Senate Bill No. 515

(By Senator Craigo)

____________

[Introduced February 20, 1995; referred to the Committee
on the Judiciary; and then to the Committee on Finance.]
____________




A BILL to amend chapter thirty-one of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding thereto a new article, designated article one-b, relating to professional limited liability companies; setting forth definitions; providing who may become a member of a professional limited liability company; requiring the use of certain initials or phrases to identify professional limited liability companies; requiring that a foreign professional limited liability company obtain a certificate of authority; providing for mergers and consolidations of domestic professional limited liability companies with foreign professional limited liability companies or foreign professional corporations; setting forth how professional limited liability companies may render professional services; providing that professional law limited liability companies may qualify as fiduciaries; providing for the continuation of professional relationships in the context of professional limited liability companies; setting forth provisions regarding the liability of professional limited liability companies, members, managers, employees and agents with respect to professional limited liability companies, members, managers, employees and agents; providing that professional limited liability companies may not engage in certain business activities; setting forth provisions regarding the qualifications of professional limited liability company members and managers; requiring that professional limited liability companies engaged in architecture, engineering, land surveying or landscape architecture obtain a certificate of authority; requiring that professional limited liability companies engaged in the practice of accounting obtain and maintain certain registration; requiring that professional limited liability companies engaged in the practice of law obtain and maintain any authorization required by state bar; allowing individuals or professional business entities duly licensed to practice law in any jurisdiction as members or managers of professional limited liability companies engaged in the practice of law; setting forth provisions with respect to the transfer of membership interests in a professional limited liability company; providing for the disqualification of a professional limited liability company member, manager, agent or employee if such person becomes legally disqualified to render professional services; setting forth provisions regarding the conversion of a professional limited liability company into a limited liability company and the disposition of membership interests of deceased or disqualified members of professional limited liability companies; providing for the management of a professional limited liability company; setting forth provisions regarding the necessity of local business licenses for professional limited liability companies; setting forth provisions regarding the consolidation and merger of professional limited liability companies; providing that article one-a, chapter thirty-one of this code applies to professional limited liability companies; and providing for coordination of this article with other provisions of this code.

