BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
SB 1253 (Moorlach)
Version: February 18, 2016
Hearing Date: April 19, 2016
Fiscal: Yes
Urgency: No
RD
SUBJECT
Real estate brokers: limited liability companies
DESCRIPTION
This bill would authorize a limited liability company to be
licensed as a real estate broker.
BACKGROUND
In 1994, the Beverly-Killea Limited Liability Company Act (SB
469 (Beverly and Killea, Ch. 1200, Stats.1994)), was enacted to
govern the formation of limited liability companies (LLCs).
Under that act, a foreign or domestic LLC was prohibited from
rendering professional services in this state unless expressly
authorized under other applicable law. "Professional services"
are services for which a license, certification, or registration
is required under specified statutes. The rationale for the
exclusion was 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 or limited
liability partnership (LLP) and, thus, become potentially
judgment-proof.
Generally, an LLC is a legal entity that allows one or more
owners to conduct a business without any owner having personal
liability for the business's obligations. The salient nontax
characteristics of an LLC are limited liability for its owners
(as in a corporation) and freedom to structure management rights
and financial interests in the entity in virtually any
configuration the parties wish (as in a partnership). An LLC
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most often elects to be treated as a partnership for income tax
purposes, so that the income, gains, losses, deductions, and
credits of the LLC generally will flow through to its members
for reporting on their personal tax returns, the distribution
depending on the terms of the LLC agreement, not necessarily the
ownership interest of the individual members.
Until the creation of LLCs, the limited partnership and the
subchapter S corporation were the primary forms of business
entities used to achieve the tax status and limited liability
features now offered by the LLC. Each of those forms has its
drawbacks, and the LLC can provide the advantages of both
without the disadvantages of either.
A limited partnership allows pass-through tax treatment,
flexibility in financial structuring, and limited liability for
the "limited" partners (as long as they do not take part in the
control of the business), but requires at least one person (the
"general" partner) be fully liable for the obligations of the
business. An S corporation allows pass-through tax treatment
and limited liability for its owners, but limits the parties'
flexibility in structuring their financial arrangements.
Furthermore, only limited persons and entities can be S
corporation shareholders, and an S corporation will lose its
pass-through tax treatment if an ineligible entity becomes a
shareholder.
In contrast to a limited partnership, no member of an LLC is
required to be personally liable for the company's obligations,
and yet, each member is permitted to manage the company and to
take part in the control of the business without losing the
member's limited liability. (See Corp. Code Sec. 17703.04.)
Further, in contrast to an S corporation, an LLC can have
different classes of ownership, and income, gain, loss, and
other items may be allocated disproportionately to ownership
without affecting the LLC's pass-through tax treatment. Any
person can be a member of an LLC (thus sidestepping the
restrictions on shareholders in the case of an S corporation).
Under the Beverly-Killea LLC Act (replaced in 2012 with the
California Revised Uniform Limited Liability Company Act
(RULLCA)), an LLC cannot provide professional services unless
permitted by the Business and Professions Code. Since the Act
was enacted, only contractors, private cemeteries, repossessors,
alarm companies, and, most recently, private investigators, have
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been authorized to operate as LLCs.
In 2008, SB 1225 (Harman, Ch. 114, Stats. 2008) authorized
private cemetery LLCs, however, it also prohibited licensees of
professional services rendered in connection with the operations
of a cemetery authority from having any ownership interest in
the LLC. In 2009, SB 392 (Florez, Ch. 698, Stats. 2009)
authorized LLCs to be issued contractors' licenses but imposed
minimum levels of liability coverage. The requirements for a
minimum amount of liability coverage were based on bills that
authorized attorneys, accountants, architects, engineers, and
land surveyors to operate as the only limited liability
partnerships (LLPs) in California. Notably, the year prior, a
bill that was similar to SB 392 was introduced for the same
purposes but lacked the insurance and/or escrow deposit
requirements for the LLC and its members. That bill died in
this Committee. (SB 1337 (Correa, 2008).)
