As a licensed professional in Indiana you can structure your business as an Indiana 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.
An Indiana PLLC is a limited liability company (LLC) formed specifically by people who will provide Indiana 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.
Note: Indiana law doesn’t use the term PLLC. For this article, a PLLC simply means an LLC formed by licensed professionals for the purpose of providing professional services.
Under the relevant Indiana law, for the purpose of forming a PLLC, a professional service is a service provided by:
Anyone who is licensed to practice one of these professions in Indiana can form an Indiana PLLC. Professionals forming PLLCs for non-health care professions generally must make a written request to the appropriate professional regulatory board or committee for authority to form the company.
To form your Indiana PLLC you’ll need to:
You can file the articles online or download a blank articles of organization form (State Form 49459) by going to the BSD website. The downloadable form is designed for use with any LLC and does not contain any information specifically for LLCs formed to provide professional services. The current filing fee is $90.
An Indiana PLLC’s name must contain the words “limited liability company” or the abbreviations “L.L.C.” or “LLC.” For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.
Indiana’s LLC Act does not mention restrictions on services or membership for PLLCs. (By way of comparison, Indiana’s law for professional corporations, which are entities similar to PLLCs, does state that professional corporations generally can only render either just one type of professional service (such as accounting services) or several related services (such as architecture and professional engineering), and that for all professional corporations except those providing accounting services, all owners must be licensed in a relevant profession.) If you have any questions about service or membership restrictions, check the rules regulating your profession or consult with a local business attorney.
Also, remember that Indiana PLLCs and/or their members are subject to the regulation of the relevant state professional licensing authorities.
You should make sure you have an operating agreement for your PLLC. Unlike professional licenses, articles of organization, naming restrictions, and service 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.
Forming your professional service business as a PLLC will protect you personally from:
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:
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 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:
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. 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.
Indiana 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.
For more information on the requirements for forming and operating an LLC in Indiana, 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.