How to Form a PLLC in Indiana

Here are the basic rules for forming professional limited liability companies (PLLC) in Indiana.

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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.

What is an Indiana PLLC?

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.

What is a Professional Service?

Under the relevant Indiana law, for the purpose of forming a PLLC, a professional service is a service provided by:

  • accountants
  • architects or professional engineers
  • attorneys
  • veterinarians
  • real estate professionals
  • chiropractors
  • dentists
  • nurses
  • optometrists
  • pharmacists
  • physical therapists
  • physicians
  • podiatrists
  • psychologists
  • speech-language pathologists, and
  • audiologists

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.

How Do I Form an Indiana PLLC?

To form your Indiana 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 approval is required (and, if so, obtain the necessary documentation showing that approval), and
  • file articles of organization with the Business Services Division (BSD) of the Indiana Secretary of State.

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.

Naming Restrictions

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.

Service and Membership Restrictions

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.

Operating Agreement

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.

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 PC

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 (including Indiana) 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, 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.

Additional Information

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.

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