BILL ANALYSIS Ó AB 560 Page 1 Date of Hearing: May 4, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 560 (Gorell) - As Amended: April 6, 2011 Policy Committee: Business and Professions Vote: 9 - 0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill deletes the January 1, 2012 sunset date on licensed architects' ability to organize as limited liability partnerships (LLPs) thereby permitting licensed architects to organize as LLPs indefinitely. FISCAL EFFECT There are no significant costs associated with this legislation. COMMENTS 1)Purpose . The current authorization for architects to form LLPs is set to sunset January 1, 2012. This legislation simply removes that sunset date and allows licensed architects to continue to form LLPs indefinitely. 2)Background . An LLP is a hybrid of a corporation and a general partnership, which offers its owners limited liability and pass-through income tax treatment, yet can be run without the formalities generally required of a corporation. The distinguishing characteristic of an LLP from a corporate or general partnership is that in an action regarding the negligence or wrongful act of a partner, a plaintiff can enforce a judgment against the partnership assets and the personal assets of the negligent partner. The personal assets of the non-negligent partners are not available to satisfy the judgment. To mitigate the public's concerns over the limitation of liability, LLPs traditionally must maintain a high level of professional liability insurance. AB 560 Page 2 3)Related Legislation . a) AB 2914 (Leno; Chapter 426, Statutes of 2006) extended the sunset date of LLPs for architects until January 1, 2012. b) SB 392 (Florez; Chapter 698, Statutes of 2010) authorized the State Contractors License Board (CSLB) to issue a contractor's license to a limited liability company (LLC) if the LLC meets other requirements such as bonding, solvency, and liability insurance. c) SB 1008 (Padilla; Chapter 634, Statutes of 2010) authorized licensed engineers and land surveyors to organize and operate as limited liability partnerships, provided that they provide security for claims against the LLP by maintaining specified levels of insurance liability coverage, cash reserves in trust, and minimum net worth. Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081