How to Form a PLLC in Wisconsin

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

A Wisconsin PLLC is a limited liability company (LLC) formed specifically by people who will provide Wisconsin 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: Unlike the majority of other states, Wisconsin's LLC Act doesn't include provisions specifically for LLCs that will provide professional services, nor is there a separate PLLC Act. Wisconsin's corporation laws, however, do include provisions for so-called service corporations (which are similar to what, in most other states, are called professional corporations). The legal bases for professional LLCs in Wisconsin apparently derive from the state's various laws and rules regulating individual professions. For example, lawyers are allowed to form LLCs (and other types of limited liability entities) based on a 1997 Wisconsin Supreme Court Rule, and the state's laws regulating CPAs indicate that a CPA "firm" can include a limited liability company.

What is a Professional Service in Wisconsin?

Wisconsin's LLC Act does not mention professional services. The Act merely states that an LLC may be formed "for any lawful purpose." By contrast, other states' LLC laws frequently provide specific lists of professional services. These lists typically include, at a minimum, physicians, surgeons, dentists, lawyers, certified public accountants, professional engineers, architects, and veterinarians, but often include other professions, as well. (Wisconsin's service corporation law does mention an array of health care professions as well as CPAs, and the state's laws or rules regulating individual professions sometimes mention LLCs.) If you have any question about whether your licensed or authorized profession is considered a professional service for the purpose of forming a Wisconsin PLLC, check with a local business attorney.

How Do I Form a Wisconsin PLLC?

To form your Wisconsin PLLC you'll need to:

• have the state licenses for professionals who will be a member of the company (licenses may be required for either some or all members depending on the profession)
• 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 Wisconsin Department of Financial Institutions (DFI).

You can file the articles online or download a blank articles of organization form (Form 502) by going to the DFI website. The form is for LLCs generally and provides no information specifically for professionals seeking to form a PLLC. The current filing fees are $130 for online filings and $170 for paper filings.

Naming Restrictions

All Wisconsin LLCs, including PLLCs, must contain the words "limited liability company" or "limited liability co." or end with the abbreviation "L.L.C." or "LLC". For additional important information on LLC names generally, check theBusiness Name, Location & Licenses section of the Nolo website.

Service and Membership Restrictions

Service and membership restrictions on Wisconsin PLLCs can differ among the various professions. Check the statute for your particular profession or consult with a local business attorney for more details. Also, keep in mind that Wisconsin 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 (such as law), 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 the current laws and rules regulating your 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 Service Corporation

A PLLC is not the same thing as a service corporation (SC). (As mentioned above, instead of "service corporations," most other states have "professional corporations"). Here are some of the key differences between a PLLC and an SC:

• a PLLC, like other LLCs, is comprised of members, but an SC, like other corporations, is comprised of shareholders
• following from the previous point, PLLC ownership consists of so-called membership interests in the business, but SC 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 Wisconsin) only the individual members have income tax obligations, while an SC, like other corporations, usually has its own income tax obligations.

The tax differences between PLLCs and SCs can become complicated. For example, an SC can elect a special tax status (S corporation status) that effectively makes it a pass-through tax entity like a PLLC. And, meanwhile, SCs that don't elect special status may be subject to double taxation—in other words, both the SC itself and its shareholders may have to pay taxes on business income.

Wisconsin allows professionals to form both PLLCs and SCs, and both PLLCs and SCs provide liability protection for, respectively, their members or shareholders. Because the protection is essentially the same for both PLLCs and SCs, 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 Wisconsin, 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.