BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 177|
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THIRD READING
Bill No: SB 177
Author: Wieckowski (D)
Amended: 5/5/15
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 4/13/15
AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez,
Jackson, Mendoza, Wieckowski
SENATE JUDICIARY COMMITTEE: 6-0, 4/28/15
AYES: Jackson, Anderson, Hertzberg, Leno, Monning, Wieckowski
NO VOTE RECORDED: Moorlach
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Alarm companies: limited liability companies
SOURCE: Author
DIGEST: This bill extends the sunset date for the Bureau of
Security and Investigative Services to issue an alarm company
operator license to a limited liability company from January 1,
2016, to January 1, 2022.
ANALYSIS:
Existing law:
1)Provides for the licensure and regulation of alarm companies
and alarm company managers and employees by the Bureau of
Security and Investigative Services (Bureau) within the
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Department of Consumer Affairs (DCA) under the Alarm Company
Act. (Business and Professions Code (BPC) §7590).
2)Defines a "licensee" as a business entity, which includes an
individual, partnership, limited liability company (LLC), or
corporation. (BPC §7590.1)
3)Defines an "alarm company operator" as a person who, for any
consideration, engages in business or accepts employment to
install, maintain, alter, sell on premises, monitor, or
service alarm systems or who responds to alarm systems except
for any alarm agent. (BPC §7590.2)
4)Prohibits an alarm company operator from transferring his or
her license to another person, as specified. (BPC §7599.47)
5)Authorizes the Bureau to issue a citation and fine to a
licensed alarm company operator, qualified manager, or an
alarm agent for specified violations of the Alarm Company Act,
and requires the citation to be in writing, contain a written
description of the violation, and the provision of law
violated. The citation shall contain an order of abatement
and shall not exceed $2,500.
(BPC §7591.9)
6)Prohibits, under the Beverly-Killea Limited Liability Company
Act, domestic and foreign LLCs from rendering professional
services in California. (Corporations Code (CC) § 17375).
a) Defines "professional services" as "any type of
professional services which may be lawfully rendered only
pursuant to a license, certification, or registration
authorized by the BPC, the Chiropractic Act, or the
Osteopathic Act." (CC § 13401(a)).
b) Explicitly provides that an LLC may render services that
may be lawfully rendered only pursuant to a license,
certificate, or registration authorized by the BPC if the
applicable provisions of the BPC authorize an LLC to hold
that license, certificate, or registration. (CC§ 17002
(c))
1)Authorizes the Bureau to issue an alarm company operator
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license to authorize an LLC along with other provisions for
alarm companies to operate as an LLC until January 1, 2016.
(BPC §7590.1)
This bill:
1)Extends the sunset date for the Bureau to issue an alarm
company operator license to an LLC from January 1, 2016, to
January 1, 2022.
Background
Formation and operation of LLCs in California was authorized in
1994 through the Beverly-Killea Limited Liability Company Act
(SB 469, Chapter 1200, Statutes of 1994). An uncodified
provision in the Act specified that nothing in the Act shall be
construed to permit a domestic or foreign LLC to render
professional services, as defined in the CC, unless expressly
authorized under applicable provisions of the BPC or the
Chiropractic Act. This provision was codified in 1999 (SB 284,
Kelley, Chapter 1000, Statutes of 1999).
Under the Moscone-Knox Professional Corporation Act (CC § 13400
ff.), "professional services" is defined as any type of
professional services that may be lawfully rendered only
pursuant to a license, certification, or registration authorized
by the BPC, the Chiropractic Act, or the Osteopathic Act.
The rationale for requiring that an LLC be expressly authorized
was apparently to ensure that service providers who harm others
by their misconduct, incompetence, or negligence should not be
able to limit their liability by operating as an LLC and thus
become potentially judgment-proof.
Based upon these provisions of law, it has been commonly
understood that the boards and bureaus under the DCA are
prohibited from issuing a license, certification or registration
to an entity organized as an LLC.
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However, in 2004, an Attorney General (AG) Opinion No. 04-103
concluded that a business that provides services requiring a
license, certification, or registration pursuant to the BPC may
conduct its activities as an LLC if the services rendered
require only a nonprofessional, occupational license.
In discussing the distinctions between professional services and
nonprofessional occupational services, the AG Opinion further
discusses Mann v. Department of Motor Vehicles (1999) 76
Cal.App.4th 312 (Mann), in which the court concluded that the
services performed pursuant to a vehicle salesperson license
issued under the Vehicle Code were not "professional services,"
but rather were "nonprofessional, occupational" services.
Since this AG Opinion has been released, several changes to the
BPC have been made through the Legislature to incorporate LLCs
into the licensure provisions of several different boards and
bureaus regulated by the DCA.
SB 392 (Florez, Chapter, 698, Statutes of 2010) was one such
amendment.
SB 392 authorized the Contractors State License Board to issue a
contractor license to an LLC, and incorporated the LLC business
structure into the contractor license provisions. The bill
additionally added paragraph (c) to CC Section 17002 to read:
"(c) Notwithstanding Section 17375, a limited liability company
may render services that may be lawfully rendered only pursuant
to a license, certificate, or registration authorized by the
Business and Professions Code if the applicable provisions of
the Business and Professions Code authorize a limited liability
company to hold that license, certificate, or registration."
Following closely behind SB 392, SB 1077 (Price, Chapter 291,
Statutes of 2012) specifically authorized an LLC to hold an
alarm company operator license. The provision was set to be
repealed on January 1, 2016, so that the Legislature could
evaluate the adequateness of the LLC insurance requirements and
enforcement by the Bureau.
This bill extends the provision that authorizes an LLC to hold
an alarm company operator license from its sunset date of
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January 1, 2016, to January 1, 2022.
Related/Prior Legislation
SB 1077 (Price, Chapter 291, Statutes of 2012) authorized the
Bureau to issue an alarm company operator license to an LLC. A
failure of a limited liability alarm company to comply with the
requirements to submit the company's information and
documentation with the Bureau would subject the company's
license to suspension and mandated that any violation of the
Alarm Company Act by an LLC be considered a crime.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified5/20/15)
California Alarm Association
OPPOSITION: (Verified5/20/15)
None received
ARGUMENTS IN SUPPORT: Writing in support of this bill, the
California Alarm Association (CAA) states that the provisions
chaptered by SB 1077 in 2012 have been able to grant greater
protection for consumers by:
1)Allowing an alarm company to professionally organize as an LLC
only if the company maintains additional insurance
requirements to ensure proper consumer protections.
2)Granting the Bureau greater and direct authority to cite and
fine alarm companies operating without a license.
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3)Allowing an alarm company to keep the same alarm license if it
changes its business structure (i.e. from a corporation to a
LLC) so that the Bureau would not have to process a new
application for an alarm company license by the same entity.
4)Granting alarm companies probationary licenses
CAA seeks to extend the sunset date from January 1, 2016, to
January 1, 2022, on all four of the above listed provisions that
SB 1077 put into law in order to properly protect consumers.
Prepared by:Janelle Miyashiro / B., P. & E.D. / (916) 651-4104
5/20/15 16:16:15
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