How to Form a Professional LLC in North Carolina

Here are the basic rules for forming professional limited liability companies in North Carolina.

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

A North Carolina PLLC is a limited liability company (LLC) formed specifically by people who will provide North Carolina 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 North Carolina law, a professional service is a state licensed service provided by:

  • Architects
  • Attorneys
  • Public Accountants
  • Medical Doctors
  • Dentists
  • Optometrists
  • Osteopaths
  • Chiropractors
  • Registered Nurses
  • Veterinarians
  • Podiatrists
  • Practicing Psychologists
  • Marriage and Family Therapists
  • Occupational Therapists
  • Speech and Language Pathologists and Audiologists
  • Professional Counselors
  • Engineers and Land Surveyors
  • Landscape Architects
  • Certified Social Workers
  • Clinical Social Workers
  • Geologists
  • Foresters, and
  • Soil Scientists.

Anyone who is licensed to practice one of these professions in North Carolina can form a North Carolina PLLC.

How Do I Form a North Carolina PLLC?

To form your North Carolina PLLC you'll need to:

  • have the state license for at least one professional who will be a member of the company
  • contact the appropriate North Carolina licensing board to make sure you're complying with any additional licensing requirements, and
  • file articles of organization with the Secretary of State (SOS).

All members of the PLLC must be licensed professionals.

You can download an Articles of Organization, Professional LLC (Form PLLC-02) from the SOS website. (The PLLC articles form is different from the articles form used by nonprofessionals.) The form is in PDF format. You can type in the required information, print it out, and then upload and submit it online. You must include your licensing board certification with your articles submission. If your licensing board doesn't offer online or electronic certification, then you will need to file your articles by mail and include an original board certification. The current filing fee is $125.

Naming Restrictions

The name of a North Carolina PLLC must contain the word "Professional" or the abbreviation "P.L.L.C." or "PLLC." Additional naming rules also apply. For additional important information on LLC names, check the Business Name, Location & Licenses section of the Nolo website.

Service and Membership Restrictions

Generally speaking, a North Carolina PLLC can only provide one type of professional service along with related (ancillary) services. However, several specific combinations of professional services are also allowed. For example, PLLCs that provide some combination of architectural, landscape architectural, engineering or land surveying, geological, and soil science services are allowed as long as at least one PLLC member is licensed to provide each of the services offered by the PLLC. Similarly, many combinations of specific medical services are permitted. Generally speaking, at least one member of a North Carolina PLLC must be licensed to provide a professional service offered by the PLLC. And, finally, remember that North Carolina 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 all members of the PLLC, 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 North Carolina) 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.

North Carolina's laws for PLLCs are mainly based on the state's preexisting law for PCs. North Carolina 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 North Carolina, 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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