LLC vs PLLC in Texas (2026)

SEO Title: LLC vs PLLC in Texas: Formation Costs, Taxes & Liability (2026)

SEO Description: Compare Texas LLC and PLLC formation costs, franchise tax rates, liability protection, and compliance requirements. Data-driven guide with exact fees and statute citations.

Introduction

Most Texas service professionals—attorneys, CPAs, physicians, dentists, engineers, and architects—should form a PLLC if they meet the eligibility requirements under Tex. Bus. Org. Code Ch. 301 and Ch. 304. A PLLC provides the same liability protection and tax flexibility as an LLC while meeting professional licensing board requirements. If you're not a licensed professional, or your profession isn't listed on the Texas Secretary of State entity chart, form a standard LLC under Tex. Bus. Org. Code § 3.005.

The cost difference is negligible ($300 filing fee for both), but the compliance and liability implications differ significantly. This guide walks you through the exact differences.

FAQ: Quick Answers

Q: Do I pay more franchise tax as a PLLC than an LLC?

No. Both entities pay the same franchise tax: 0.75% of taxable margin (standard rate), 0.375% for retail/wholesale, or 0.331% under the EZ computation method, per Tex. Tax Code Ch. 171. Neither owes tax if annualized revenue stays under $2,650,000 (2026 threshold). The only difference is that a PLLC must be formed by licensed professionals and comply with professional licensing board rules.

Q: What's the annual compliance cost for each?

Both file a free annual Public Information Report (PIR) or Ownership Information Report (OIR) with the Texas Comptroller by May 15 each year, per Tex. Tax Code § 171.0001. Late filing triggers a $50 penalty plus 5–10% interest. No other state-level annual fees apply to either entity type. Your actual cost depends on whether you hire a CPA or attorney to prepare tax returns and maintain compliance.

Q: Can I convert an LLC to a PLLC later?

Yes, but it requires filing a new Certificate of Formation (Form 206) with the Secretary of State and paying the $300 filing fee again. You'll also need to obtain written consent from your professional licensing board. Plan ahead: if you're a licensed professional, form a PLLC from the start to avoid conversion costs and potential licensing complications.

Side-by-Side Comparison Table

Dimension	LLC	PLLC
Formation Cost	$300 (Tex. Bus. Org. Code § 101.051)	$300 (Tex. Bus. Org. Code Ch. 301)
Expedited Filing	$50 (2–3 days); $500 (next-day); $750 (same-day)	$50 (2–3 days); $500 (next-day); $750 (same-day)
Annual Compliance Cost	$0 (free PIR/OIR filing)	$0 (free PIR/OIR filing)
Late Filing Penalty	$50 + 5–10% interest (Tex. Tax Code § 171.0001)	$50 + 5–10% interest (Tex. Tax Code § 171.0001)
Franchise Tax Rate	0.75% taxable margin (standard); 0.375% (retail/wholesale); 0.331% (EZ)	0.75% taxable margin (standard); 0.375% (retail/wholesale); 0.331% (EZ)
Franchise Tax Threshold	No tax if revenue ≤ $2,650,000 (2026)	No tax if revenue ≤ $2,650,000 (2026)
Federal Tax Default	Single-member: disregarded (Schedule C); Multi-member: partnership (Form 1065)	Single-member: disregarded (Schedule C); Multi-member: partnership (Form 1065)
S-Corp Election	Yes (Form 2553)	Yes (Form 2553)
C-Corp Election	Yes (Form 8832)	Yes (Form 8832)
Liability Protection	Members protected from personal liability (Tex. Bus. Org. Code § 101.001)	Members protected; professional negligence liability may not be shielded (licensing board rules)
Ownership Transferability	Restricted; unanimous consent required unless modified in operating agreement (Tex. Bus. Org. Code § 101.112)	Restricted; unanimous consent required unless modified in operating agreement; licensing board approval may be required
Management Flexibility	Member-managed or manager-managed (Tex. Bus. Org. Code § 101.001)	Member-managed or manager-managed; must comply with professional licensing board governance rules
Operating Agreement Required	No (Tex. Bus. Org. Code § 101.052)	No; but professional licensing boards often require one
Registered Agent Required	Yes; Texas resident or authorized entity (Tex. Bus. Org. Code § 5.201)	Yes; Texas resident or authorized entity (Tex. Bus. Org. Code § 5.201)
Minimum Members	1 (Tex. Bus. Org. Code § 101.001)	1 (Tex. Bus. Org. Code Ch. 301)
Foreign Ownership Allowed	Yes	Yes (subject to professional licensing board approval)
Series LLC Available	Yes (Tex. Bus. Org. Code §§ 101.601–101.636)	No
Dissolution Filing Fee	$40 (Tex. Bus. Org. Code § 11.101)	$40 (Tex. Bus. Org. Code § 11.101)
Eligibility Requirement	None	Licensed professional (attorney, physician, dentist, veterinarian, CPA, architect, engineer, optometrist, or other licensed profession per SOS entity chart)

Formation Cost and Process

Both an LLC and a PLLC cost exactly $300 to file with the Texas Secretary of State, per Tex. Bus. Org. Code § 101.051 (LLC) and Ch. 301 (PLLC). You submit a Certificate of Formation (LLC) or Form 206 (PLLC) online at https://www.sos.state.tx.us/corp/sosda/index.shtml.

