A PLLC in Texas protects you, as a Member from the malpractice of any of the other members in your Professional Limited Liability Company.
A Professional Limited Liability Company is specifically provided for professionals looking to offer their services through an entity in Texas. Professional services, as defined by the Texas Statutes, means “any type of service that requires, as a condition precedent to the rendering of the service, the obtaining of a license in this state, including the personal service rendered by an architect, attorney, certified public accountant, dentist, physician, public accountant, or veterinarian.” Put simply, if your position require you to have a license issued by the State of Texas to perform that service then you are rendering professional services. For professionals of all kinds, a common concern when going into private practice is malpractice, and a PLLC can add a layer of protection to the individual professionals rendering their services.
There are two important factors to remember here:
1) The PLLC itself, as an entity, can still be held liable for the malpractice of a Member. This is specifically laid out in the Texas Statutes authorizing the formation and use of PLLCs by professionals in Texas. Subsection A of that Statute provides:
A professional entity is jointly and severally liable for an error, omission, negligent or incompetent act, or malfeasance committed by a person who: (1) is an owner, managerial official, employee, or agent of the entity; and (2) while providing a professional service for the entity or during the course of the person’s employment, commits the error, omission, negligent or incompetent act, or malfeasance.
Texas Business Code 301.010
2) The member committing the malpractice has no protection from a malpractice suit based on his membership in a PLLC. The benefit of the PLLC lies in a situation where one of the Members of the PLLC commits some form of malpractice: the other members do receive protection from a malpractice suit. This is different than in, say, a Partnership where partners may be held liable for the malpractice of a partner. The Texas Business Code provides that:
An owner, managerial official, employee, or agent of a professional entity other than an owner, managerial official, employee, or agent liable under Subsection (a) is not subject to the same liability imposed on the professional entity under this section.
Texas Business Code 301.010
There are a variety of reasons to choose a PLLC for your business formation, but the considerations of malpractice should weigh heavily on the decision to choose this structure for your professional service providing organization. When considering your PLLC formation in Texas, consult with an attorney familiar with the workings of entity formation and management, Attorney Nathaniel Gilbert in San Antonio. To learn more about PLLCs and LLC formation, Click here. To contact Nate directly, Click Here.