If your business consists of providing services that require a state license — medicine, law, accounting, dentistry, architecture, engineering, psychology, real-estate brokerage — you generally cannot form an ordinary LLC or corporation. Nearly every state requires licensed professionals to practice through a professional corporation (PC), a professional limited liability company (PLLC), or a professional association (PA), and to limit ownership to licensees in the same profession. The label is regulatory; the tax treatment is identical to the non-professional version of the same structure. A PLLC taxed as a partnership behaves like a multi-member LLC; a PC defaults to C-corporation taxation but can elect S-corp status on Form 2553 like any other corporation.
What changes is the liability shield. A professional entity protects you from the firm’s debts and from your colleagues’ malpractice. It does not protect you from your own. Personal malpractice coverage is non-optional and the entity itself does not substitute for it. Read your state’s specific rules before forming — a handful of states (notably California) prohibit certain professions from using an LLC entirely and require a PC instead.
For the typical high-earning solo professional — a physician, an attorney, a CPA in their own practice — the standard architecture is a PLLC (or PC where required) electing S-corporation status, combining the malpractice shield, the entity-level credibility, and the self-employment-tax saving of the S-corp split. The decision tree in section “Reasonable Compensation and the Break-Even Point” applies unchanged; the only difference is the form of the underlying entity.