More recently, in 2012, SB 1077 (Price, Ch. 291, Stats. 2012),
among other things, allowed for an LLC to be issued an alarm
company operator's license, as is permitted in 49 other states.
This Committee conditioned its approval of SB 1077 on similar
liability coverage that was included in other LLC and LLP bills,
and added a three year sunset to its provisions. Similarly, in
2014, AB 1608 (Olson, Ch. 669, Stats. 2014) authorized the
issuance of a private investigator's license to limited
liability companies (LLCs) if, among other things, certain
insurance requirements are met. That bill, too, contained a
sunset so that this Committee would have an opportunity to
evaluate whether judgments against the conditionally-authorized
LLCs have been sufficiently covered by insurance and whether the
mandated insurance levels are sufficient to meet potential
future claims. Of particular relevance to this bill, two prior
attempts to add authorization for real estate brokers to
organize as LLCs (AB 2235 (Parra, 2006) and AB 2261 (Parra,
2004)) died in this Committee without a hearing.
This bill would now add authorization for LLCs to be issued real
estate broker licenses.
This bill was heard in the Senate Business, Professions &
Economic Development Committee on April 4, 2016, and was passed
out on a vote of 7-1.
CHANGES TO EXISTING LAW
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Existing law , the California Revised Uniform Limited Liability
Company Act (RULLCA), governs all California limited liability
companies (LLCs). (Corp. Code Sec. 17701.01 et seq.; RULLCA
replaced the Beverly-Killea LLC Act in 2012, but maintained many
of the California specific protections in the Beverly-Killea LLC
Act.)
Existing law generally prohibits domestic and foreign limited
liability companies from rendering professional services, as
defined, in California. Existing law provides that an LLC 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.
(Corp. Code Sec. 17701.04.)
Existing law defines professional service as those services that
may only be lawfully rendered pursuant to a license,
certification, or registration under the Business and
Professions Code, Chiropractic Act, Osteopathic Act, or Yacht
and Ship Brokers Act. (Corp. Code Secs. 13401, 13401.3.)
Existing law provides that the debts, obligations, or other
liabilities of an LLC, whether arising in contract, tort, or
otherwise, are solely the debts, obligations, or other
liabilities of the LLC to which the debts, obligations, or other
liabilities relate. They do not become the debts, obligations,
or other liabilities of a member or manager solely by reason of
the member acting as a member or manager for the limited
liability company. (Corp. Code Sec. 17703.04(a).)
Existing law provides that a member of an LLC shall be subject
to liability under the common law theory of alter ego liability,
and shall be personally liable under a judgment of a court or
for any debt, obligation, or liability (whether arising from
contract, tort, or otherwise) of the LLC to the same extent as a
shareholder may be personally liable for any debt, obligation,
or liability of the corporation (i.e. by piercing the corporate
veil), except as specified. (Corp. Code Sec. 17703.04(b).)
Existing law provides that a member may otherwise agree to be
personally obligated for any or all debts, obligations, and
liabilities of the LLC in writing in the articles of
incorporation or written operating agreement, as specified.
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(Corp. Code Sec. 17703.04(e).)
Existing law establishes the Real Estate Law, which provides for
the licensure and regulation of real estate brokers and real
estate salespersons by the Bureau of Real
Estate (bureau) under the direction of the Real Estate
Commissioner (commissioner). (Bus. & Prof. Code Sec. 10000 et
seq.) Existing law prohibits any person from engaging in the
business of, acting in the capacity of, advertising as, or
assuming to act as a real estate broker or a real estate
salesperson within this state without first obtaining a real
estate license. (Bus. & Prof. Code Sec. 10130.)
Existing law , for the purposes of the Real Estate Law, defines
"person" to include corporation, company, and firm. (Bus. &
Prof. Code Sec. 10006.)
