PLLCs now required. Professionals licensed by the IDFPR: there has been a major change to the LLC statute in Illinois. It likely affects you and your business. Previously, licensed professionals were able to form their businesses as LLCs. Now, these businesses must register as a Professional LLC (PLLC).
This change went largely unenforced, but no longer.
Attention IDFPR Licensed Professionals: An Illinois LLC Statute Change Applies to You
Are you a professional licensed by the Illinois Department of Financial and Professional Regulation (IDFPR)?
In Illinois, the IDFPR issues licenses to professionals like therapists, counselors, licensed social workers, occupational therapists, psychologists, physical therapists, physicians, speech language pathologists, salons, cosmetologists, barbers, esthetician, massage therapist, chiropractor, architects, CPAs, dentists, and engineers, among others. You can find a full list of regulated professions here.
One of the first decisions when starting a business is what type of entity to form. Here at G & G Law, we like LLCs [link to landing page] because they limit your liability while providing the most flexibility and ease of any of the other entity types.
However, it’s unfortunately not that simple for businesses that provide professional services licensed by the IDFPR.
These businesses must now form as a Professional LLC (PLLC) with the Illinois Secretary of State. Businesses already formed as LLCs must amend their formation documents to be PLLCs instead.
What is the Difference between a PLLC and an LLC?
A PLLC is technically a subtype of an LLC (“LLC” stands for “limited liability company”). LLCs that intend to prove or do provide professional services regulated by the IDFPR must comply with the Professional Limited Liability Act. Such businesses are referred to as Professional Limited Liability Companies, Professional LLCs, PLLCs, or P.L.L.C.s.
The legal reason for forming a PLLC is the same as the reason for forming an LLC: both create a shield between your personal assets and your business’s assets. This can limit your personal liability if something happens to the business, just one of many reasons to form an LLC.
Illinois PLLC Statute Change
In August 2018, Illinois updated the Illinois Professional Limited Liability Act (805 ILCS 185/) and the Illinois Limited Liability Company Act (805 ILCS 180/). Previously, businesses providing professional services could form their business as either an LLC or a PLLC (there are other entity possibilities, but we’ll stick to LLCs and PLLCs for now). The 2018 change requires such businesses to form a PLLC instead. The statutory change also requires such businesses already formed as LLCs to amend their Secretary of State and formation documents to be PLLCs instead.
While the law changed in 2018, it’s been difficult to implement the changes. Up until the past months, when we reached out to the Illinois Secretary of State and the IDFPR for clarification on the processes for formation, many of the people we spoke with were unable to provide clear answers to our questions. The response is understandable and typical when the law changes, but certainly a bit frustrating for those affected.
Since then though, we have received more information from the IDFPR and the Secretary of State. In fact, we’ve gotten word that the IDFPR is no longer allowing newly formed businesses that provide professional services to register LLCs with them. The IDFPR is cracking down. LLCs must amend their business filing with the Secretary of State to reflect a PLLC before the IDFPR will allow them to register.
IDFPR PLLC Registration Requirements
According to the Illinois LLC Act, a PLLC must register with the IDFPR:
Sec. 1-28. Certificate of registration; Department of Financial and Professional Regulation. This Section applies only to a limited liability company that intends to provide, or does provide, professional services that require the individuals engaged in the profession to be licensed by the Department of Financial and Professional Regulation. A limited liability company covered by this Section shall not open, operate, or maintain an establishment for any of the purposes for which a limited liability company may be organized under this Act without obtaining a certificate of registration from the Department pursuant to the Professional Limited Liability Company Act.
(805 ILCS 180/1-28)
Here’s a handy guide the IDFPR put together that provides step-by-step instructions for obtaining the required registration.
LLCs intending to provide professional services always needed to register with the IDFPR. Now, though, the IDFPR is ONLY allowing PLLCs to register. New LLCS can’t register until they make the required amendments. Clearly, it’d save some time to form as a PLLC with the Secretary of State from the get-go.
IDFPR Cracking Down on LLC vs. PLLC
In the last few months, the IDFPR started sending deficiency notices to LLCs that try to register with the IDFPR. This is new! The form says:
YOUR APPLICATION OR REQUEST CANNOT BE PROCESSED DUE TO ERRORS OR DEFICIENCIES.
NO FURTHER ACTION CAN BE TAKEN ON YOUR APPLICATION UNTIL SUCH TIME AS ALL DEFICIENCIES HAVE BEEN MET.
The form clarifies:
Please be advised: Due to statute changes in Illinois for LLC, all businesses listed as LLC’s providing professional services licensed by the Illinois Department of Financial and Professional Regulation (IDFPR) are now required to register as a Professional Limited Liability Company (PLLC) with the Illinois Secretary of State’s Office (ILSOS).
It goes on to list the steps required to amend the LLC to a PLLC. The IDFPR will only process registration after “You… provide a filed copy of your Articles of Amendment to IDFPR as well as a signed and dated statement to correct your business name…”
So far, the IDFPR is only cracking down on newly-formed LLCs. According to the form:
These requirements apply to an application for licensure with IDFPR and not a renewal of an existing license.
However, since the statute requires all LLCs that provide IDFPR-licensed services to convert, we expect the IDFPR to apply the requirements to renewals at some point down the line.
If you’re a licensed professional striking out on your own and starting a business – congratulations! We’d be happy to schedule a consultation with you to talk about this exciting move and discuss entity choices. It’s likely we’ll decide that a PLLC is the best fit. You should know that a regular LLC is NOT appropriate for your business and the Secretary of State and IDFPR are cracking down on this.
If you already have an LLC providing IDFPR-licensed services, you should amend your formation documents to be a PLLC. We’d be happy to talk you through that process as well!