Can a Dentist Limit Liability by Forming an LLC?
Many states allow formation of a professional limited liability company. The PLLC is different from the standard limited liability company in that only licensed professionals, including dentists, can be members, as owners are called. The liability protection is similar to that of an LLC except when it comes to malpractice.
Other People Are Reading
-
State Laws Vary
-
While every state allows the formation of an LLC, many have restrictions when licensed professionals are involved. Some states prohibit these professionals from forming an LLC to practice their profession, though there's nothing to stop licensed professionals from being members of an LLC conducting a different line of business. The options include forming the similarly structured PLLC. The professions covered by the PLLC vary from state to state, but all PLLC state statutes include medical practices such as dentists.
Liability Differs
-
An LLC generally protects personal assets from any claims or debts held against the company. An LLC, however, does not limit liability for any misdeeds by a member. States allow licensed professionals to form the professional version of the LLC to codify in its liability protection the treatment of malpractice, a special form of misdeeds. A PLLC's member's assets are not protected against claims in a suit of malpractice, but the lawsuit does not affect other members unless the claimant can show they were involved in the malpractice or were in a position to know and prevent the professional misdeeds from occurring.
-
Business Liability Protection
-
Outside of malpractice, a PLLC does limit members' liability in regard to the business itself, protecting personal assets from any debts incurred by or claims against the company. In this way, its liability protection is the same as a standard LLC. But the liability protection is not unconditional. In a lawsuit filed against a PLLC, a court may be able to "pierce the veil" if personal funds and assets are comingled with business assets, or if business funds are misused for its members' personal benefit. A court can rule that, in essence, there is no proper division between members' personal assets and those of their company, and so hold the members personally liable for any legal finding against the PLLC.
Members Limited to Professionals
-
LLC statutes do not restrict who can be members. For a PLLC, however, only members who are licensed in the professional services the company provides can be members. A PLLC for dentistry, for instance, can only have dentists as members.
-
References
- Photo Credit Dentist at work in dental room image by Vladimir Melnik from Fotolia.com