Standard processing takes 5–7 business days online. If you need faster approval, expedited options are:

$50 for 2–3 business days
$500 for next-day processing
$750 for same-day processing

Both entity types require a registered agent—a Texas resident or authorized entity with a physical address in Texas (Tex. Bus. Org. Code § 5.201). You can serve as your own registered agent if you're a Texas resident. Changing your registered agent costs $15.

Name reservation costs $40 and reserves your name for 120 days. Your entity name must include "Limited Liability Company," "LLC," or "L.L.C." and be distinguishable from existing entities on file (Tex. Bus. Org. Code § 5.053). Avoid restricted words: Bank, Trust, Insurance, University, College (Tex. Bus. Org. Code § 5.054).

If you operate under a name other than your LLC or PLLC name, you must file a DBA (Doing Business As) for $25 with the Secretary of State (Form 503).

The PLLC difference: You must be a licensed professional to form a PLLC. Eligible professions include attorneys, physicians, dentists, veterinarians, CPAs, architects, engineers, optometrists, and other licensed professionals per the Texas Secretary of State entity chart. Your professional licensing board may require you to submit additional documentation or obtain approval before or after formation.

Tax Treatment Differences

Texas has no state income tax, so both LLCs and PLLCs avoid corporate-level income taxation. However, both entities are subject to the Texas franchise tax, which is based on revenue, not profit.

Franchise Tax Rates (Tex. Tax Code Ch. 171):

Standard rate: 0.75% of taxable margin
Retail/wholesale rate: 0.375% of taxable margin
EZ computation rate: 0.331% of taxable margin
No tax due if annualized revenue ≤ $2,650,000 (2026 threshold)

The franchise tax is due May 15 annually. Late filing triggers a $50 penalty plus 5–10% interest, and failure to file can result in involuntary termination of your entity by the Secretary of State after tax forfeiture (Tex. Tax Code § 171.0001).

Federal Tax Treatment:

Both LLCs and PLLCs default to the same federal tax classification:

Single-member: Disregarded entity (you report income on Schedule C, Form 1040)
Multi-member: Partnership (you file Form 1065 and receive a K-1)

Both can elect S-Corp or C-Corp status using Form 2553 (S-Corp) or Form 8832 (C-Corp). An S-Corp election can reduce self-employment tax by allowing you to pay yourself a reasonable W-2 salary and take the remainder as a distribution, subject to IRS scrutiny.

Self-employment tax applies to LLC and PLLC members unless you elect S-Corp status. Estimated tax payments are due April 15, June 15, September 15, and January 15.

The PLLC difference: Professional licensing boards may impose additional tax or accounting requirements. For example, some boards require PLLCs to maintain separate trust accounts or file specific financial reports. Verify with your licensing board before formation.

Liability and Asset Protection

Both LLCs and PLLCs provide limited liability protection: members are not personally liable for the debts or obligations of the entity (Tex. Bus. Org. Code § 101.001). Creditors cannot pursue your personal assets to satisfy business debts.

Charging Order Protection:

Texas provides standard charging order protection under Tex. Bus. Org. Code § 101.112. If a creditor obtains a judgment against you personally, they can only place a charging order on your LLC or PLLC membership interest. The creditor cannot force a sale of the business or seize other members' interests. This protection is strong but not absolute—a court may order a foreclosure sale in certain circumstances.

The Critical PLLC Limitation:

A PLLC does not shield members from liability for their own professional negligence or malpractice. If you're an attorney and commit malpractice, the injured party can sue you personally. The PLLC protects you from liability for other members' negligence (if you have multiple members), but not your own.

This is a licensing board requirement, not a Texas statute limitation. Your professional licensing board mandates that PLLCs maintain professional liability insurance and cannot eliminate personal liability for professional acts.

Operating Agreement Impact:

Both LLCs and PLLCs can modify or eliminate fiduciary duties in their operating agreement, per Tex. Bus. Org. Code § 101.052 and SB 29 (2025). However, you cannot eliminate liability for fraud or willful misconduct. A written operating agreement is not legally required, but it's strongly recommended to clarify member rights, profit distribution, and management authority.

