BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 177  


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          Date of Hearing:  July 8, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 177  
          (Wieckowski) - As Amended May 5, 2015


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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill extends the authorization of the Bureau of Security  
          and Investigative Services (Bureau) to issue an alarm company  
          operator license to a limited liability company (LLC) from  








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          January 1, 2016, to January 1, 2019.


          FISCAL EFFECT:


          On-going annual costs to the Bureau in the range of $22,000 to  
          $35,000 (Private Security Services Fund) to issue alarm company  
          operator licenses to LLCs beyond the January 1, 2016, sunset  
          date.  This fund is self-supporting with fee revenue.


          COMMENTS:


          1)Purpose.  According to the author, "When the state first  
            authorized businesses to incorporate as LLCs, alarm companies  
            were one of the businesses prohibited from forming or  
            operating a LLC due to consumer protection concerns. The  
            prohibition was originally targeted at keeping law firms and  
            accounting firms from becoming LLCs.  Those professions are  
            now allowed to become Limited Liability Partnerships (LLP).   
            Subsequently, other industries were statutorily authorized to  
            form LLCs as well.  Today, [nearly] all other states allow  
            alarm companies to organize as LLCs.  This bill extends the  
            sunset date until 2019 to allow alarm companies to continue to  
            organize as LLCs."
          2)Background. Unless expressly authorized, boards and bureaus  
            under the Department of Consumer Affairs (DCA) are prohibited  
            from issuing a license, certification or registration to an  
            entity organized as an LLC.  The rationale is 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. 













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            In 2004 the Attorney General (AG) concluded that a business  
            that provides services requiring a license, certification, or  
            registration pursuant to the Business and Professions Code may  
            conduct its activities as an LLC if the services rendered  
            require only a nonprofessional, occupational license. Since  
            this AG Opinion was released, several statutory changes have  
            been made to incorporate LLCs into the licensure provisions of  
            boards and bureaus regulated by the DCA.





            In 2012, when alarm companies were first allowed to operate as  
            LLCs, the bill included a three year sunset date to ensure  
            that the required liability insurance levels were sufficient  
            to cover the potential number of claims.  Because there is  
            still insufficient data on insurance levels, this bill also  
            contains a three-year sunset date. Of the 2,000 licensed alarm  
            companies, approximately 70 are LLCs.





          3)Current Legislation. 



             a)   SB 284 (Cannella), pending in this committee, extends  
               the sunset provisions on professional engineer and land  
               surveyor LLPs to January 1, 2019.  



             b)   SB 468 (Hill), pending in the Assembly Business and  
               Professions Committee, among other provisions, imposes  
               training, psychological evaluation, and training duties on  
               various security forces, and subjects the Bureau to review  








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               by the appropriate policy committees of the legislature.  



          1)Prior Legislation.  



             a)   AB 1608 (Olsen), Chapter 669, Statutes of 2014, among  
               other provisions, authorized the Bureau, until January 1,  
               2016, to issue a private investigator's license to LLCs. 



             b)   SB 1077(Price), Chapter 291, Statutes of 2012, among  
               other provisions, authorized LLCs, until January 1 2016, to  
               be issued to alarm company operator licenses if specified  
               liability insurance requirements are met. 



             c)   SB 469 (Beverly and Killea), Chapter 1200, Statutes of  
               1994, prohibited a foreign or domestic LLC from rendering  
               professional services in this state unless expressly  
               authorized under applicable provisions of law.
          


          Analysis Prepared by:Jennifer Swenson / APPR. / (916)  
          319-2081

















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