Operating as an LLC vs PLLC: How to make the right choice

July 8, 2019

Leona Rajaee

An independent physician operating a direct care practice is running a business, in addition to caring for patients. Operating a business requires that the provider maintain financial records, hire and manage staff, and conform to legal regulations for the business entity. Part of the consideration for a direct care practice is whether to operate as a limited liability company (LLC) or a professional limited liability company (PLLC).

An LLC protects the owner of a business from liability regarding financial debts. When a business owner forms an LLC, the owner is not personally liable for the company’s debts and so the owner’s assets are protected. The LLC itself is, legally, the responsible party and the company’s assets are subject to any potential litigation. The business owner must keep up with any state filing requirements as well as annual reporting to ensure the LLC continues its legal protection.

A PLLC is designed for professionals, typically those who require licensing, such as lawyers, realtors, dentists, and physicians. Many states require that healthcare providers form PLLCs rather than LLCs. The direct care physician should check with the state’s business licensing department to determine that particular state’s legal requirements.

While both the LLC and PLLC protect the direct care physician’s assets, neither will protect against a malpractice charge. That requires separate insurance protection. However, Attorney Lee R. Phillips, writing in MD Magazine, states that “the fact is that most of the lawsuits and liability issues will involve issues other than professional malpractice. An employee will sue over an HR problem. A patient will slip and fall in the parking lot. Your ‘partner’ or bookkeeper will embezzle money.” For these situations, the PLLC will offer protection for the direct care physician.

Like most medical businesses, direct care practices have legal needs outside of the scope of a physician’s training. Taking advantage of legal help and resources can play a large role in helping your practice comply with laws and employ legal protections.