PLLC vs LLC is one of the first questions a therapist asks when a private practice starts to feel real. The two look almost the same on paper, and most comparisons online are written for lawyers, accountants or anyone with a license. This guide is for licensed mental health professionals: counselors, clinical social workers, marriage and family therapists and psychologists. It covers what each entity is, the states where an official state source steers therapists to a PLLC or a professional corporation (with a link to each source), what the company does and doesn't protect, how taxes work, what forming one costs, the steps, and a checklist for deciding as a solo therapist.
The short answer
- A PLLC (professional limited liability company) is an LLC for licensed professionals.Its owners must hold the license for the service it provides, and in many states the licensing board takes part in forming or registering it.
- In some states, a therapist can't use a regular LLC for clinical work.New York, California, Illinois and Texas are examples, with sources below. California doesn't offer therapists an LLC of any kind: the option there is a professional corporation.
- Neither one protects you from your own malpractice.A company can keep business debts away from your personal assets. Claims about your own clinical work are what your professional liability insurance is for.
- Taxes are a separate decision.By default the IRS taxes a one-owner LLC or PLLC like a sole proprietorship. An S corporation election is something you can add later, or never, with a CPA.
- A company is optional for many solo therapists.Plenty of them practice as sole proprietors under their own license. New York, for example, lists a sole proprietorship owned by a licensee as an acceptable setting for mental health counseling. A company adds paperwork and yearly costs, so it should earn its place.
What is a PLLC?
A PLLC is a limited liability company formed to provide a professional service that requires a state license. Under state law it is still an LLC, with members and an operating agreement, but with extra rules attached:
- Owners must be licensed.In Texas, only a "professional individual" (someone licensed to provide the same service) or a professional organization may own or manage a PLLC. In Illinois, a PLLC that provides social work, counseling, clinical psychology or marriage and family therapy must have every member and manager licensed in the same profession.
- The licensing board takes part.In New York, the Education Department reviews the articles and attaches a Certificate of Authority before you file with the Department of State. In Illinois, you form the PLLC with the Secretary of State and then register it with the state's professional regulation department.
- The purpose is narrow.Texas and Illinois both want the specific professional service named in the formation documents, not "any lawful purpose."
- The name follows rules.Illinois requires the name to end with "PLLC" or "Professional Limited Liability Company." Texas requires "Professional Limited Liability Company" or an accepted abbreviation.
- Ownership follows the license.Professional entity laws generally require an owner's interest to move to a licensed person if that owner loses their license, retires or dies. California's rules for therapist corporations, for example, set deadlines for selling those shares.
For federal taxes, a PLLC is treated like any other LLC. More on that in the taxes section below.
What is an LLC?
A regular LLC is the general-purpose version. Anyone can own it, it can run almost any lawful business, and it doesn't need a licensing board's sign-off. Its owners get the same limited liability for the company's debts.
For a therapist, the real question is whether your state lets a regular LLC provide licensed clinical services. Some states say no for licensed professions, and others allow it. That's why the same question gets different answers in different states, and why advice written for a consultant or a designer doesn't carry over to a therapy practice.
PLLC vs LLC: the differences that matter in a therapy practice
Here are the two side by side, point by point:
- Who can own it.LLC: anyone. PLLC: people licensed in the profession it provides (and, in some states, other professional entities).
- Who signs off.LLC: the secretary of state. PLLC: the secretary of state, and in many states your licensing board as well.
- What it can do.LLC: almost any lawful business. PLLC: the professional service named in its documents. Mixing professions is limited, and the limits vary by state.
- Name.LLC: "LLC" or a similar ending. PLLC: "PLLC" or "Professional Limited Liability Company," depending on the state.
- Liability for business debts.The same: both generally keep company debts and contracts away from your personal assets.
- Liability for your own clinical work.The same: neither protects you from claims about your own professional services.
- Federal taxes.The same defaults and the same elections.
- Cost and upkeep.A PLLC can add board fees, renewals and extra filings, such as Illinois's three-year registration or New York's newspaper publication.
Professional corporation vs LLC (and PLLC vs PC)
A professional corporation (PC, sometimes called a professional service corporation) is the corporate version. Instead of members and an operating agreement, it has shareholders, directors, officers and bylaws, plus corporate housekeeping such as recorded board decisions. Like a PLLC, its owners generally must be licensed.
