How to form a PLLC in Texas, and what the entity actually protects.

When Texas requires a professional entity

Start with the rule that removes most of the discretion. Section 301.006 of the Texas Business Organizations Code permits a professional entity to provide a professional service in this state only through owners, managerial officials, employees, or agents who are authorized to provide that service, and it adds a blunt closing provision: an individual may not, under the guise of employment, provide a professional service in Texas unless the individual is licensed to provide it. Section 301.003 defines a professional service as any type of service that requires a Texas license as a condition precedent to rendering it, and its illustrative list covers architects, attorneys, certified public accountants, dentists, physicians, public accountants, and veterinarians. The test is the license, not the profession's familiarity, so the definition reaches licensed fields well beyond the named examples.

The Secretary of State enforces the same line at the filing window. The instructions to Form 205, the certificate of formation for a standard LLC, state that the form cannot be used to engage in a licensed activity when the license cannot be issued to the LLC, and they direct professionals to Form 206, the certificate of formation for a professional limited liability company. A licensed Texas attorney cannot form a standard LLC and practice law through it. A physician cannot form a standard LLC and provide medical services through it. The Code and the licensing statutes point in the same direction, and a practice that ignores the direction is simply out of compliance until someone notices.

Where the standard LLC still fits

None of this retires the ordinary LLC for professionals. It remains the right vehicle for the activities around the practice rather than the practice itself. A physician who wants to own the building the clinic operates from can hold the real estate in an LLC. A lawyer who runs a consulting business that is not the practice of law can run it through an LLC. Most multi-entity professional structures pair one professional entity with one or more standard LLCs, each carrying the assets and activities it is legally suited to carry.

How the Code actually assembles a PLLC

Here is the point most published guidance gets wrong, and it is worth getting right because it changes how every other rule in this article reads. Title 7 of the Business Organizations Code, "Professional Entities," contains four chapters. Chapter 301 carries the provisions that apply to professional entities generally. Chapter 302 covers professional associations. Chapter 303 covers professional corporations. Chapter 304 is titled "Provisions Relating to Professional Limited Liability Companies," and a reader could be forgiven for assuming that is where PLLC law lives. It is not. Chapter 304 contains exactly one section, Section 304.001, and that section is one sentence long: Title 3 applies to a professional limited liability company, unless there is a conflict with Title 7.

That single sentence is the whole design. A Texas PLLC is built in two layers. The base layer is the general limited liability company law in Chapter 101: formation by certificate of formation, membership, management, the company agreement, and the liability shield all come from there, imported into the professional context by Section 304.001. The overlay is Chapter 301, which applies to professional associations, professional corporations, and professional limited liability companies alike. The definitions, the licensing requirement, the ownership restrictions, and the professional liability rule all live in that shared chapter. Nothing about them is unique to the PLLC.

The consequences are not academic. An adviser who reads only "the PLLC chapter" has read one sentence. A governing document drafted from a generic Chapter 101 template will be silent on the Title 7 overlay: it will not restrict transfers to licensed persons, will not address what happens when an owner loses a license, and will not track the professional liability structure. And a blanket statement that PLLCs are "governed by Chapter 304," which appears in a surprising amount of competing commentary, misdescribes a provision whose entire function is to point somewhere else. When we form or repair a professional entity, we read Chapter 101 and Chapter 301 together, because that is where the law actually is.

One boundary note: Section 301.001 provides that Title 7 does not apply to partnerships, including limited liability partnerships. A firm organized as an LLP is running on different statutory rails entirely, which is one reason entity conversations between professional firms so often talk past each other.

Who may own a Texas PLLC

Section 301.007 of the Business Organizations Code allows a person to be an owner of a professional entity, or a governing person of a professional limited liability company, only if the person is an authorized person. In practice, that means an individual licensed in the same professional service the entity provides, or a professional organization whose own ownership satisfies the same test. The restriction is absolute as to outsiders. A PLLC organized to practice law cannot admit an accountant as an equity owner, even a passive minority owner. A physician's practice cannot carry a non-physician investor on its cap table.

The planning consequence is that non-licensed equity has to live somewhere else. A spouse who manages the business side, an investor, a partner who is not licensed: none of them can hold an interest in the professional entity itself. The workable structures put the non-professional assets (real estate, equipment, brand, management services) in separate entities where ownership is unrestricted, and keep the professional entity strictly in licensed hands.

The forced-exit rule nobody papers for

Section 301.008 is the provision that turns informal arrangements into disputes. An owner or managerial official who ceases to be an authorized person must promptly resign the position and promptly relinquish the ownership interest. The statute does not wait for a convenient valuation season, and the events that trigger it are rarely planned: a lapsed or revoked license, a disciplinary suspension, a divorce decree or an estate administration that would move an interest toward a spouse or heir who holds no license. A company agreement that never says how a relinquished interest is valued, who acquires it, and how the purchase is funded has left the hardest conversation in the practice's life to be negotiated at the worst possible moment. This is one of the specific reasons a professional entity should not run on a template agreement.

