Replies

1. 
   Scooter1 | May 03, 2004 06:17pm | #1

   The reason that that no LLC can hold State License. So law firms, process servers, contractors private detectives, etc can not be an LLC. You can operate as a Sub Chapter S or LLP or a regular corp.

   Another way of doing it is to hold the license individually but operate as an LLC.

   Regards,

   Boris

   "Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1934

   
   

   ---

   Edited 5/3/2004 4:42 pm ET by Boris Yeltsin

1. 
   Dave45 | May 04, 2004 01:33am | #2

   I know that it's the law but I'm trying to understand why.  Apparently CA is the only state that does this.

1. 
   davidmeiland | May 04, 2004 02:06am | #3

   Not sure I have the answer, but I do have a CA class B (general contractor) license as an individual and I know that an individual qualifies (documents experience and takes the test)... so how could an LLC or any other entity but a sole proprietor get a license? You can contract as a corporation, but you need a licensed person/partner to qualify the company. That person signs the contracts.

   Here in WA it's different... a company can register as a contractor as easily as an individual. I think that here I'm not personally a licensed contractor, but I own a company that is one. Or something like that.

1. 
   Scooter1 | May 04, 2004 03:37am | #4

   The concept and rationale was that that the LLC route is like "corporation light". No by laws, no stock, no officers, no directors, no shareholders. It is like a 1040 EZ form.

   The legislature did not want persons or entities that are required to be licensed to be able to use corporation light, and wanted them to observe a more formal entity, like a regular corp.

   Then two years later, the legislature amended that law, by allowing LLP's, for professionals, like accountants and lawyers. Legislators are lawyers so its no wonder that they got an exception.

   Thats all I know about it. Being a former head of state, I get an exemption.

   Regards,

   Boris

   "Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1934

1. 
   davidmeiland | May 04, 2004 07:12am | #5

   But.... doesn't any entity need a qualifying individual? A corporation itself cannot hold a license in CA as far as I know. But whadda I know?

2. 
   PlumbandTrue | May 04, 2004 07:48am | #6

   I guess the one-word answer is "politics."  Or, more aptly perhaps, "money."  Attempts to extend licensing to LLCs have failed, apparently because the regulated professions didn't want a mandatory liability insurance requirement placed on them as a condition of licensure, and the trial lawyers didn't want to allow them the protections of the LLC structure without such coverage. 

   This write-up is taken from the Senate Business and Professions bill analysis on AB 2401 of the 1995-96 Legislative Session.   A subsequent similar measure, AB 2724 of the 2001-02 session, never had a hearing. 

   While LLCs may generally engage in any lawful business 
   activity, except banking, insurance or trust company 
   operations, an uncodified provision of the Act specified 
   that it did not authorize "professional services," as 
   defined, to be offered unless expressly authorized under 
   the applicable provisions of the Business and Professions 
   Code.  "Professional services" were defined as those 
   services that may lawfully be rendered pursuant to a 
   license, certification or registration authorized by the 
   Business and Professions Code or the Chiropractic Act.  
   Therefore, under existing law, state licensed professionals 
   such as lawyers, certified public accountants, real estate 
   brokers, engineers, land surveyors, and contractors, among 
   others, are not eligible to operate as an LLC.  

   SB 141 (Beverly, Chapter 57 - Statutes of 1995) at one time 
   would have added numerous categories of state regulated 
   professional service providers to the types of businesses 
   that could operate as LLCs.  However, opponents of SB 141 
   and the bill's sponsor were unable to agree as to whether 
   or not professional or licensed LLC service providers 
   should carry adequate insurance to ensure their financial 
   ability to respond to legal judgments for contract or tort 
   claims.  Consequently, those additional classes of 
   businesses were amended out of SB 141 prior to its 
   enactment.

   SB 513 (Calderon, Chapter 679 - Statutes of 1995) 
   authorized the establishment of limited liability 
   partnerships (LLPs) for licensed attorneys and licensed 
   accountants, to be registered with the Secretary of State 
   -- with the effect that partners of the LLP would only be 
   personally liable for those torts in which they personally 
   participated and not jointly and severally liable for any 
   other torts or debts of the partnership.

   4.   Opposition.

   The California Bankers Association (CBA) and the Consumer 
   Attorneys of California (formerly the California Trial 
   Lawyers Association) have both expressed opposition to this 
   bill.  The CBA is concerned that the bill would 
   disadvantage property owners who do business with LLC 
   contractors by shielding the personal assets of the 
   contractor from liability, and a perceived lack of clarity 
   regarding whether the property owner would be able to go 
   behind the limited liability corporate status to hold LLC 
   members personally liable if the LLC is not adequately 
   capitalized.  The Consumer Attorneys of California maintain 
   that service professionals who wish to form LLCs should 
   correspondingly be required to maintain adequate insurance 
   -- which is not required by the provisions of the bill.

    

1. 
   Dave45 | May 04, 2004 04:06pm | #7

   Thanks, Plumb.  I suspected that 'politics' would be part of the reason.  I didn't realize that the debate dated back almost 10 years, though.