Existing law requires applicants for licensure as a real estate
broker and real estate broker licensees to pay application,
licensure, and renewal fees, as specified. (Bus. & Prof. Code
Sec. 10200-10226.5.) Existing law requires a person who is
licensed as a real estate broker only as an officer of a
corporate broker to comply with specified continuing education
requirements. (Bus. & Prof. Code Sec. 10171.5)
Existing law provides that a real estate broker is a person who,
for compensation or in expectation of compensation, regardless
of the form or time of payment, does or negotiates to do any of
the following acts, among other things, for another person:
sells or offers to sell, buys or offers to buy, solicits
prospective sellers or purchasers of, solicits or obtains
listings of, or negotiates the purchase, sale or exchange of
real property or a business opportunity;
solicits borrowers or lenders for or negotiates loans or
collects payments or performs services for borrowers or
lenders or note owners in connection with loans secured
directly or collaterally by liens on real property or on a
business opportunity; or
sells or offers to sell, buys or offers to buy, or exchanges
or offers to exchange a real property sales contract, or a
promissory note secured directly or collaterally by a lien on
real property or on a business opportunity, and performs
services for the holders thereof. (Bus. & Prof. Code Sec.
10131.)
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Existing law provides that if the licensee is a corporation, the
license issued to it entitles one officer thereof, on behalf of
the corporation, to engage in the business of real estate broker
without the payment of any further fee, such officer to be
designated in the application of the corporation for a license.
(Bus. & Prof. Code Sec. 10211.) Existing law provides that the
officer designated by a corporate broker licensee in the
application of the corporation for a license shall be
responsible for the supervision and control of the activities
conducted on behalf of the corporation by its officers and
employees as necessary to secure full compliance with the Real
Estate Law, including the supervision of salespersons licensed
to the corporation in the performance of acts for which a real
estate license is required. (Bus. & Prof. Code Sec.
10159.2(a).)
Existing law provides that when a corporation is issued a real
estate license, the corporation must obtain an additional
license to employ each additional officer if it desires any of
its officers, other than the specified designated officer,
above, to act under its license as a real estate broker. (Bus.
& Prof. Code Sec. 10158.)
Existing law provides that each officer of a corporation through
whom it is licensed to act as a real estate broker is, while so
employed under that license, a licensed real estate broker, but
is licensed only to act as such for and on behalf of the
corporation as an officer. (Bus. & Prof. Code Sec. 10159.)
Existing law governs the revocation, denial, or suspension of a
real estate license. (Bus. & Prof. Code Sec. 10175-10186.9.)
Among other things, existing law allows the commissioner to
suspend or revoke a real estate licensee or a corporation's
license, delay the renewal of a license of a real estate
licensee or a corporation, or deny issuance of a license to an
applicant or corporation, who has done any of the following or,
in the case of a corporation, whose officer, director, or person
owning or controlling 10 percent or more of the corporation's
stock has done any of the following:
procured or attempted to procure, a real estate license or
renewal by fraud, misrepresentation, or deceit, or by making a
material misstatement of fact in an application, as specified;
entered a plea of guilty or no contest, or been found guilty
of, or been convicted of, a felony, or crime substantially
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related to the qualifications, functions or duties of a real
estate licensee, as specified;
willfully disregarded or violated the Real Estate Law;
demonstrated negligence or incompetence in performing an act
for which he or she is required to hold a license;
violated specified laws related to mortgages; or
as a broker licensee, failed to exercise reasonable
supervision over the activities of his or her salespersons, or
as the officer designated by a corporate broker licensee as
the primary broker, failed to exercise reasonable supervision
and control of the activities of a corporation for which a
real estate license is required. (Bus. & Prof. Code Sec.
10177.)
Existing law provides that if a real estate broker that is a
corporation has not done any of the foregoing acts, either
directly or through its employees, agents, officers, directors
or persons owning or controlling 10 percent or more of the
corporation's stock, the commissioner may not deny the issuance
or delay the renewal of a real estate license to, or suspend or
revoke the real estate license of, the corporation, provided
that any offending officer, director, or stockholder has been
completely disassociated from any affiliation or ownership in
the corporation. (Bus. & Prof. Code Sec. 10177.)
