Ask the Health Lawyer

Can a Professional Limited Liability Company Own Another Professional Limited Liability Company?

Question: Can a professional limited liability company own another professional limited liability company?

Answer: Yes, a PLLC can own another PLLC provided it has the correct ownership and is formed for the same purpose as the PLLC it owns.

For example, a physician can form John Doe, MD, PLLC, and that entity can be an owner of Medical Practice, PLLC. Interestingly, this would not be true for professional associations. PAs can only be owned by individuals, cannot be owned by any other type of professional entity, and cannot own another PA.

The key is in the chain of legal definitions that only an attorney could love.

Professional associations, professional corporations, or professional limited liability companies are all considered “professional entities” under Texas law. Texas Business Organizations Code § 301.003(4). Each of these entities must be formed to provide a professional service and meet all the requirements of a professional entity. Id. §301.003(2), (3), and (6).

All professional entities have one thing in common: they can only be owned by an “authorized person.” Id. § 301.004. But who qualifies as an “authorized person” is different depending on the type of professional entity involved.

For professional associations, an authorized person can only be a “professional individual,” which is an individual who is licensed to provide in Texas or another jurisdiction the same professional service that will be rendered by that professional entity. Id. § 301.006(a), .003(5).

For professional corporations and professional limited liability companies, an authorized person also includes “professional organizations.” Id. § 301.004(2).

The definition for professional organizations is needlessly confusing. Companies are considered “persons” in the sense they are separate legal entities. With that in mind, a professional organization means “a person other than an individual, … that renders the same professional service as the professional corporation or professional limited liability company…”

That answers the question. Professional entities are “persons other than an individual,” and if they render the same professional service as the professional corporation or professional limited liability company they own, they meet the definition of a professional organization.