• Justin Hein

Professional LLCs are Not Permitted in California

If you are operating an LLC performing any of these professional services, you might want to speak to your attorney.

Section 17002 of the Beverly-Killea LLC Act (Corp Code Sections 17000-17666 or “LLC Statute”) states that a limited liability company (“LLC”) may engage in any lawful business activity, whether or not for profit, except the banking business, the business of issuing policies of insurance and assuming insurance risks, or the trust company business. However, that open-ended description is actually "subject to any limitations contained in the articles of organization and to compliance with any other applicable laws."

One of the "other applicable laws," is found within California Corporations Code. Section 17375 explicitly states that an LLC may not render professional services, as defined in sections 13401(a) and 13401.3 (the “Moscone-Knox Professional Corp Act”). Rather, those professionals may only operate as solo practitioners, partnerships, or professional corporations.

As defined in this part, “professional services” includes any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act. 13401.3.

“Professional services” also includes any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Yacht and Ship Brokers Act (Article 2 (commencing with Section700) of Chapter 5 of Division 3 of the Harbors and Navigation Code).

What is a Professional?

A 2004 Attorney General opinion letter defines “professional service” for purposes of this law. This opinion letter states that a profession is distinguished by its extensive educational and training requirements and the passing of a rigorous state administered examination.

This 2004 Opinion states that even if a business requires a license, certification, or registration pursuant to the Business and Professions Code, it may still conduct its activities as a LLC company if the services rendered require “only a non-professional occupational license.”

To actually determine whether a particular service is “one or the other” requires an examination of the educational, training, and testing prerequisites.

What Professions are Prohibited?

Here is a list of professions that have been determined to already meet the professional threshold:

  1. Accountant

  2. Acupuncturist

  3. Architects

  4. Attorneys

  5. Audiologists

  6. Clinical Social Workers

  7. Chiropractors

  8. Court Reporters

  9. Doctors

  10. Dentists

  11. Engineers

  12. General Contractors

  13. Marriage and Family Therapists

  14. Nurses

  15. Optometrists

  16. Pharmacists

  17. Psychologists

  18. Physical Therapists

  19. Physician Assistant

  20. Real Estate Brokers

  21. Securities Brokers

  22. Speech Pathologists

  23. Veterinarians

What if Professional, but Not on the List?

If your business is required to be licensed, certified or registered in California, before attempting to form the professional business as an LLC (i.e. filing Form LLC-1 with the California Secretary of State’s office), it is recommended that you contact your licensing authority to determine whether your services are, in fact, considered professional.

161 views0 comments

Recent Posts

See All