top of page

Do I Need an LLC or PLLC for My Physician Practice or Side Gig?

We often get questions on our online physician communities about entity choice when establishing a side gig or private practice. This is a complicated topic that depends on the state that you live in, and you should consult appropriate legal and accounting advice prior to making any decisions. However, we outline below some basic guidelines, pros and cons to each, and how to factor in your business’ specific purpose and tax implications, as a foundation to understand the factors to consider when deciding between creating an LLC or PLLC. 


Disclaimer: Our content is for generalized educational purposes. Please do your own due diligence before making decisions based on this page. Nothing on this page constitutes formal or personalized legal or financial advice. Laws and taxes vary based on location and while this information is accurate to the best of our knowledge, it may not be up to date or apply in your location or personal situation. We are not formal financial, legal, or tax professionals, and you should consult these as appropriate. To learn more, visit our disclaimers and disclosures.


Common questions physicians ask when trying to choose between an LLC or PLLC for their medical practice or side gig business


Is it better to form an LLC or a PLLC?


The first thing to understand here is that this may not be a choice. Many states have very specific guidelines about the types of entities physicians can create, especially if the purpose of your business is to practice as a physician (or other licensed professional such as an accountant or lawyer). 



Does a PLLC or an LLC offer better tax advantages?


The second thing to understand is that neither of these entities has distinct tax advantages relative to the other. An LLC and a PLLC are legal entities and structures, which were established with the goal of providing protection from liability (but importantly, not from malpractice). They are not tax entities in and of themselves. They can elect to be taxed in different ways, but the entity itself does not give you tax advantages. So if your decision to be an LLC or PLLC is based on the tax implications, this may not make sense.


You can elect status to be taxed as an S corporation in either scenario if it offers you tax advantages.




How is a PLLC different from an LLC?


A PLLC is a ‘Professional Limited Liability Company,’ whereas an LLC is a ‘Limited Liability company’. The PLLC is essentially a specialized version of an LLC that’s specifically for professional services, such as the ones you would provide as a physician. 


Since the PLLC is limited to professional services, it usually requires that all shareholders are licensed in the specific profession that the entity is being formed for (so all of your owners may need to be physicians).



When do you need a PLLC?


Some states require that all professionals use a PLLC, whereas others give a choice between a PLLC and an LLC. The state’s medical board may also have some say in this matter. Typically, situations where physicians use PLLCs are:


  • If you’re providing medical services (i.e. practicing medicine) under that entity

  • Your state requires that licensed professionals use PLLCs



What if I’m starting a side gig, but I’m a doctor? Do I have to start a PLLC, or can I start an LLC?


This will usually come down to whether or not you are practicing medicine in your side gig or not. If it’s a non-medical side gig, you can have an LLC instead in most states. Some states may require you to send in a statement or have your state medical board sign off that they agree that you’re not practicing medicine in your side gig if it’s ambiguous. For example, you might be an author or writer that writes about medical topics but is not practicing medicine through your writing.  


If this work is completely separate from your practice or employer, and your side gig is not engaging in the practice of medicine, you probably have the option to elect an LLC, but again, check with the Secretary of State’s office in your state or with an attorney. 



Are there other entities I need to consider?


Some states have different entities that they allow or prefer in certain situations. For example, it may be that your state doesn’t allow licensed professionals to form either an LLC or a PLLC, but rather requires that you use a PC (Professional Corporation). There are some other options as well, but PC is the one we see the most often on our communities. For example, California has strict preferences about PCs. Corporations generally have stricter requirements, rules, and protections, so while it may be a pain, it could be to your advantage. 



Once I’ve decided my structure of LLC vs PLLC (or others), what’s next?


Now that you have a basic understanding of the difference between the two, it’s time to check with the particular laws of your state, and confirm with the Secretary of State’s office in your state or with an attorney as needed. Also check with your State Medical Board to see if they have any related guidance, or if you need a letter from them to support your election.


After you’ve clarified these things, you’ll be able to move forward with filing your Articles of Organization with your state! In some states, and depending on your organizational structure, this may be as easy as doing it on the state Secretary of State website, whereas in other circumstances, it’s a complicated process that will require an attorney.


If you need an attorney, check out our attorney database for physicians.



Conclusion


Choosing an entity can seem very complicated, but sometimes the decision will be made for you. These entities are not tax entities, so the decision to do one versus the other is not a tax decision. We hope this article explains the difference and when one entity may be more appropriate than another, but please consult with appropriate legal expertise or your state’s Secretary of State office or state medical board to be sure.



Additional resources for physicians starting a side gig or private practice


Explore related PSG resources:


If you need help navigating local laws and the complexities of getting a private practice started, reach out to one of the healthcare attorneys on our database.


We offer a free private practice educational series for physicians interested in virtual events to help you start and manage your practice. Sign up for our PSG weekly newsletter for alerts on upcoming events and registration links.


bottom of page