The California Legislature has chosen to classify certain careers or professions as “Professional.” Professionals are bestowed with greater responsibility simply do to the nature of their profession. For example, the consequences of a doctor’s mistake would be far more life altering to the patient than a mistake made by a newspaper delivery person to the newspaper subscriber. Therefore, Professionals are held to a higher standard then participants of all other careers or professions.
In order to maintain this high standard of professionalism the California Legislature prohibits Professionals from limiting their liability for mistakes by establishing a Limited Liability Company, or LLC. In short if the California Legislature has determined you are a professional (see the list below), it is illegal for you to operate as a LLC.
California Corporations Code § 13401(a) defines a professional as one who provides any type of professional service 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. Additionally, Corporations Code § 17375 specifically prohibits those meeting the above definition from establishing an LLC to provide those services.
Below is a list of common Professionals:
- General Contractor
- Marriage and Family Therapist
- Physical Therapists
- Physician Assistant
- Securities Brokers
If you are conducting business as an LLC and you are a member of one of the above named professions you need to make a change. The procedure is relatively simple and can be done with little if any effort by you. Let us know if we can help.