What are the Differences Between an Arizona PLLC vs LLC?

Question:  Arizona pllc vs llc: What are the differences between an Arizona professional limited liability company and an Arizona limited liability company and when would somebody form a PLLC instead of an LLC?

Answer:  Only three percent of Arizona LLCs are PLLCs.  Few people are required to form an Arizona PLLC.

Arizona Revised Statutes Section 29-841.4 states: “‘Professional limited liability company’ means a limited liability company organized under this chapter for purposes that include rendering one or more categories of professional services.”  Arizona Revised Statutes Section 10-2201.6 states: “‘Professional service’ means a service that may be lawfully rendered only by a person licensed or otherwise authorized by a licensing authority in this state to render the service.”

This means that an Arizona PLLC is an LLC that provides professional services that  may be performed only by a person who is licensed by a limited number of professions in Arizona such as medical doctors, certified public accountants, attorneys and real estate agents.  As of July 12, 2011, there were 422,687 LLCs (97%) and 14,301 professional LLCs (3%) in existence in Arizona.

The following provisions apply only to AZ PLLCs:

1.  The Articles of Organization must state that the company is a professional limited liability company.

2. The Articles of Organization must state the professional service or services that the company is organized to provide.

3. The name of the PLLC shall contain the words “professional limited liability company” or the abbreviations “P.L.L.C.”, “P.L.C.”, “PLLC” or “PLC”, in uppercase or lowercase letters.

4.  A professional limited liability company may issue membership interests only to:

a. Individuals who are licensed by law in Arizona or another state to render a professional service described in the articles of organization of the professional limited liability company.  The following are not violations of this restriction: i) Any community interest of an unlicensed spouse in the membership interest issued to a licensed spouse in which the unlicensed spouse with a community interest in the membership interest does not have the right to vote the membership interest, or (ii) Issuance of a membership interest to a trust established for the benefit of a licensed individual or members of the licensed individual’s immediate family in which the licensed individual has the right to vote the membership interest and the trust and the members of the licensed individual’s immediate family do not have the right to vote the membership interest.

b. General partnerships, registered limited liability partnerships, other partnerships and joint ventures, domestic or foreign, in which all of the partners are licensed persons with respect to the profession to be conducted by the professional limited liability company and in which at least one partner is authorized by law in this state to render a professional service described in the articles of organization of the professional limited liability company.

c. Professional corporations, professional limited liability companies and other persons, domestic or foreign, authorized by law in Arizona to render a professional service described by the articles of organization of the professional limited liability company.

d. Other persons, if after the issuance of voting membership interests, the other persons in the aggregate do not hold more than forty-nine per cent of the membership interests entitled to vote for the election of officers and managers of the professional limited liability company, unless a greater or lesser percentage is prescribed by the board.

Membership interests and rights or options to purchase membership interests of a professional limited liability company that are held by persons described in 4, a, b & c may be transferred or pledged, whether voluntarily, involuntarily, by operation of law, by court judgment or otherwise, only to persons qualified under subsection B to be issued voting membership interests and to the professional limited liability company. Voting membership interests and rights or options to purchase voting membership interests of a professional limited liability company that are held by persons described in subsection B, paragraph 4 may be transferred or pledged, whether voluntarily, involuntarily, by operation of law, by court judgment or otherwise, only to persons who are qualified under subsection B, to be issued voting membership interests and to the professional limited liability company.

Arizona Revised Statutes Section 29-842.A states: “Those persons may render those professional services in any other business form or entity, including a limited liability company formed under a general law of this state other than this chapter, unless the use of the form or entity is expressly prohibited by the licensing law of this state that is applicable to the profession or by the board that has jurisdiction over the profession.”  This statute says that a person who is licensed by a profession in Arizona is not required to form a PLLC and provide the professional services through the Arizona professional limited liability company unless the Arizona licensing authority requires the use of a PLLC.

