligation if there is a default.

For more information regarding how to form a regular LLC, please check out my blog article, “Five Steps to Forming an LLC in Oklahoma” which can be accessed here: http://www.libertylegalok.com/five-steps-to-forming-an-llc-in-oklahoma.html

If you are interested in starting a small business anywhere in Oklahoma, or if you have a small business and you are looking to grow, please feel free to contact me at [email protected].  For more information about Liberty Legal Solutions, LLC, please visit our website http://www.libertylegalok.com.

About the Author

Jonathan Krems

Jonathan is the Founder and Managing Attorney of Liberty Legal Solutions, LLC, a law firm dedicated to building, protecting, and defending the business and personal interests of our clients in Oklahoma.  Jonathan's primary practice areas are business law, contracts and agreements, business liti...

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