What changes when you compare a PC with an LLC or PLLC:
- Structure.A PC has more formal governance. A PLLC is usually simpler to run for one owner.
- Default taxes.A corporation is taxed as a C corporation unless it elects S corporation status. The IRS explains that a C corporation's profit is taxed when the corporation earns it and taxed again when it is paid to shareholders as dividends, which "creates a double tax." Many small professional corporations elect S status for that reason, with a CPA's help. A one-owner PLLC starts out taxed like a sole proprietorship.
- Availability.Some states give therapists only the corporate route. In California, a marriage and family therapist, clinical social worker or professional clinical counselor who wants a company forms a professional corporation, because California LLCs can't provide licensed professional services (details below). Texas also has a third form, the professional association (PA), which its Secretary of State says mental health professionals such as psychologists, family therapists and licensed professional counselors may form.
If your state allows both a PLLC and a PC for your license, the PLLC is often the lighter choice for a solo practice, and the PC suits owners who want corporate structure from the start. Ask your CPA how each would be taxed in your state before you choose.
Which states require a PLLC or PC for therapists?
There is no single national rule. Each state decides through its business entity laws and its licensing laws, and the two don't always point the same way. Below are the states where we found an official state source saying, for mental health professionals, that a regular LLC isn't the route. We haven't surveyed every state, and a state missing from this list doesn't mean a regular LLC is fine there.
Rules vary and change. Before you form anything, read your licensing board's rules on business entities and your secretary of state's guidance, and confirm with a lawyer in your state.
New York
- New York's Education Department, which licenses therapists, says the Education Law restricts professional practice to licensed individuals and to entities authorized to employ licensed professionals, and that "a general business corporation or not-for-profit corporation may not provide professional services or employ licensed professionals unless authorized under law" (NYSED, LCSW license requirements).
- Its list of acceptable settings for mental health counseling includes a professional corporation, a registered limited liability partnership, a professional service limited liability company, a sole proprietorship owned by a licensee and a professional partnership of licensees, plus hospitals, clinics and programs authorized under other laws. A regular LLC isn't on the list (NYSED, mental health counselor license requirements). The list for licensed clinical social work is similar.
- To form a PLLC, you send the articles of organization to the Education Department's Office of the Professions with a fee of $10 per member or manager. It attaches a Certificate of Authority, and then you file with the Department of State and pay its fees (NYSED, how to file a professional entity).
- Within 120 days of filing, a New York PLLC must publish a notice once a week for six weeks in two newspapers in its county and file proof with the Department of State. If it doesn't, its authority to do business in the state is suspended until it does (NY LLC Law section 1203).
- Mixed-license practices need care. The Education Department's filing guide says a PLLC can offer several professional services, but lists licensed clinical social work, mental health counseling, marriage and family therapy, psychoanalysis and creative arts therapy among the exceptions. Ask the Office of the Professions before you plan a practice owned by people with different licenses.
California
- California's Secretary of State says: "A domestic or foreign LLC may not render professional services." It defines professional services as those that may be lawfully rendered only under a license, certification or registration authorized by the Business and Professions Code, among other laws (California Secretary of State, LLC information sheet). Therapist licenses are issued under that code.
- The Board of Behavioral Sciences' law book describes marriage and family therapy corporations, licensed clinical social worker corporations and professional clinical counselor corporations, each governed by the Moscone-Knox Professional Corporation Act (BBS statutes and regulations, January 2026).
- In the same law book: each director, shareholder and officer of a marriage and family therapy corporation must be a licensed person, and its name must combine a word such as "marriage," "family" or "child" with a word such as "counseling" or "therapy," plus wording that shows it is a corporation.
- The board stopped regulating MFT and LCSW corporations on January 1, 2000, but these corporations still file their articles with the Secretary of State (BBS, about the board).
- Psychologists are licensed by a different board, the Board of Psychology. Check its rules for your entity options.
Illinois
- The Illinois Department of Financial and Professional Regulation (IDFPR) says that, after changes to Illinois LLC law, "all businesses listed as LLC's providing professional services licensed by" the department "are now required to register as a Professional Limited Liability Company (PLLC)" with the Secretary of State, with a purpose clause naming the professional service (IDFPR, PLLC new application checklist).