Be it enacted by the Legislature of West Virginia:
That chapter thirty-one of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article one-b, to read as follows:
ARTICLE 1B. PROFESSIONAL LIMITED LIABILITY COMPANIES.
§31-1B-1. Legislative purpose.
It is the intent of this legislation to provide for the association of a group of individuals and professional corporations, professional limited liability companies or other
business entities, to provide professional services as a limited
liability company and, as a limited liability company, to render
the same professional services to the public for which those individuals or other business entities are required by law to be
licensed or to obtain other legal authorization from this state.
§31-1B-2. Definitions.
(a) Except as otherwise expressly provided herein, all terms
defined in article one-a of this chapter shall have the same meanings for purposes of this article.
(b) As used in this article:
(1) "Professional business entity" means: (A) A professional limited liability company, (B) a professional corporation, or (C) a partnership each of the partners of which is duly licensed or otherwise legally authorized to render the same professional services as those for which the partnership was organized.
(2) "Professional limited liability company" means: (A) A limited liability company that is organized under this article and article one-a of this chapter for the sole and specific purpose of rendering professional services and, except as otherwise expressly permitted by this article, that has as its members only persons or professional business entities that themselves are duly licensed or otherwise legally authorized within this state to render the same professional service as the professional limited liability company; (B) a limited liability company that is organized under this article and article one-a of this chapter for the sole and specific purpose of rendering professional services of architects licensed under article twelve, chapter thirty of this code, engineers licensed under article thirteen, chapter thirty of this code, land surveyors licensed under article thirteen-a, chapter thirty of this code, and landscape architects licensed under article twenty-two, chapter thirty of this code, or any combination thereof, and all of whose members are persons or professional business entities duly licensed or legally authorized to perform such services: Provided, That nothing herein shall be construed to allow any member of any of such professions to conduct that person's practice in a manner contrary to the standards of ethics of such profession; or (C) a limited liability company that is organized under this article and article one-a of this chapter for the sole and specific purpose of rendering the professional services of two or more practitioners of medicine licensed under article three, chapter thirty of this code, or two or more dentists licensed under article four, chapter thirty of this code, or two or more dental hygienists licensed under article four, chapter thirty of this code, or two or more pharmacists licensed under article five, chapter thirty of this code, or two or more optometrists licensed under article eight, chapter thirty of this code, or two or more osteopathic physicians and surgeons licensed under article fourteen, chapter thirty of this code, or two or more assistants to osteopathic physicians and surgeons licensed under article fourteen-a, chapter thirty of this code, or two or more chiropractors licensed under article sixteen, chapter thirty of this code, or two or more physical therapists licensed under article twenty, chapter thirty of this code, or two or more psychologists licensed under article twenty-one, chapter thirty of this code, or two or more hearing aid dealers licensed under article twenty-six, chapter thirty of this code, or two or more hearing aid fitters licensed under article twenty-six, chapter thirty of this code, or two or more occupational therapists licensed under article twenty-eight, chapter thirty of this code,
or two or more social workers licensed under article thirty, chapter thirty of this code, or two or more professional counselors licensed under article thirty-one, chapter thirty of this code, or two or more speech-language pathologists licensed under article thirty-two, chapter thirty of this code, or two or more audiologists licensed under article thirty-two, chapter thirty of this code, or any combination thereof, and all of whose members are persons or professional business entities duly licensed or otherwise legally authorized to perform such services: Provided, That nothing herein shall be construed to allow any member of any of such professions to conduct that person's practice in a manner contrary to the standards of ethics of such profession.
(3) "Professional corporation" means a corporation that is organized under chapter thirty of this code.
(4) "Professional services" means any type of personal service to the public that requires as a condition precedent to the rendering of that service or the use of that title the obtaining of a license, certification or other legal authorization and shall be limited to the personal services rendered by those persons whose professions are set forth in chapter thirty of this code.
§31-1B-3. Who may become a member.
Two or more individuals or professional business entities duly licensed or otherwise legally authorized to render the same
professional services within this state may become members of a
limited liability company for pecuniary profit under article one-a of this chapter, for the sole and specific purpose of rendering the same and specific professional service, subject to any laws, not inconsistent with this article, which are applicable to the practice of that profession in the limited liability company form.
§31-1B-4. Use of initials "P.L.C." or "P.L.L.C." following

company name.

A professional limited liability company shall use the
initials "P.L.L.C." or the phrase "a professional limited company" or "a professional limited liability company" immediately after its limited liability company name in the place of any word or abbreviation required by article one-a of this chapter, to indicate that the limited liability company is duly organized under and subject to the provisions of this article.
§31-1B-5. Annual registration fee.
A professional liability company organized under this article and article one-a of this chapter shall pay the secretary of state, in addition to any other fees required under article one-a, a registration fee of fifty dollars at the time it files its articles of organization and annually thereafter shall pay the secretary of state a registration renewal fee of fifty dollars.
§31-1B-6. Certificate of authority for foreign professional
limited liability company.

(a) Notwithstanding any other provision of this article, a
foreign professional limited liability company organized under the laws of a jurisdiction other than this state to perform a professional service of the type defined in section two of this article, may apply for and obtain a certificate of authority to render those professional services in this state on the following terms and conditions:
(1) Only members, managers, employees and agents licensed or otherwise legally qualified by this state may perform the professional service in this state.
(2) The professional limited liability company must meet every requirement of this article, except the requirement that all of its members and managers be licensed to perform the professional service in this state.
(3) The powers of any foreign professional limited liability company admitted under this section shall not exceed the powers permitted to domestic professional limited liability companies under this article.
(b) In order to qualify, a foreign professional limited liability company shall make application to the secretary of state as provided in article one-a of this chapter and, in addition, shall set forth the name and address of each member, manager, employee and agent of the limited liability company who will be providing the professional service in this state and whether those members, managers, employees and agents are licensed, or otherwise legally qualified, to perform the professional service in this state.
(c) A foreign professional limited liability company shall
pay the secretary of state, at the time it applies for a certificate of authority, a registration fee of fifty dollars, and annually thereafter shall pay the secretary of state a registration renewal fee of fifty dollars.
§31-1B-7. Merger or consolidation with foreign professional
limited liability company or foreign professional corporation.