To my knowledge, the only profession that requires its licensed professionals to form an Arizona PLLC is the real estate sales agent profession (not real estate brokers).  Arizona realtors do not have to form a professional corporation or a professional LLC unless they want their real estate commission paid by their broker broker to an entity rather than directly to them.  Doctors, lawyers and accountants in the past were required to form Arizona professional corporations or Arizona PLLCs, but not currently.

The Arizona Department of Real Estate requires the following of real estate agent’s PLLCs:

  • The name of the PLLC or PC be the name of the professional as it appears on the real estate agent’s license, and
  • The Professional Corporation or Professional Limited Liability Company Name, through and on behalf of which a salesperson or broker acts, shall consist of only the full or last name(s) of its shareholder(s) or member(s), and contain the words “Professional Corporation,” “Professional Limited Liability Company”, as applicable, or the abbreviations authorized under A.R.S. § 10-2215 or 29-845, as applicable, to reflect that it is a Professional Corporation or Professional Limited Liability Company, and shall reflect whether it comprises one or more licensees (single or plural as in John Smith, P.C. or Smith & Smith, P.C.).
  • For a designated broker, PC/PLLC name shall only consist of the broker’s full or last name, and words or abbreviation to indicate it is a PC or PLLC.
  • A PC or PLLC shall not have a fictitious name.
  • The Articles of Organization of a PLLC formed for a real estate agent contain the following statement:  “The sole purpose of the Professional Corporation (or Professional Limited Liability Company) is to render professional real estate services.”

Read “Can an Arizona LLC Become a PLLC & an Arizona PLLC Become an LLC?

2017-02-23T22:57:31+00:00 July 12th, 2011|FAQs, PLLCs|27 Comments

About the Author:

The author of this article is Richard Keyt, an Arizona limited liability company attorney who has formed 5,500+ LLCs. His Silver & Gold LLC packages include the $85 expedited filing fee, a custom Operating Agreement and 170 book called the Arizona LLC Operations Manual. Connect with Richard at 480-664-7478 or on Google+

27 Comments

  1. Connie Larson May 9, 2012 at 2:15 pm

    Does a company providing security for homes and buusinesses need a PLLC?

    • Richard Keyt May 13, 2012 at 3:21 pm

      A company in that business is not able to form an Arizona professional LLC, but it can and should form an LLC to protect the owners from liabilities that arise from the business.

  2. Ron October 5, 2012 at 9:08 pm

    As a registered professional engineer, licensed by the State of Arizona, am I required to form a PLLC and is there any benefit to it over an LLC?

    • Richard Keyt October 7, 2012 at 7:09 am

      Arizona engineer’s do not need to form a professional LLC. There is no benefit of having PLLC vs an LLC.

  3. Brandon November 6, 2012 at 10:05 am

    I am a dentist, would it be more beneficial to have LLC or PLLC?

    • Richard Keyt November 11, 2012 at 7:21 am

      It’s six of one and one half dozen of the other. Doesn’t really matter any more.

  4. Cheryl November 29, 2012 at 2:09 pm

    What is the difference between having an LLC (with pass thru taxation) and PC with Sub S status? For tax purposes is one more beneficial than the other?

  5. Jeff December 12, 2012 at 9:01 am

    What would be the benefit(s) of choosing a family lawyer who is pllc vs llc?

    • Richard Keyt December 12, 2012 at 10:21 am

      The type of entity the lawyer forms is not related to the skill or ability of the lawyer.

  6. dan mullins December 27, 2012 at 6:07 pm

    can my real estate commissions be paid to a pllc if I set it up?

    • Richard Keyt January 3, 2013 at 8:34 am

      Yes for an Arizona realtor if the Articles of Organization contain the language required by the Arizona Department of Real Estate, the name of the LLC satisfies the ADRE’s name requirements and you get the ADRE to approve the LLC.

  7. Dave Brown February 10, 2013 at 6:23 am

    Should a CPA firm best be set up as a PC, LLC or PLLC?