- The name must end with "Professional Limited Liability Company" or "PLLC." After forming it, you register the PLLC with IDFPR. The checklist lists a $50 fee, a three-year renewal cycle and a separate application for each business location.
- For social work, clinical professional counseling or professional counseling, clinical psychology and marriage and family therapy, every member and manager must be licensed in the same profession.
Texas
- The Texas Secretary of State's filing help says: "If the LLC is to provide a licensed professional service, then you must select option 2, Professional Limited Liability Company" (Texas SOS, certificate of formation help).
- Its guide to entity types for licensed professions lists licensed counselors, marriage and family therapists, psychologists, licensed clinical social workers and licensed mental health professionals under PC, PLLC or PA, and not under a for-profit corporation or a regular LLC. The guide was last revised in 2017 (Texas SOS, permissible entity types for licensed professions).
- Texas lets professionals in related mental health fields, such as psychology, clinical social work, licensed professional counseling and marriage and family therapy, jointly own a PLLC (same filing help page).
Where the board signs off: North Carolina
Some states bring the licensing board into the process even when the question is how to form a professional entity rather than whether to. North Carolina's social work board says licensees who want to form a professional corporation or PLLC must apply to the board for a Certificate of Registration under Chapter 55B, with a $50 initial fee and a $25 annual renewal (NC Social Work Certification and Licensure Board). Look for a step like this with your own board.
How to check your state
- Search your licensing board's website and rules for "professional corporation," "PLLC" or "business entity."
- Read your secretary of state's formation instructions for professional entities. Some, like Texas, publish a chart by profession.
- If you hold more than one license, or plan to co-own with someone in a different profession, check the rules for each license.
- If you see clients in more than one state, ask whether your company also needs to register in those states.
- Confirm with a lawyer in your state before you file.
What a PLLC protects, and what it doesn't
The word "limited" causes most of the confusion. Here is what the shield covers and where it stops.
It can help with:
- Business debts and contracts signed in the company's name, such as a vendor contract or a lease the company signs on its own.
- In many states, claims about another owner's clinical work, so one owner's malpractice doesn't automatically reach the other owners' personal assets. This varies by state, so ask your lawyer how it works in yours.
It doesn't help with:
- Your own malpractice.New York's PLLC law says each member, manager, employee or agent is "personally and fully liable and accountable" for negligent or wrongful acts or misconduct they commit, or that anyone under their direct supervision and control commits, while providing professional services (NY LLC Law section 1205). Professional entity laws generally keep this idea: the company doesn't stand between you and claims about your own care.
- People you supervise.In New York, that liability extends to people under your direct supervision and control, which matters once you take on associates or pre-licensed clinicians.
- Debts you sign for personally.Landlords and lenders often ask a new practice's owner to sign personally. If you do, the company doesn't shield you from that debt.
- Your license.Practicing through a company doesn't reduce your board's authority over you; New York's section 1205 says so directly.
How to keep the protection you do get: keep a separate business bank account, sign contracts in the company's name, don't mix personal and practice money, and keep the company's filings current. Courts can set aside the protection of a company that its owner treats as a personal wallet.
What actually covers your clinical work is professional liability insurance. When you form a company, ask your insurer whether the company itself needs to be named on the policy or covered separately, and check how much coverage your lease and payer contracts require. California's law even lets its board require therapist corporations to provide "adequate security by insurance or otherwise" for claims by their patients (BBS law book, section 4990.20).
Taxes: the entity and the S-corp election are separate choices
Therapists often hear "form a PLLC to save on taxes." The company type alone usually doesn't change your federal taxes. What changes them is how the company is classified for tax purposes, which is a separate choice.
- One-owner LLC or PLLC, by default:the IRS treats it as a "disregarded entity." Its income goes on your personal return, usually on Schedule C, and you pay self-employment tax the way a sole proprietor does (IRS, single member LLCs). A PLLC is an LLC under state law, so the same default applies.
- Two or more owners, by default:the IRS classifies a domestic LLC with at least two members as a partnership unless it elects to be treated as a corporation (IRS, limited liability company).
