BILL ANALYSIS Ó AB 560 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 560 (Gorell) As Amended July 12, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |70-0 |(May 12, 2011) |SENATE: |34-0 |(August 22, | | | | | | |2011) | ----------------------------------------------------------------- Original Committee Reference: B., P. & C.P. SUMMARY : Extends the sunset date on licensed architects' ability to organize as limited liability partnerships (LLPs) until January 1, 2019. The Senate amendments add a January 1, 2019 sunset date on licensed architects' ability to organize as LLPs. EXISTING LAW provides for the formation of various types of legal business entities, including LLPs and foreign LLPs. Under existing law, registered LLPs and foreign LLPs may only be formed for the practice of accountancy, the practice of law, and, until January 1, 2012, the practice of architecture. LLPs formed within these professions must meet specified insurance requirements. AS PASSED BY THE ASSEMBLY , this bill deleted the sunset date on licensed architects' ability to organize as LLPs, thereby permitting licensed architects to organize as LLPs indefinitely. FISCAL EFFECT : According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS : A LLP is a hybrid of a corporation and a general partnership. Management of a LLP functions much like that of a general partnership. Only an informational tax return is required of a LLP - any profit generated by the LLP is passed through to its partners who are then taxed at the individual level. Possibly the greatest benefit of a LLP, however, is "limited liability" for a LLP partner. This limited liability protects a LLP partner's personal assets from the errors and omissions of an employee or other partner in the LLP, as well as from financial disaster that may lead to business losses. Thus, AB 560 Page 2 a partner in a LLP is not personally liable for the negligent acts of other partners or for debts and obligations of the partnership, although it should be noted that a "protected" partner may still benefit from the profits produced by the negligent partner. A partner of a LLP still remains personally liable for his or her own actions and errors or omissions. In contrast to a LLP, all partners of a general partnership are liable for the actions of their business partners. This bill, as amended in the Senate, is consistent with Assembly actions. Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916) 319-3301 FN: 0001837