Existing law permits the commissioner to deny, suspend, or
revoke the real estate license of a corporation as to any
officer or agent acting under its license without revoking the
license of the corporation. (Bus. & Prof. Code Sec. 10180.)
Existing law provides that the bureau may suspend or revoke the
license of any real estate broker, real estate salesperson, or
corporation licensed as a real estate broker, if the real estate
broker, real estate sales person, or any director, officer,
employee, or agent of the corporation licensed as a real estate
broker knowingly destroys, alters, conceals, mutilates, or
falsifies specified books, papers, writings, documents or
tangible objects that must be maintained under the law, or that
have been sought in connection with an investigation, audit, or
examination of a real estate licensee by the commissioner.
(Bus. & Prof. Code Sec. 10148.)
Existing law provides that any person, including officers,
directors, agents, or employees of corporations, who willfully
violates or knowingly participates in the violation of the Real
Estate Law shall be guilty of a misdemeanor punishable by a
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specified fine, or imprisonment in the county jail not exceeding
six months, or by a fine and imprisonment. (Bus. & Prof. Code
Sec. 10185.)
Existing law provides that certain violations of the Real Estate
Law are a public offense and, if committed by a corporation, are
punishable by specified fines. Existing law provides that other
specified violations of the Real Estate Law, when committed by a
corporation, are punishable by a fine not exceeding $50,000.
(Bus. & Prof. Code Secs. 10085.5, 10085.6, 10139.)
Existing law requires for a trust funds status report to be
filed with the commissioner, as specified, under penalty of
perjury by the broker. Existing law requires that the
declaration in a report submitted on behalf of a corporate
broker be signed by a broker-officer through whom the
corporation is licensed as a real estate broker and by the chief
executive officer of the corporation if he or she is not the
signing broker-officer. (Bus. & Prof. Code Sec. 10232.25.)
Existing law also requires for a specified notice to be provided
to the commissioner, signed by the broker or the designated
officer of corporate broker. (Bus. & Prof. Code Sec. 10238.)
Existing law requires all money paid into the state treasury and
credited to the Real Estate Fund be appropriated to be used by
the commissioner in carrying out the provisions of the Real
Estate Act, as specified. (Bus. & Prof. Code Sec. 10451.)
This bill would authorize an LLC to be licensed as a real estate
broker, notwithstanding any other law, and would expand the
definition of "person" under the Real Estate Law to also include
"limited liability company." This bill would require an LLC to
procure an additional license to employ each additional member,
manager, or officer if the LLC desires any of its members,
managers, or officers other than the designated (primary) broker
member, manager or officer to act under its license as a real
estate broker.
This bill would make other conforming changes to the Real Estate
Act to apply any provisions that are currently applicable to
real estate broker corporations (including provisions described
above relating to licensure, fees, continuing education,
supervisory responsibilities, mandated reports and notices to
the commissioner, unlawful activities, fines, suspension and
other authorized disciplinary actions) to LLCs and LLC members,
managers, and officers.
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This bill would provide that, notwithstanding any other law, the
money in the Real Estate Fund that is attributable to
administrative fines, civil penalties, and criminal penalties
imposed by the bureau against an LLC broker, or to cost recovery
by the bureau from enforcement actions and case settlements
relating to an LLC broker, shall not be continuously
appropriated and shall be available for expenditure as provided
in the Real Estate Law only upon appropriation by the
Legislature.
COMMENT
1. Stated need for the bill
According to the author:
Under current California law, real estate brokers are not
permitted to be licensed as an LLC. This restriction is
antiquated, as other professional groups have been able to
pass legislation allowing them the tax liability protections
of being licensed as an LLC, including private investigators,
cemeteries, alarm company operators, and contractors.
The real advantages to forming an LLC instead of an S- or
C-corporation or another entity are based in tax liability.