- Choosing corporate treatment:an LLC can file Form 8832 to be taxed as a corporation (IRS, About Form 8832), or Form 2553 to be taxed as an S corporation (IRS, About Form 2553).
- Professional corporation:a corporation is taxed as a C corporation by default, with the double tax described above (IRS, forming a corporation). It can elect S status with Form 2553, signed by all shareholders. An S corporation must be a domestic corporation with no more than 100 shareholders and one class of stock, among other requirements (IRS, S corporations).
- Timing:Form 2553 is due no more than 2 months and 15 days after the beginning of the tax year the election should start, or at any time during the year before (IRS, Instructions for Form 2553).
- The salary rule:an S corporation owner who works in the business must be paid wages that are reasonable compensation for that work, and the IRS can reclassify distributions as wages (IRS, S corporation compensation). That means running payroll, paying payroll taxes and filing payroll returns, which takes money and time.
- State taxes differ.California, for example, charges every corporation incorporated, registered or doing business in the state a minimum franchise tax of $800 a year, though new corporations don't owe it in their first taxable year (California Franchise Tax Board, corporations). Some states and cities don't follow the federal S corporation treatment, so ask how yours handles LLCs, PLLCs and S corporations.
Whether an S election helps depends on your profit, a reasonable salary for your work, your state and the cost of payroll. That's a calculation to make with a CPA using your own numbers, not a rule of thumb from a blog post, this one included.
What forming a PLLC or PC costs
Costs vary by state. Here's what to budget for, with examples from the sources above:
- The state formation fee paid to the secretary of state.
- Board fees, where your board takes part: $10 per member or manager to New York's Education Department; $50 to register an Illinois PLLC, renewed every three years; $50 for a North Carolina social work Certificate of Registration, plus $25 a year.
- Publication in New York: six weeks of notices in two newspapers in your county.
- Annual reports and state taxes, such as California's $800 minimum franchise tax for corporations after their first year.
- A registered agent, if you'd rather not list your own address on public records or can't receive legal papers at your office.
- A lawyer and a CPA for the operating agreement or bylaws, the tax election and year-end returns.
- Payroll costs if you elect S corporation status.
One item costs nothing: the IRS says "You never have to pay a fee for an EIN" (IRS, get an employer identification number).
How to form a PLLC as a therapist: step by step
- Confirm which entity your state allows for your license, using the checks above.
- Choose a name that meets both the secretary of state's rules and your board's rules, and that won't mislead clients about who provides the care.
- Get the board's sign-off first if your state requires it. In New York, the Certificate of Authority comes before the Department of State filing.
- File the articles of organization (PLLC) or articles of incorporation (PC), with a purpose clause that names your professional service.
- Finish the follow-up filings: New York's publication within 120 days, the Illinois registration with IDFPR, North Carolina's Certificate of Registration, or your state's equivalent.
- Write an operating agreement (PLLC) or bylaws (PC). Even a solo practice needs one. It shows the company is separate from you and says what happens to your interest if you retire, die or lose your license. California's regulations for therapist corporations, for example, require a disqualified shareholder's shares to be sold within set time limits (section 1850.7 in the BBS law book).
- Get an EIN from the IRS.
- Open a business bank account in the company's name and run all practice money through it.
- If you bill insurance, get a Type 2 NPI. CMS says an individual provider who is incorporated can hold an NPI for themselves (Type 1) and one for their corporation or LLC (Type 2) (CMS, NPI fact sheet). Then update your payer contracts and credentialing. Payers may need to set up the new company before they pay claims in its name, so plan the switch date with them.
- Move your contracts to the company: your lease, your malpractice policy and your vendor agreements, including any Business Associate Agreement with the software that holds client records.
- Update client-facing documents. Your intake and consent forms, privacy notice, superbills and website should use the practice's legal name. Our guide to the therapy intake form covers what intake paperwork should include, and our therapist website examples show how practices present themselves online.
- Put renewals on a calendar: annual reports, board renewals and state taxes. Missing one can suspend the company.
One filing you can skip: the beneficial ownership (BOI) report. Under FinCEN's final rule, U.S. companies are exempt from BOI reporting and no longer need to file (FinCEN, beneficial ownership information). Some older guides still list it as a step.
Already formed a regular LLC?
