How to Form a PLLC in Maryland

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

By , Contributing Author

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As a licensed professional in Maryland you can structure your business as a Maryland professional limited liability company (LLC). 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.

Note: Maryland law doesn't use the term professional LLC (PLLC). For this article, a PLLC simply means an LLC formed by licensed professionals in Maryland that provides professional services.

What is a Maryland PLLC?

A Maryland PLLC is a limited liability company (LLC) formed specifically by people who will provide Maryland 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?

Under Maryland law, a professional service is a service provided by:

  • an architect
  • an attorney
  • a certified public accountant
  • a chiropractor
  • a dentist
  • an osteopath
  • a podiatrist
  • a physician
  • a professional engineer
  • a licensed real estate broker, licensed real estate salesperson, and licensed associate real estate broker
  • a veterinarian
  • a psychologist; or
  • a physical therapist.

Anyone who is licensed to practice one of these professions in Maryland can form a Maryland PLLC. More generally, any person who is required by state law to have a Maryland license or other state authorization before engaging in a profession can form a Maryland PLLC for that profession.

How Do I Form a Maryland PLLC?

To form your Maryland 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 prior approval is required, (and, if so, obtain the necessary documentation showing that approval), and
  • file articles of organization with the Maryland Department of Assessments and Taxation (DAT).

The DAT has a blank articles of organization form available on its website. The form includes helpful instructions. The articles may be filed by mail or online. The basic filing fee is $100. Additional fees apply for certified copies and expedited processing (including an additional $50 expedited fee for all online filings).

Naming Restrictions

Maryland requires that your PLLC contain one of the following: "Limited Liability Company," "L.L.C.," "LLC," "L.C." or "LC." For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website. You should also check your professional licensing board for any additional name use restrictions.

Service Restrictions

A Maryland PLLC can only provide the professional services authorized in its articles of organization. Maryland 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 your business. 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 (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).

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 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 Maryland) 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. Maryland requires LLCs to file a Personal Property Return along with an annual report with a $300 fee. Maryland also requires LLCs to pay income tax on income allocable to nonresident members. (More information on these tax issues 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.

Maryland allows professionals to form both PCs and PLLCs and Maryland's rules for PLLCs rely heavily on the state's older rules for PCs. 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 Maryland, 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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