The standard advice for a new practice is to form an LLC. It’s good advice for a bakery. For a licensed clinician, it’s incomplete, because the question of which entity you can form is decided first by your state’s professional licensing law and only second by tax considerations.
What a PLLC is, and why it exists
A professional limited liability company is an LLC limited to licensed professionals. Some states require licensed professions to use a PLLC (or a professional corporation) instead of an ordinary LLC; some allow either; a few don’t allow professionals to use an LLC structure at all. Nolo’s state-by-state professional LLC guide notes, for example, that California permits professionals to form registered limited liability partnerships or professional corporations but not LLCs or PLLCs, while states such as New York use a professional service LLC form for licensed professions. Which list your state is on, and whether mental health licenses are covered, is the first fact to establish.
What neither one protects
Here’s the part that gets lost. Neither an LLC nor a PLLC shields you from your own professional negligence. If a client sues over your clinical work, the entity doesn’t stand between that claim and you; your malpractice insurance does. What the entity protects is your personal assets from the business’s debts and contracts, and, in a group, from a partner’s malpractice. That protection is real and worth having. It’s just not the protection most clinicians think they’re buying.
Where the wrong choice shows up
The wrong entity rarely causes trouble on the day you file. It shows up later. A bank that wants formation documents matching the name on your EIN. A payer application that asks whether the contracting party is an individual or an organization, and then needs a Type 2 NPI for the organization. A licensing board that expects professional entities to be owned only by licensees. Fixing it then means a new filing, a new EIN in some cases, and updating every account and contract that used the old one.
How to check your own state
Two sources settle it. Your Secretary of State’s business filing page lists the entity types available and whether a professional entity requires board approval. Your licensing board’s rules say whether your license type is a regulated profession for entity purposes. The SBA’s business structure guide covers the general tradeoffs; your state’s own pages decide the answer.
Where the S corporation fits
An S corporation isn’t an entity you form; it’s a tax election an LLC or corporation can make with IRS Form 2553. It can lower self-employment tax once profit is steady enough to pay yourself a reasonable salary and still have meaningful profit left over. For most new practices, that’s a year-two conversation with an accountant, not a day-one filing.