Should a Lawyer Form an LLC or PC? Business Structure for a Solo Law Firm

The Quick Answer

In most states, solo attorneys have three viable entity options: a Professional Limited Liability Company (PLLC), a Professional Corporation (PC or APC), or a sole proprietorship (no entity). A PLLC is the most popular choice for solo attorneys because it provides liability protection for business debts (though not for your own malpractice), allows pass-through taxation, and is simpler to maintain than a PC. A PC (or Professional Corporation) is required in some states (notably California, where PLLCs are not permitted for law firms) and provides the same basic liability protection with more rigid formalities (annual meetings, corporate records). A sole proprietorship provides no liability protection and is typically used only by attorneys who haven't yet set up an entity — avoid it as a long-term structure. Never form a standard LLC for a law firm without confirming your state bar explicitly permits it; many states require the 'professional' designation (PLLC or PC) for law firms.

State Bar Restrictions on Law Firm Entity Types

The permissible entity types for law firms vary by state and are governed by both the state's business entity laws and the state bar's rules of professional conduct. Key state-by-state rules: California does not permit PLLCs for law firms — attorneys must use a Professional Law Corporation (PLC) or Professional Corporation (PC), or practice as a sole proprietor. New York permits LLPs (Limited Liability Partnerships) and PLLCs for law firms. Texas, Florida, and most other states permit PLLCs. Some states (e.g., Maryland) permit standard LLCs for law firms. The American Bar Association's website maintains a state-by-state summary of permissible law firm structures. Before filing any entity paperwork, check your state bar's website under 'law firm registration' or 'entity requirements' — most bars post clear guidance. A $250 consultation with a business attorney in your state (or your state bar's ethics hotline) can save you from filing the wrong structure.

PLLC: The Most Common Structure for Solo Attorneys

A Professional Limited Liability Company (PLLC) provides personal liability protection for the firm's business debts — office leases, software subscriptions, vendor contracts — while allowing pass-through taxation (profits flow to your personal return without entity-level corporate tax). Importantly, a PLLC does NOT protect you from liability for your own professional malpractice — only malpractice insurance does that. PLLC formation costs vary by state: $50 (Kentucky) to $500 (Massachusetts), with most states charging $100–$200. Annual maintenance requires a registered agent ($50–$150/year), an annual report filing ($25–$100/year), and a separate bank account. PLLCs require less formal governance than a PC — no annual shareholder meetings, no corporate minutes required (though good practice to keep records). PLLC members must be licensed attorneys in most states, meaning you cannot bring in a non-attorney business partner as an equity owner.

Professional Corporation (PC): When It's Required and How It Works

A Professional Corporation (PC, APC in California, or Prof. Corp.) is required in states that don't permit PLLCs for law firms. California attorneys must form a Law Corporation (registered with the State Bar of California under Business & Professions Code §6160). A PC provides the same general liability protection as a PLLC but requires more formal governance: articles of incorporation, bylaws, an initial board meeting, annual shareholder meetings, and corporate minutes. PCs also face a potential double-taxation issue if structured as a C-Corp: corporate profits taxed at the entity level, then dividends taxed again personally. Most solo attorneys avoid this by electing S-Corp status (Form 2553 filed with the IRS within 75 days of incorporation), which preserves pass-through taxation. In California, a law corporation's stock can only be owned by licensed California attorneys.

Sole Proprietorship: The Default You Should Avoid Long-Term

If you start practicing law without forming an entity, you're automatically a sole proprietor. A sole proprietorship is legally identical to you as an individual — there is no liability separation between your business debts and personal assets. If your firm owes $10,000 to a landlord and you close the firm, that debt follows you personally. The only advantage of a sole proprietorship is simplicity: no formation costs, no annual filings, no separate bank account required (though strongly recommended for accounting hygiene). Most new solo attorneys who haven't yet formed an entity are technically sole proprietors. Set a deadline — no later than 30 days after opening — to file your PLLC or PC. The cost and time required are minimal compared to the protection gained.

Tax Implications: PLLC Pass-Through vs S-Corp Election

As a PLLC or PC with S-Corp election, all net income flows to your personal tax return and is subject to self-employment tax (15.3% on the first $160,200 of net income in 2025). Once your practice generates more than $80,000–$100,000 in net income annually, an S-Corp election (available to PLLCs and PCs) can significantly reduce self-employment taxes. Under S-Corp status, you pay yourself a 'reasonable salary' (subject to payroll taxes) and take remaining profits as distributions (not subject to self-employment tax). Example: $150,000 net income, $80,000 salary, $70,000 distribution saves approximately $10,710 in self-employment taxes annually. Consult a CPA familiar with professional service firms before making this election — the savings must outweigh the cost of running payroll ($50–$150/month through Gusto or ADP). Most attorneys make this election when consistent annual net income exceeds $100,000.

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