    • Richard Keyt February 10, 2013 at 7:22 am

      Depends on the state where the CPA practices. In Arizona the PLLC or LLC is a better choice than the PC. PLLC or LLC for an Arizona CPA is six of one and a half dozen of another.

  8. Beth February 10, 2013 at 4:38 pm

    I am currently in the middle of taking over our existing Real Estate Company’s “—–Cat,LLC” as the other members sell off their portion of the business. I have been told that as a Realtor I should have a PLLC… as in “My Name, PLLC.” Shall I change the LLC over to a PLLC? Or leave it alone?

    • Richard Keyt February 12, 2013 at 7:53 am

      I assume you are asking about Arizona law. If you are a licensed Arizona real estate broker your LLC can be an LLC. If you are a licensed Arizona real estate agent the LLC must be a PLLC and its name must be the name on your license if you will be the only owner. If there will be multiple owners contact the Arizona Department of Real Estate and ask it what the name should be.

  9. David February 26, 2013 at 1:59 pm

    Considering opening my own Wealth Management practice d/b/a an affiliate of an Independent Broker / Dealer. I would need to be FINRA licensed to hold my series 7,63,65,24, AZ and other states securities licenses, and get my AZ life and health insurance license. A few years up the road, I may choose to dissolve my affiliation with the IBD and become an RIA. Does PLLC or LLC make difference for me?

  10. John February 27, 2013 at 2:08 pm

    Thinking about starting my own law firm in Arizona that will provide review and negotiation of business transactions as well as general consulting about business, processes, etc. Do I form a PLLC or a LLC?

    John

  11. Mike March 26, 2013 at 2:49 am

    Would like to convert llc to pllc or pc(not sure which). An MD will become a member as we will be providing medical services: do all members need to be MDs, and is it ok that the pc or pllc ‘owns/sells’ some other healthcare product (an iPhone app) not managed/ required to have MD involvement/oversight?

    • Richard Keyt March 30, 2013 at 8:09 am

      An Arizona PLLC contains language in its Articles of Organization that restricts the activities the PLLC to practicing the profession through its licensed professionals. Therefore, an AZ PLLC could not be involved in selling an iPhone app. Please call me at 602-906-4953, ext. 1 and I will answer your other questions.

      Richard Keyt
      Arizona LLC attorney

  12. Eudoro Zayas Rochin June 20, 2013 at 7:50 pm

    I’m Mexican and want to start a solar power and energy efficiency business in Arizona.

    1 can a foreign person start and be the solely owner of an a LLC?
    2 what type of company (llc, pllc, etc) is more suitable for selling solar and energy efficiency projects?

    Thanks.

    • Richard Keyt June 25, 2013 at 6:49 am

      The answer to question 1 is yes. The answer to question two is everybody except Canadians should form an Arizona LLC rather than any other type of entity.

  13. Jeremy September 1, 2013 at 9:08 pm

    Thank you for this informative article. I am now only a licensed real estate agent. When I meet the requirements by the ADRE I plan on getting my brokers license. I currently have an LLC that dabbles in a few eServices (apps & ebooks). When I do get my brokers license can I additionally operate under that LLC for real estate? I don’t want to assume the expenses of more than one if I don’t have to. Thank you in advance for your time.

    • Richard Keyt September 4, 2013 at 8:14 am

      Arizona does allow a licensed real estate broker to operate the brokerage business through an LLC or a PLLC. You could use your existing LLC. Keep one asset protection concept in mind: If you put all your eggs in one basket and you drop your basket you lose all of your eggs. If you have an operating brokerage LLC that owns other assets like stocks, bonds or investment real estate and a lawsuit arises out of the conduct of the business that turns into a large judgment for money, you lose the brokerage business and all the assets owned by the LLC. If you had put the investment assets in one LLC and operated the brokerage in a different LLC a financial disaster with the brokerage LLC would not cause a loss of the assets in the other LLC.

      • Jeremy September 4, 2013 at 7:01 pm

        Thank you so much for your insight – your advice is well received!