Profession-specific carve-outs exist

The Code's default is not always the last word. Some licensing statutes are more permissive than the same-profession baseline in Section 301.007. The clearest example is public accountancy: Section 901.354 of the Occupations Code permits a certified public accountancy firm to include owners who are not license holders under specific conditions, including majority CPA ownership and voting control and active involvement by the non-CPA owner. How a carve-out like that interacts with the Business Organizations Code's default for a firm organized specifically as a PLLC is exactly the kind of question to resolve with counsel before the interest is issued, not after.

What the PLLC protects, and what it never will

The PLLC's liability protection comes from two different statutes, and confusing them is the most common error professionals make about their own entity.

The first is the general LLC shield, which the PLLC inherits through Section 304.001. Under Section 101.114 of the Business Organizations Code, a member or manager is not liable for a debt, obligation, or liability of the company except to the extent the company agreement provides otherwise. The office lease, the equipment financing, the vendor contract, the judgment against the entity on a business obligation: those stop at the entity. This is the same protection a standard LLC gives any business owner, and it is real.

The second is the professional liability rule, and it is narrower than most people assume. Section 301.010 makes the professional entity jointly and severally liable for an error, omission, negligent or incompetent act, or malfeasance committed by an owner, managerial official, employee, or agent while providing a professional service for the entity. The other owners are not subject to that same liability. Read carefully, the rule cuts in three directions at once. The professional who commits malpractice remains personally liable; no Texas entity removes that exposure, and no honest adviser will suggest otherwise. The entity is liable alongside the negligent professional, which means the firm's own assets are exposed to a co-owner's error. And the non-negligent co-owners are shielded personally, which is the protection multi-owner practices are actually buying when they organize.

That is why entity structure and malpractice insurance are complements, not substitutes. The entity allocates who stands behind a professional error. The policy determines whether anyone has to reach personal or firm assets at all. Carriers underwrite around exactly this statutory structure, and a practice that has thought about both layers presents a cleaner risk than one that assumes the letters after its name are the whole answer.

The formation sequence, step by step

The mechanics of forming a PLLC are not complicated. The judgment calls hide inside them.

1. Confirm the entity type and the ownership plan

Before anything is filed, confirm that every intended owner satisfies Section 301.007, that the profession's own licensing statute does not add requirements or offer carve-outs, and that any non-licensed participants are structured outside the professional entity. This is also the moment to ask the licensing board about any profession-specific naming or registration expectations, because fixing a name after the practice has stationery costs more than asking first.

2. File the certificate of formation

A Texas PLLC is formed by filing a certificate of formation with the Secretary of State on Form 206, the form dedicated to professional limited liability companies. The filing fee is 300 dollars, the same fee charged for a standard LLC or a professional corporation; a professional association files at 750 dollars. The certificate states the professional purpose, and Section 101.101 confirms that a single member is enough: a solo practitioner does not need a second owner to organize.

3. Paper the company agreement

The governing document of a Texas LLC or PLLC is the company agreement. That is the statutory term: Section 101.052 of the Business Organizations Code provides that the company agreement governs the relations among members, managers, and officers and the other internal affairs of the company, with the Code's default rules filling whatever gaps the agreement leaves. Most of the business world calls this document an operating agreement, and nothing is wrong with the habit, but the statute a Texas court will apply says "company agreement," and precise drafting should too. For a professional entity the agreement has to do more than a standard LLC agreement: restrict ownership and transfers to authorized persons, handle a Section 301.008 relinquishment with a valuation method and a funding mechanism, and set admission, exit, and deadlock terms that fit a licensed practice. This is the core of our company agreement drafting work for professional clients.

4. Handle the tax layer

Federal tax treatment follows the standard LLC rules. A single-member PLLC is disregarded by default, a multi-member PLLC defaults to partnership taxation, and either may elect S corporation or C corporation treatment, with the S election on IRS Form 2553 being the common move once practice income supports a salary-plus-distributions structure. On the state side, a PLLC is a taxable entity for the Texas franchise tax. For the 2026 and 2027 report years, an entity with annualized total revenue at or below 2,650,000 dollars owes no tax, but it must still file a Public Information Report or Ownership Information Report each year, due May 15. The report obligation survives even when the tax is zero, which is where new practices get tripped, as covered below.

A fuller walkthrough of scope, timing, and flat-fee pricing for this work is on our Texas PLLC formation page.

PLLC, PC, or PA: choosing among the professional entities

Texas offers three professional entity types, and all three wear the same Chapter 301 overlay: the same licensing requirement, the same ownership restrictions, the same professional liability rule. What differs is the base law underneath.