It happens often: a therapist forms an LLC online, then learns the state wanted a professional entity. It's usually fixable.
- Illinois:IDFPR's checklist tells LLC owners to amend their articles with the Secretary of State (form LLC 5.25) to change the name to PLLC and add a purpose clause naming the professional service.
- California:the Secretary of State has a form to convert a California LLC into a California professional corporation, Form CONV LLC-PC (California SOS, LLC to professional corporation conversion).
- Other states:ask the secretary of state and a lawyer whether to amend, convert or form a new company.
After any change, ask your CPA whether anything changes for your EIN, and update your NPI record, payer contracts, bank account and insurance as needed.
A decision checklist for a solo therapist
Copy this list and fill it in before you meet a lawyer or a CPA. It turns a vague question into one they can answer in a single meeting.
Reasons some solo therapists wait:
Reasons some form a company right away:
Either way, keep the two decisions apart: the company type is about what your state allows, and the tax election is about what works with your numbers.
How this works in TranqBay
TranqBay is practice software for therapists in private practice. Whichever company type you choose, these parts of the practice sit in one place:
- A practice website and online booking. You set your hours, services and fees, and clients book from your site.
- Video sessions that are HIPAA-ready. TranqBay signs a Business Associate Agreement, which you can read in full before you store anything (TranqBay's Business Associate Agreement). If you form a company, check with your lawyer whose name agreements like this should be in.
- Session notes in BIRP, DAP, SOAP or GIRP format, or a blank note. Structured formats are part of the advanced note templates, which some plans include.
- A form library of ready-made templates you send to a client for a session, including intake, consent to treat, telehealth consent and release of information. The client fills them in online and the answers wait with the session. TranqBay doesn't score forms automatically.
practice.tranqbay.health shows the website designs and the booking page your clients would use, which helps when you're choosing a practice name and deciding how it should appear to clients.
Frequently asked questions
What is a PLLC?
A professional limited liability company: an LLC formed to provide a licensed professional service and owned by people licensed in that profession. Many states also bring the licensing board into forming or registering it.
Is a PLLC better than an LLC for a therapist?
It isn't better or worse. It's what some states require for licensed services. Where your state requires a professional entity, use the PLLC or PC it allows. Where a regular LLC is allowed, the protection and default taxes are usually the same, so the choice comes down to your state's rules and your plans for the practice.
Can a therapist form a regular LLC?
In some states, yes. In others, no: official sources in New York, California, Illinois and Texas steer licensed mental health professionals to a professional entity. Check with your board and your secretary of state.
Does a PLLC protect me from malpractice lawsuits?
No. It doesn't protect you from claims about your own professional services and, in New York, claims about people under your direct supervision. Professional liability insurance is what covers those claims.
Is a PLLC taxed differently from an LLC?
Not by default. For federal taxes, a one-owner PLLC, like a one-owner LLC, is a disregarded entity unless it elects to be taxed as a corporation or an S corporation. State taxes can differ.
PLLC vs PC: which should I choose?
If your state allows both for your license, compare structure and taxes. A PLLC is usually simpler for one owner. A PC is a corporation with shareholders, directors and bylaws, taxed as a C corporation unless it elects S status. In California, therapists who want a company use a professional corporation.
Can an LCSW and an LPC own a PLLC together?
It depends on the state. Texas lets professionals in related mental health fields jointly own a PLLC. Illinois requires every member and manager of a social work or counseling PLLC to be licensed in the same profession. New York's filing guide lists clinical social work and mental health counseling among the exceptions to its rule letting a PLLC offer several professions.
Can I convert my LLC to a PLLC?
Often, yes. Illinois tells LLC owners to amend their articles to become a PLLC, and California has a form to convert an LLC into a professional corporation. Ask your secretary of state how it works in your state.
Do I need an S corporation?
No. S corporation status is an optional tax election, not an entity type you must form. Whether it helps depends on your income and costs, so work it out with a CPA.
Do I have to file a beneficial ownership report for my PLLC?
Under FinCEN's final rule, U.S. companies are exempt from BOI reporting. Check FinCEN's site for changes before you file anything.
Can a pre-licensed associate own part of my practice?
