How to Form a Professional LLC in Illinois

If you're a licensed professional in Illinois, you have the option of forming your business as a professional limited liability company (PLLC). A PLLC gives you and your business limited liability, tax advantages, and management flexibility—making it an attractive choice among professionals.

What Is an Illinois PLLC?

Illinois defines a "PLLC" as a limited liability company (LLC) that provides "professional services that require the individuals engaged in the profession to be licensed by the Department [of Financial and Professional Regulation]." (805 Ill. Comp. Stat. § 185/5 (2024).)

With a PLLC, like an LLC, you can have one or more people own the business, called "members." These members can actively and directly manage the company. In addition, again, like an LLC, you can structure your PLLC as a corporation, partnership, S corporation, or disregarded entity (for single-member LLCs) for tax purposes. Further, PLLCs protect their individual members from people with claims for many (but not all) types of financial debts and personal injuries.

Illinois PLLCs are governed by the state's Professional Limited Liability Company Act: 805 Ill. Comp. Stat. §§ 185/1 and following (2024).

What Is a Professional Service in Illinois?

In general, a "professional service" is any service that's licensed under the Illinois Department of Financial and Professional Regulation (IDFPR). You can find a full list of professions on the IDFPR website.

Some of the more common professional services include:

• architectural services
• athletic training
• barber services
• cosmetology services
• counseling
• dentistry
• engineering
• interior design
• land surveying
• the practice of medicine
• nursing
• public accounting
• real estate service
• social work
• veterinarian services, and
• various therapeutical services.

Moreover, some regulatory boards have rules allowing their professionals to form PLLCs. If you're unsure whether there's any prohibition on members of your Illinois-licensed profession forming an LLC, check the regulatory laws and official state rules governing your profession, or consult with a local business attorney.

What Are the Requirements for a PLLC in Illinois?

PLLCs must meet several requirements under Illinois law.

PLLC Naming Restrictions

Your PLLC's business name must follow Illinois's special naming laws for PLLCs. Specifically, Illinois requires that a PLLC's name include the terms:

• "Professional Limited Liability Company"
• "P.L.L.C.," or
• "PLLC."

(805 Ill. Comp. Stat. § 185/12 (2024).)

In addition, your PLLC's name must follow the same rules as other LLC names, as discussed further later.

Membership and Service Restrictions

Illinois laws and regulatory board rules for various professions lay out an array of service and membership restrictions for PLLCs.

Some PLLCs require all members to be licensed. In general, a PLLC doesn't need to consist of members and managers who are all licensed professionals. In other words, some members and managers can be nonprofessionals. However, Illinois law provides exceptions to this general rule for some types of professions. Under these professions, every PLLC member and manager must be licensed. These professions include the practices of:

• dentistry
• medicine (though members or managers can also be qualifying registered corporations, hospitals, or PLLCs)
• real estate (unless the member isn't actively participating in real estate activities)
• clinical psychology
• social work
• marriage and family therapy
• professional counseling
• sex offender evaluation and treatment, and
• veterinary medicine.

(805 Ill. Comp. Stat. § 185/13 (2024).)

Only licensed individuals can provide professional services through the PLLC. An Illinois PLLC can only provide professional services through licensed members, managers, employees, and agents. (805 Ill. Comp. Stat. § 185/15 (2024).)

Some professional services can be combined to form a single PLLC. Illinois law allows a PLLC to provide more than one professional service as long as those professional services are explicitly allowed to be combined. The following sets of professional services can be combined under one PLLC:

• the practice of medicine by physicians, the practice of podiatry, the practice of dentistry, and the practice of optometry
• the practice of clinical psychology, the practice of social work, the practice of marriage and family counseling, the practice of professional counseling, and the practice of sex offender evaluation and treatment
• the practice of architecture, the practice of professional engineering, the practice of structural engineering, and the practice of land surveying; or
• the practice of acupuncture, the practice of massage, the practice of naprapathy, the practice of occupational therapy, the practice of physical therapy, and the practice of speech-language pathology.

(805 Ill. Comp. Stat. § 185/13 (2024).)

Your profession might have additional membership or service requirements. You should check the laws and rules specific to your profession. Your regulatory board might have membership or service restrictions specific to your profession. For example, Illinois's laws regulating architects say that the state regulatory board will not register a PLLC providing architectural services unless at least two-thirds of the company's members are licensed under the laws of any state to practice architecture, professional engineering, land surveying, or structural engineering. (225 Ill. Comp. Stat. § 305/21 (2024).)

A PLLC Will Not Protect You From All Liability

Forming your professional service business as a PLLC will generally 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).

PLLCs give owners limited liability, however, 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).

Some professionals are required by their regulatory laws and rules to obtain a minimum amount of professional liability insurance or malpractice insurance. You should review both the state law and board rules regulating your profession. If you have questions about your liability insurance requirements, you should consult an Illinois business attorney.

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 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. For example, a PC can elect a special tax status (S corporation status) that effectively makes it a pass-through tax entity like a PLLC. 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.

Illinois recognizes both PLLCs and PCs (which Illinois calls "professional service corporations"). Both PLLCs and PCs provide liability protection for, respectively, their members or shareholders.

Additional Information About Forming an Illinois PLLC

If you're considering forming a PLLC, you should check out the IDFPR webpage on PLLCs. This webpage provides a list of useful links to:

• applications
• forms
• resources
• publications, and
• laws and rules.

Specifically, the webpage links to the PLLC New Application Checklist, which walks you through the PLLC application process. This guide provides professionals with instructions, legal requirements, qualifications and exemptions, application requirements, and fees.

For information on how to start, manage, and dissolve your LLC, check out the LLC section of our website. If you need additional legal help or have specific questions, you should talk to a local business attorney.