A professional corporation runs on corporate law. Section 303.001 applies the for-profit corporation provisions of Chapters 20 and 21 to a PC unless they conflict with Title 7. That brings shareholders, a board of directors, officers, and bylaws, with the formality that structure implies. A professional association carries its own governance provisions in Chapter 302 and files its certificate of formation at the higher 750 dollar fee. The PLLC, as covered above, runs on Chapter 101's LLC law, which means one document, the company agreement, can be written to fit the practice instead of the practice conforming to corporate formalities.

In our experience, the PLLC is the natural starting point for a new Texas professional practice, and the burden of persuasion sits on choosing something else. The reasons to organize as a PC or a PA tend to be specific and structural: a multi-state footprint where another state treats one form more cleanly for the profession, an existing entity being carried forward, or a carrier or counterparty preference. Those reasons exist, but they should be named before they are paid for in ongoing formality.

The failure modes we see

1. A standard LLC where a PLLC was required

Online filing services form entities quickly and ask few questions, and a surprising number of professional practices are sitting inside standard LLCs today because nobody asked the licensing question. The entity keeps operating, and the gap can go unnoticed for years, but the practice is out of compliance with the professional-entity requirements the entire time. The correction generally runs through amending the certificate of formation to carry the professional designation and purpose language rather than starting a new entity, but the exact mechanics, cost, and tax reporting consequences should be confirmed with counsel before anything is filed. The cheaper version of this paragraph is to file the right form on day one.

2. A template agreement on a professional entity

A downloaded LLC agreement does not restrict ownership to authorized persons, does not price or fund a Section 301.008 relinquishment, and does not address the admission of a new licensed partner or the exit of a retiring one. Every one of those silences becomes a negotiation at the moment the parties are least able to negotiate.

3. Treating "no tax due" as "no filing due"

The franchise tax threshold relieves the tax, not the report. A practice under the revenue threshold owes nothing but must still file its Public Information Report or Ownership Information Report annually. Practices that skip it receive forfeiture notices from the Comptroller for a year in which they never owed a dollar, and unwinding a forfeiture costs more than the filing ever would have.

4. Informal promises of equity to non-licensed people

A handshake understanding that a spouse or a practice manager "owns part of the practice" collides with Section 301.007 the day anyone tries to formalize or enforce it. If the economics need to include non-licensed participants, structure that intent lawfully in adjacent entities from the start rather than leaving it as an unenforceable expectation.

Frequently asked questions

Can a licensed professional in Texas just form a regular LLC instead of a PLLC?

No. Section 301.006 of the Business Organizations Code restricts how a professional service may be provided, and the Secretary of State's own form instructions direct professionals away from the standard LLC form and to Form 206, the PLLC certificate of formation. A standard LLC is not a substitute for a professional entity.

Does forming a PLLC protect a professional from their own malpractice?

No. Under Section 301.010, the entity is jointly and severally liable for an owner's professional error, and the professional who committed it remains personally liable. The structure protects the other, non-negligent owners from that liability; it does not protect the individual who made the error.

Who is allowed to own an interest in a Texas PLLC?

Generally, only a person licensed in the same professional service the entity provides, or a professional organization whose owners hold that license, under Section 301.007. Some licensing statutes add narrow exceptions; Section 901.354 of the Occupations Code, for example, permits non-CPA minority owners of a certified public accountancy firm under specific conditions.

How much does it cost to form a PLLC in Texas?

The Secretary of State's filing fee for a PLLC certificate of formation on Form 206 is 300 dollars, the same fee charged for a standard LLC or a professional corporation. A professional association files at 750 dollars.

Does a Texas PLLC owe franchise tax?

A PLLC is a taxable entity under the Texas franchise tax. For the 2026 and 2027 report years, an entity with annualized total revenue at or below 2,650,000 dollars owes no tax but must still file an annual Public Information Report or Ownership Information Report. Missing the report can trigger a forfeiture notice even when no tax was due.

Can a Texas PLLC have only one owner?

Yes. Section 101.101 of the Business Organizations Code permits a limited liability company, including a PLLC, to have a single member, provided that member satisfies the ownership requirements of Section 301.007.

When to bring in counsel

Not every formation needs a lawyer in the room, but the situations that do share a shape: more than one owner, any non-licensed person in the economics, a practice already formed as the wrong entity, an owner whose license status is uncertain, or a practice heading toward an admission, an exit, or a sale. In each of those, the cost of the structure being wrong is measured in disputes and forfeitures, not filing fees.

Maddox & Muñiz advises Texas professionals on entity selection, PLLC formation, company agreements, multi-entity structuring, and the questions that follow, through flat-fee formation work and outside general counsel arrangements. Our corporate and business practice works with practices from solo formation through multi-owner restructuring. If you are choosing an entity or repairing one, schedule a consultation and we will walk the structure through with you.

This article is general information about Texas entity and business organizations law and is not legal advice. It does not create an attorney-client relationship with Maddox & Muñiz, PLLC. Statutes, Secretary of State forms and fees, and Comptroller thresholds change; confirm the current requirements for your profession and your specific facts with counsel before filing.