For example, "C" corporation owners are subject to double
(corporate and individual) taxation. The income of the LLC is
subject to one level of federal tax and a modest state tax,
and distributions of property generally are tax free. "S"
corporations pass company earnings through the individual
shareholders, but they are subject to restrictions such as
limitation on the number of shareholders. LLCs have more
operational flexibility and are simpler and cheaper to set up.
With California trying to shed its image as
anti-small-business, SB 1253 would help improve that image by
allowing small businesses in the real estate arena to enjoy
the same tax advantages as other businesses.
2. Are new authorizations for LLCs to hold professional
licenses undoing the public policy set forth by the 1994
Beverly-Killea LLC Act?
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As noted in the Background, when the Beverly-Killea Limited
Liability Company Act (the LLC Act) (SB 469 (Beverly and Killea,
Ch. 1200, Stats.1994)), was enacted, it generally prohibited
LLCs in California from rendering professional services for
which a license, registration, or certification is required.
This issue was heavily debated in SB 469 (Beverly, Killea, 1994)
and its trailer bill, SB 141 (Beverly, 1996). That debate
centered on whether 54 categories of professional service
providers should be authorized to operate as "LLCs" without any
particularized showing of need. Another issue was whether the
"professional service" LLC should be required to carry some
specified level of insurance as a condition of becoming an LLC.
The rationale for the exclusion of professional services from
the business that an LLC may undertake was 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 or LLP and, thus, become potentially
judgment-proof.
While in recent years, certain authorizations have been added
for LLCs to be granted professional licenses (most recently, in
the case of alarm company licenses and private investigator
licenses), in light of the liability concerns associated with
LLCs, those authorizations have been made contingent upon
minimum insurance requirements to ensure that judgments against
the LLC can be paid to the injured party, and upon a sunset to
allow this Legislature to review whether those mandated
insurance levels have been sufficient to cover all claims in the
years since the LLC authorization has been granted. (See
Comment 3 for more on liability concerns.)
That being said, it has not been the intent, but perhaps the
effect, of these recent bills to suggest a "formula" by which
new authorizations are added to allow LLCs to hold professional
licenses. At a certain point, a serious public policy question
arises as to whether this gradual trend to add new
professionally-licensed LLCs to become more "business friendly,"
which comes at the cost of leaving more and more consumers at
risk of being unable to obtain redress for their injuries, has
unraveled the public policy protections set forth in the 1994
Beverly-Killea LLC Act (a policy that was affirmed in 2012 when
this Legislature passed the current LLC law, the Revised Uniform
Limited Liability Company Act.)
3. Significance of insurance liability coverage requirements
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of LLC and LLP bills
California's LLP laws have always sought to strike a balance
between allowing professional licensed service providers to
operate in a mode offering both tax and liability-limiting
advantages while preserving to an appropriate degree the ability
of a party injured by professional negligence to recover damages
for that injury. Thus, an insurance requirement has always been
imposed upon professional licensees wishing to operate as an
LLP. Accordingly, current law authorizes attorneys,
accountants, and architects, all of whom provide professional
services under the Business and Professions Code, to organize
themselves as LLPs and to provide professional services, so long
as the LLP maintains a net worth of at least $10 million, and
obtains liability insurance coverage or maintains bank deposits
of $1 million for partnerships of five or fewer licensees and an
additional $100,000 for each additional licensee up to a maximum
of $5 million for all others.
Similarly, over the years, when the Legislature has authorized
LLCs to hold various professional licenses, it has imposed
insurance requirements upon professional licensees wishing to
operate as an LLC to protect consumers who might be injured by
the negligence of those professional entities. Moreover,
existing law also ensures that in the event an LLC does not
maintain the insurance minimums mandated as a condition of their
LLC license, the LLC's license would be suspended and each
member would be held liable up to $1 million for damages or
injuries resulting from the LLC's acts or omissions.
The rationale behind such insurance requirements is to ensure
that a person who is injured by an LLP or LLC is likely able to
collect his or her judgment. Again, because of the limited
liability attributes of these business entities, the injured
person cannot rely on the joint and several liability of the
partners and their personal assets; instead, the injured party
can only look to the assets of the LLP or LLC itself. Thus,
even if the LLP or LLC has few assets because the profits are
regularly distributed to its members, the required insurance
would be available to pay tort damages.
