How to Form a PLLC in Utah

As a licensed professional in Utah you can structure your business as a Utah 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 Utah PLLC?

A Utah PLLC is a limited liability company (LLC) formed specifically by people who will provide Utah 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: Utah law often refers to professional services limited liability companies rather than just professional limited liability companies. However, the state still uses the standard abbreviation PLLC.

What is a Professional Service in Utah?

Under Utah's PLLC law, a professional service is a licensed personal service provided by:

• a public accountant
• an architect
• an attorney
• a chiropractor
• a doctor of dentistry
• a professional engineer
• a naturopath
• a nurse
• an optometrist holding
• an osteopathic physician or surgeon
• a pharmacist
• a physician, surgeon, or doctor of medicine
• a physical therapist
• a podiatric physician
• a psychologist
• a principal broker, associate broker, or sales agent
• a clinical or certified social worker
• a mental health therapist
• a veterinarian; or
• an individual licensed, certified, or registered under Utah's Real Estate Appraiser Licensing and Certification Act.

Anyone who is licensed to practice one of these professions can form a Utah PLLC. (In general, you must be licensed by the State of Utah as opposed to another state, but there are exceptions to this rule.)

How Do I Form a Utah PLLC?

To form your Utah PLLC you'll need to:

• have whatever state license is required by the applicable Utah licensing or registration law 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 a certificate of organization with the Utah Division of Corporations (DOC) which includes a description of the profession to be practiced through the PLLC.

Regarding the first point (having state licenses): Utah law allows unlicensed individuals to be members of PLLCs only the extent allowed by the applicable state licensing or registration act. Otherwise, all members must be licensed.

You can file online using Utah's OneStop Online Business Registration or by mail. The DOC also has a blank certificate of organization form available on its website. The form is specifically for PLLCs (as opposed to regular LLCs). The current filing fee for the certificate of organization is $70.

Naming Restrictions

The name of a Utah PLLC must contain the words "professional limited liability company" or the abbreviations "P.L.L.C." or "PLLC." The name may not contain any language stating or implying that the business is formed for a purpose other than what is stated in your certificate of organization and what is allowed as a professional service under Utah's PLLC law. The name also must comply with any requirements of the state regulating board that has jurisdiction over the professional service your PLLC will provide. Additional naming rules also apply. For more important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.

Membership and Service Restrictions

As mentioned above, all members of a Utah PLLC generally must be licensed to provide the professional services offered by the PLLC, but there are some exceptions. A Utah PLLC can provide only one kind of professional service (along with directly related (ancillary) non-professional services). However, a Utah PLLC may own property and invest the company's money. Utah 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 (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 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 (including Utah) 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.

Utah 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 Utah, 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.