Any limited liability company organized under this article may merge or consolidate with a foreign professional limited liability company that has qualified to do business in this state pursuant to section five of this article, or a foreign professional corporation that has qualified to do business in this state, but only if both limited liability companies or the limited liability company and the professional corporation are organized to render the same professional services: Provided, That (a) the merger or consolidation is permitted by the laws of the state under which the foreign professional limited liability company or foreign professional corporation is organized; (b) if the surviving professional business entity or new professional business entity is a professional limited liability company organized and operating under the laws of this state, all members and managers of the remaining professional limited liability company shall be licensed or otherwise legally authorized within this state to render the same professional service as the professional limited liability company; and (c) if the surviving professional business entity or new professional business entity is a professional corporation organized and operating under the laws of this state, all stockholders of the remaining professional corporation, except stockholders subject to the provisions of section fourteen of this article, shall be licensed or otherwise legally authorized within this state to render the same professional service as the professional corporation.
§31-1B-8. How limited liability company may render professional
services; nonprofessional employees and agents; members and managers need not be employees, etc.

No professional limited liability company may render professional services except through its members, managers, employees and agents who are duly licensed or otherwise legally authorized to render those professional services within this state: Provided, That this provision shall not be interpreted to preclude clerks, secretaries, bookkeepers, technicians and other assistants who are not usually and ordinarily considered by custom and practice to be rendering professional services to the public for which a license or other legal authorization is required from acting as employees, managers and agents of a professional limited liability company and performing their usual duties or from acting as employees, managers or agents of a professional limited liability company. Nothing contained in this article shall be interpreted to require that the right of an individual to be a member or manager of a limited liability company organized under this article, or to organize that limited liability company, is dependent upon the present or future existence of an employment relationship between that individual and that limited liability company, or that individual's present or future active participation in any capacity in the production of the income of that limited liability company or in the performance of services rendered by that limited liability company.
§31-1B-9. Professional relationships not affected; liability for
debts, etc., of limited liability company, its members, managers, employees and agents.

The provisions of this article shall not be construed to alter or affect the professional relationship between a person furnishing professional services and a person receiving that service either with respect to liability arising out of that professional service or the confidential relationship between the person rendering the professional service and the person receiving that professional service, if any, and all confidential relationships enjoyed under the laws of this state, whether now in existence or hereafter enacted, shall remain inviolate. A member, manager, agent or employee of a professional limited liability company shall not, by reason of being a member, manager, agent or employee of such professional limited liability company, be personally liable for any debts or claims against, or the acts or omissions of, the professional limited liability company or another member, manager, agent or employee of such professional limited liability company, but the professional limited liability company shall be liable for the acts or omissions of its members, managers, agents, employees and servants to the same extent to which any other limited liability company would be liable for the acts or omissions of its members, managers, agents, employees and servants while they are engaged in carrying on the limited liability company business.
§31-1B-10. Professional limited liability company not to engage

in other business; investment of funds.

No professional limited liability company organized under this article may engage in any business other than the rendering of the professional services for which it was specifically organized: Provided, That nothing in this code applicable to limited liability companies shall be interpreted to prohibit a limited liability company from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments, from owning real or personal property, or from exercising any other investment power granted to limited liability companies under this chapter and not in conflict with the provisions of this article.
§31-1B-11. Qualifications of members and managers.
No professional limited liability company may have as a member anyone other than an individual or a professional business entity that is duly licensed or otherwise legally authorized to render the same professional services as those for which the professional limited liability company was organized.
§31-1B-12. Special provisions for law limited liability
companies as to qualifications of members or managers.

Individuals or professional business entities duly licensed to practice law in this state or another state or foreign jurisdiction may be members or managers of a professional limited liability company engaged in the practice of law: Provided, That only members, managers, employees and agents licensed to practice law within this state may perform the practice of law in this state.
§31-1B-13. Transfer of membership interests.
No member of a professional limited liability company organized under this article may sell, assign, in whole or in part, or otherwise transfer, that member's membership interest in that professional limited liability company except to that professional limited liability company or another individual or professional business entity that is eligible to be a member of that professional limited liability company.
§31-1B-14. Disqualification of member, manager, agent or
employee.

