Should a private practice psychologist form a PC or a PLLC?

The regulatory layer comes first: most states prohibit licensed professionals from sheltering professional liability inside a standard LLC or corporation. The malpractice liability of a licensed clinician typically flows through to the individual regardless of entity form. Professional entities (PC, PLLC) exist to comply with state licensing board requirements, not primarily to limit malpractice liability.

PC vs PLLC distinctions: a Professional Corporation is a corporation taxed as a C-corp by default (unless it elects S-corp status). A PLLC is a limited liability company with professional restrictions. For federal tax purposes, both can elect S-corp treatment with Form 2553 and produce identical tax results. The difference is in state law: governance formalities (corporate minutes and officers for a PC vs. an operating agreement and managers for a PLLC), state fees, and which professions each entity type is available to.

State-by-state reality: California requires licensed psychologists to use a professional corporation (PC), not a PLLC, because California does not recognize PLLCs for most licensed professions. New York allows both PCs and PLLCs for mental health professionals. Arizona allows PLLCs for licensed professionals. Texas allows both. This is state-specific law that changes. Check your state licensing board's website or call their office directly.

Multi-state telehealth: if you are licensed in multiple states and see clients across state lines, you may need to register your entity in each state where you have clients and conduct significant business. Multi-state professional licensing compliance is complex and should be reviewed with a professional who understands the telehealth nexus rules in your states.

The tax election is state-agnostic: once you confirm the permissible entity type in your state (PC or PLLC), the federal S-corp election via Form 2553 applies identically to both. The tax planning mechanics (reasonable salary, distributions, SE tax savings, Solo 401(k)) are the same regardless of whether the entity is a PC or PLLC.