How to Form a PLLC in Washington D.C.

As a licensed professional in the District of Columbia you can structure your business as a District of Columbia professional limited liability company (PLLC). This will give you protection from several important types of liability. It also may provide certain tax advantages compared to other ways of structuring your business.

What is a District of Columbia PLLC?

A District of Columbia PLLC is a limited liability company (LLC) formed specifically by people who will provide District of Columbia licensed professional services. LLCs in general 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 people with claims for many (but not all) types of financial debts or personal injuries.

What is a Professional Service in the District of Columbia?

The District of Columbia's LLC Act does not mention professional services. However, there is no prohibition on LLCs providing professional services (i.e., PLLCs). In addition, rules published by the local regulating boards for various professions (such as the DC Bar for attorneys) make clear that members of those professions can form PLLCs. Various documents published by the District of Columbia suggest that, at a minimum, a professional service is a service provided by:

• certified public accountants
• attorneys
• architects
• practitioners of the healing arts
• dentists
• optometrists
• podiatrists, or
• professional engineers.

Anyone who is licensed to practice one of these professions in the District of Columbia should be able to form a District of Columbia PLLC. Members of other licensed professions also may be able to form PLLCs in the District of Columbia. If you have any question about whether members of your profession can form a PLLC, you should check the rules regulating your profession and consult with a local business attorney.

How Do I Form a District of Columbia PLLC?

To form your District of Columbia PLLC you'll need to:

• have the state license for each professional who will be a member of the company (licenses may be required for either some or all members depending on the profession)
• check with the relevant state licensing board for your profession to see if its approval is required (and, if so, obtain the necessary documentation showing that approval), and
• file articles of organization with the Corporations Division of the Department of Consumer & Regulatory Affairs (DCRA).

You can file the articles of organization online or by mail. A blank articles of organization form (Form DLC-1) is available for download from the DCRA website. The form is for all types of LLCs but includes a few special instructions for PLLCs. The current filing fee is $220.

Naming Restrictions

The name of a District of Columbia PLLC must contain the words "professional limited liability company" or the abbreviation "P.L.L.C." or "PLLC". "Limited" may be abbreviated as "Ltd.", and "company" may be abbreviated as "Co.". For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.

Service and Membership Restrictions

The District of Columbia's LLC Act does not specify service or memberships restrictions on PLLCs. However, District of Columbia PLLCs and/or their members are subject to the regulation of the relevant state professional licensing authorities. (A separate DC statute, governing professional corporations, which are entities similar to PLLCs, states that professional corporations "may not do any act that is prohibited to an individual licensed to render the professional service for which the corporation is organized;" a similar prohibition may apply to PLLCs.)

Operating Agreement

You should make sure you have an operating agreement for your PLLC. Unlike professional licenses, articles of organization, and naming restrictions, this is not a state requirement. However, it is important to have an operating agreement so that other members of the PLLC (if any), as well as outside companies and businesses (for example banks), know what the internal rules are for the company. Depending on your own level of knowledge and expertise, you should consider having a lawyer assist you in preparing this document.

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, 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 are 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.

Meanwhile, you are personally responsible 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 are 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.

A PLLC is Different From a Professional Corporation

A PLLC is not the same thing as a professional corporation (PC). A PLLC is a newer type of business entity than a PC. Here are some of the 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 the District of Columbia) only the individual members have income tax obligations, while a PC, like other corporations, usually has its own income tax obligations.

The tax differences between PLLCs and PCs can become complicated. For example, the District of Columbia imposes a separate franchise tax on some LLCs. (More information on this tax is available in other Nolo LLC articles.) 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 may be subject to double taxation—in other words, both the PC itself and its shareholders may have to pay taxes on business income.

The District of Columbia 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

For more information on the requirements for forming and operating an LLC in the District of Columbia, such as those relating to annual reports and taxes, see Nolo's articles in 50-State Guide to Forming an LLC and 50-State Guide to Annual Report and Tax Filing Requirements for LLCs, along with the other articles on LLCs in the LLC section of the Nolo website.