If any member, manager, agent or employee of a professional
limited liability company organized under this article who has been rendering professional service to the public becomes legally disqualified to render those professional services within this state, that member, manager, agent or employee shall immediately sever all employment with, and financial interests in, that professional limited liability company, except that the member, manager, agent or employee may be a member subject to the provisions of this article. A professional limited liability company's failure to require compliance with this provision shall constitute a ground for the forfeiture of its articles of organization and its dissolution or, in the case of a foreign professional limited liability company, for the revocation of its certificate of registration to transact business in this state.
§31-1B-15. Conversion into nonprofessional company; disposition
of membership interests of deceased or disqualified members.

(a) A professional limited liability company organized under
this article shall continue until dissolved in accordance with
other provisions of this article or the provisions of article one-a of this chapter.
(b) Whenever all members of a professional limited liability
company licensed under this article cease at any one time and for
any reason to be licensed, certified or registered in the
particular field of endeavor for which the professional limited
liability company was organized, or by the vote of the holders of
at least two thirds of its membership interests, the professional
limited liability company thereupon shall be treated as converted
into, and shall operate henceforth solely as, a limited liability
company under article one-a of this chapter, exclusive of this article, but may be reconverted upon removal of the disability or by the vote of the holders of at least two thirds of its membership interests.
§31-1B-16. Management.
Unless the articles of organization or an operating agreement provides for management of a professional limited liability company by a manager or managers, management of a professional limited liability company shall be vested in its members. If the articles of organization or an operating agreement provide for management of a professional limited liability company by a manager or managers, each manager shall be an individual or professional business entity duly licensed or otherwise legally authorized to render the same professional services within this state that the professional limited liability company was organized for the purpose of rendering. Only members or managers duly licensed or otherwise legally authorized to render the same professional services within this state shall supervise and direct the provision of professional
services within this state.
§31-1B-17. Consolidation and merger.
A professional limited liability company operating pursuant to this article may consolidate or merge with another corporation, limited liability company or partnership only if the surviving corporation, limited liability company, or partnership is a professional corporation, a professional limited liability company, or a partnership, all of the partners of which are professional corporations, professional limited liability companies, or individuals duly licensed or otherwise legally authorized to render the same professional services as those for which the surviving professional corporation, professional limited liability company or partnership was incorporated.
§31-1B-18. Application of article one-a of this chapter.
The provisions of article one-a of this chapter shall be applicable to professional limited liability companies organized under the provisions of this article. Where a conflict arises between the provisions of article one-a of this chapter and this article, the provisions of this article shall control.





NOTE: The purpose of this bill is to authorize the formation of professional limited liability companies to allow certain individuals and business entities to provide professional services to the public as a limited liability company. Under the bill, two or more individuals or professional business entities would be able to become members of a professional limited liability company. No professional limited liability company would be able to render professional services except through its members, managers, employees and agents, and no professional limited liability company would be able to engage in certain other business other than the rendering of professional services. A professional limited liability company would be managed by a manager or managers named in the professional limited liability company's articles of organization or operating agreement, or, in default of such provision, by its members. The bill would allow foreign professional limited liability companies to obtain a certificate of authority allowing them to act as professional limited liability companies in West Virginia. No member of a professional limited liability company would be able to transfer membership interests in the professional limited liability company except to the professional limited liability company or another individual or professional business entity that is eligible to become a member of that professional limited liability company. If a member, manager, agent or employee of a professional limited liability company were to become disqualified to render professional services, then such person would have to sever all employment with and financial interest in the professional limited liability company. The bill would allow consolidations and mergers of professional limited liability companies with other business entities if the surviving entity were a professional business entity. The bill would allow professional limited liability companies to be converted into limited liability companies on a two-thirds vote of the professional limited liability company membership interests or on the occurrence of certain other conditions. Finally, the bill provides that the provisions of the West Virginia Limited Liability Company Act would apply to this article unless a conflict arises, in which case this article would control.

This article is new; therefore, underscoring and strike-throughs have been omitted.