Generally not. Professional entity laws limit ownership to licensed people, as the New York, Texas and Illinois sources above show. Ask your board how associates can work in your practice.
Before you file
Start with what your state allows for your license. Then settle the tax side with a CPA, and then move the practice's contracts, insurance and client paperwork into the company's name. Done in that order, the PLLC vs LLC question takes one afternoon of reading and two short meetings, not months of second-guessing.
When your practice name is settled, see how TranqBay works for private practice: you can look at the practice website designs and the booking page your clients would use. If you're deciding whether to join, this page explains how joining TranqBay works.
Sources
States 15Federal 10CMS 1
State boards and laws15
- 1New York State Education Department, Office of the Professions: LCSW license requirementsop.nysed.govhttps://www.op.nysed.gov/professions/licensed-clinical-social-worker/license-requirements
- 2New York State Education Department, Office of the Professions: mental health counselor license requirementsop.nysed.govhttps://www.op.nysed.gov/professions/mental-health-counselors/license-requirements
- 3New York State Education Department, Office of the Professions: how to file a professional entityop.nysed.govhttps://www.op.nysed.gov/corporate/disclaimer/section-ii
- 4New York Limited Liability Company Law section 1203: formationnysenate.govhttps://www.nysenate.gov/legislation/laws/LLC/1203
- 5New York Limited Liability Company Law section 1205: professional relationships and liabilitiesnysenate.govhttps://www.nysenate.gov/legislation/laws/LLC/1205
- 6California Secretary of State: Limited Liability Companies, tax and professional services informationbpd.cdn.sos.ca.govhttps://bpd.cdn.sos.ca.gov/llc/forms/llc-tax-prof-info.pdf
- 7California Secretary of State: converting a California LLC to a California professional corporationbpd.cdn.sos.ca.govhttps://bpd.cdn.sos.ca.gov/corp/pdf/articles/conv-llc-pc.pdf
- 8California Board of Behavioral Sciences: statutes and regulations, January 2026bbs.ca.govhttps://www.bbs.ca.gov/pdf/publications/lawsregs.pdf
- 9California Board of Behavioral Sciences: about the boardbbs.ca.govhttps://www.bbs.ca.gov/about/board_info.html
- 10California Franchise Tax Board: corporationsftb.ca.govhttps://www.ftb.ca.gov/file/business/types/corporations/index.html
- 11Illinois Department of Financial and Professional Regulation: Professional Limited Liability Company new application checklistidfprapps.illinois.govhttps://idfprapps.illinois.gov/Forms/Online/%28248%29%20Limited%20Liability%20Company%20User%20Guide.pdf
- 12Texas Secretary of State: certificate of formation help (LLC and PLLC)direct.sos.state.tx.ushttps://direct.sos.state.tx.us/help/help-corp-filing-205.html
- 13Texas Secretary of State: guide for determining permissible entity types for licensed professionssos.state.tx.ushttps://www.sos.state.tx.us/corp/forms/entitychart.pdf
- 14Texas Secretary of State: formation of Texas entities FAQssos.state.tx.ushttps://www.sos.state.tx.us/corp/formationfaqs.shtml
- 15North Carolina Social Work Certification and Licensure Board: professional corporation and professional LLCncswboard.govhttps://www.ncswboard.gov/professional-corp-llc/
Other federal agencies10
- 16IRS: limited liability company (LLC)irs.govhttps://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
- 17IRS: single member limited liability companiesirs.govhttps://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
- 18IRS: About Form 8832, Entity Classification Electionirs.govhttps://www.irs.gov/forms-pubs/about-form-8832
- 19IRS: About Form 2553, Election by a Small Business Corporationirs.govhttps://www.irs.gov/forms-pubs/about-form-2553
- 20IRS: Instructions for Form 2553irs.govhttps://www.irs.gov/instructions/i2553
- 21IRS: S corporationsirs.govhttps://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
- 22IRS: S corporation compensation and medical insurance issuesirs.govhttps://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues
- 23IRS: forming a corporationirs.govhttps://www.irs.gov/businesses/small-businesses-self-employed/forming-a-corporation
- 24IRS: get an employer identification numberirs.govhttps://www.irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number
- 25FinCEN: beneficial ownership information reportingfincen.govhttps://www.fincen.gov/boi