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If you hold a professional license, your entity options are different

  • Writer: Brandi Joffrion
    Brandi Joffrion
  • Jul 15, 2024
  • 2 min read

Many states require licensed professionals to use a specific entity form, with restrictions on who can own it.


What this covers

Typically doctors, dentists, lawyers, accountants, architects, engineers, and similar. Sometimes real estate, insurance, and contracting — those vary widely by state.


What's different

The entity type. Many states require a professional corporation or professional LLC rather than an ordinary one.


Who can own it. Ownership is frequently limited to people licensed in the same profession. A spouse who isn't licensed often can't be a member.


Board approval. Your licensing board may need to approve the entity, the name, or both, before or after formation.


Naming rules. Some professions restrict what the entity can be called.


What it doesn't protect against

This is the important part. A professional entity generally does not shield you from liability for your own professional conduct. If you commit malpractice, the entity doesn't stand between you and the claim.


What it does is separate you from the business's general obligations and, depending on the state, from the malpractice of other professionals in the practice.


Which means your malpractice coverage is doing the heavy lifting, not the entity.


How people get caught out

Forming an ordinary LLC through an online service because nothing asked about licensing. The entity may be invalid for the professional practice, and the licensing board may have views about having practiced through it.


What to do

Before forming anything, check your licensing board's requirements — most publish them plainly.


If you already formed an ordinary LLC and you're licensed, verify whether it's permitted.


Correcting it early is straightforward; explaining it during a licensing review is not.


This is general information, not legal advice for your situation. If you want an answer for your business, book a consultation.

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