Management and Compliance

Management Structure:

Both LLCs and PLLCs default to member-managed (all members have equal management authority) unless you elect manager-managed in your Certificate of Formation. Manager-managed structures allow non-member managers to run the business while members remain passive investors.

Tex. Bus. Org. Code § 101.001 permits either structure. Your operating agreement can customize management rights, but the default rules apply if you don't have a written agreement.

Operating Agreement:

Neither LLCs nor PLLCs require a written operating agreement under Texas law (Tex. Bus. Org. Code § 101.052). However, professional licensing boards often require one for PLLCs. A written agreement clarifies:

Profit and loss distribution
Member voting rights
Admission and removal of members
Buyout and dissolution procedures
Dispute resolution mechanisms

Without an operating agreement, Texas default rules apply: equal profit/loss sharing, unanimous consent for new members, and member-managed structure.

Annual Compliance:

Both entities must file a free annual Public Information Report (PIR) or Ownership Information Report (OIR) with the Texas Comptroller by May 15 each year. The report includes:

Principal office and place of business addresses
Names and addresses of managers or members
Registered agent information
SOS file number

Late filing penalties: $50 per late report, plus 5–10% interest. Failure to file for two consecutive years can result in involuntary termination. Reinstatement costs $75 and requires filing all delinquent reports, paying all taxes and penalties, and obtaining a tax clearance from the Comptroller.

The PLLC Difference:

PLLCs must comply with additional professional licensing board requirements, which may include:

Annual continuing education for members
Mandatory professional liability insurance
Restrictions on ownership (e.g., only licensed professionals can own membership interests)
Approval of new members or managers
Specific operating agreement language

Contact your licensing board before forming a PLLC to confirm requirements.

Which Is Right for Your Situation

Form an LLC if:

You're not a licensed professional (or your profession isn't eligible for PLLC status)
You want maximum flexibility without licensing board oversight
You operate a business, not a professional service practice
You want to form a series LLC (available for LLCs only; Tex. Bus. Org. Code §§ 101.601–101.636)

Form a PLLC if:

You're a licensed attorney, physician, dentist, veterinarian, CPA, architect, engineer, optometrist, or other eligible professional per the Texas Secretary of State entity chart
Your professional licensing board requires or recommends a PLLC structure
You want to signal professional credibility and compliance with licensing rules
You plan to hire other licensed professionals as members or managers

Decision Framework:

Check licensing board requirements. Contact your professional licensing board (State Bar of Texas, Texas Medical Board, Texas Board of Accountancy, etc.) and ask if a PLLC is required, recommended, or optional. Some boards mandate PLLCs; others allow standard LLCs.
Compare formation costs. Both cost $300 to file. If your board requires a PLLC, the decision is made. If it's optional, the cost difference is zero.
Evaluate liability exposure. If you provide professional services and face malpractice risk, a PLLC doesn't shield you from your own negligence—only from other members' negligence. Professional liability insurance is essential regardless of entity type.
Plan for growth. If you anticipate multiple members, a PLLC may require board approval for each new member. An LLC offers more flexibility. However, if your board requires a PLLC, you must comply.
Consider tax elections. Both entities can elect S-Corp or C-Corp status. An S-Corp election can reduce self-employment tax but adds payroll complexity. Consult a CPA to determine if an election makes sense for your income level.
Document your choice. Draft a written operating agreement (even though it's not legally required) to clarify member rights, profit distribution, and management authority. This prevents disputes and demonstrates professionalism to clients and lenders.

Conclusion

For licensed professionals in Texas, form a PLLC. The $300 filing fee is identical to an LLC, and your professional licensing board likely requires or strongly recommends PLLC status. A PLLC signals compliance with licensing rules and protects you from liability for other members' professional negligence (though not your own).

For non-licensed businesses, form an LLC. You get the same liability protection, tax flexibility, and franchise tax treatment as a PLLC without the licensing board oversight.

Key takeaways:

Both cost $300 to form and $0 to maintain annually (excluding franchise tax)
Both pay the same franchise tax: 0.75% of taxable margin (no tax if revenue ≤ $2,650,000)
Both provide liability protection (with the PLLC caveat: professional negligence is not shielded)
Both allow S-Corp or C-Corp tax elections
PLLCs require compliance with professional licensing board rules; LLCs do not

Next steps:

Verify your profession's eligibility for PLLC status with the Texas Secretary of State
Contact your professional licensing board to confirm PLLC requirements
File your Certificate of Formation (LLC) or Form 206 (PLLC) online