That being said, the difficulty has always lied in determining
the appropriate amount for the minimum level of required
insurance. While the law has never sought to cover all
potential claims, since that would obviate the need and benefit
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for operating as a LLP or LLC, the law has always sought to
ensure that most predictable claims are covered. Hence, this
Committee has always sought available insurance claims data to
determine the appropriate level of minimum insurance. In this
case, SB 1253 seeks to authorize LLCs to be issued real estate
brokers licenses, but does not provide for any minimal insurance
requirements. Additionally, no information has been provided
that would suggest what levels of insurance would be sufficient
to cover most claims against a real estate broker LLC.
Staff notes that real estate brokers have sought authorization
to organize as LLCs on several other occasions. The two most
recent attempts were in 2004, and 2006, and both those bills
died in this Committee without a hearing. Even still, both of
those bills, AB 2261 (Parra, 2004), and AB 2235 (Parra, 2006),
in contrast to this bill, would have generally required that the
LLC, for claims based upon acts, errors, or omissions arising
out of conduct subject to licensure: (1) maintain at least
$500,000 in liability insurance or an amount equal to $100,000
multiplied by the number of licenses in the firm, whichever was
greater, up to a maximum of $5 million; (2) maintain in trust or
bank escrow, cash, bank certificates of deposits, US Treasury
obligations, or bank letters of credit in the same amounts
required in liability insurance; or (3) confirm that the LLC had
a net worth equal to or exceeding $5,000,000 in the most recent
fiscal year.
4. Other consumer protection concerns related to LLCs
In addition to concerns noted in Comments 2 and 3, above, this
bill arguably also implicates broader considerations as to
whether public policy supports the authorization of new
professionally-licensed LLCs and, if so, whether LLCs should
specifically be able to be licensed as real estate brokers.
First, state laws on the incorporation of LLCs are often
criticized with regard to their lack of transparency given that
LLCs do not have to disclose the names of their owners. A
recent Los Angeles Times article reports an increasing concern
with the ability of business owners to hide their identity by
way of organizing as LLCs, particularly on the heels of the
release of the "Panama Papers" which "revealed that dozens of
global politicians hid assets in offshore shell companies set up
by a Panamanian law firm." The article cites the use of LLCs
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and shell companies "to obfuscate the source of ill-gotten cash
or cover up illegal activity," asserting that, "[i]n
California, perhaps the easiest way to set up an anonymous firm
is to create a limited liability company, one of the most common
types of business entities." The article notes that while some
LLCs list their owners in their filings with the Secretary of
State, those owners are sometimes other LLCs or other types of
corporate entities, making it difficult to figure out who really
owns the company. In turn, "[t]he lack of public information
about company ownerships could frustrate attempts to rein in the
ability of such businesses to operate." (Koren, Los Angeles
Times, The Debate in California Over How Owners Can Use LLCs to
Obscure Their Identities (Apr. 9, 2016)
[as of Apr. 10, 2016].)
Second, assuming that in certain circumstances public policy
favors the conditioned authorization of a new LLC, there remains
a question as to whether LLCs should be licensed real estate
brokers, given the level of harm that could befall a consumer in
cases where the licensee operates negligently, or even
criminally. While the specific type of claims and judgments
that are typically brought and entered against real estate
brokers remains unclear, presumably, in the context of real
estate transactions, these claims could easily involve judgments
in the hundreds of thousands, if not millions, of dollars. And
though a consumer could potentially seek to reach the personal
assets of an LLC member or manager by way of pursuing common law
theories of alter ego liability or by piercing the corporate
veil, it would involve time-consuming and costly actions to do
so, and the consumer would likely not succeed.
5. Opposition concerns
In opposition, the Consumer Attorneys of California (CAOC)
writes:
LLCs are business entities that shield individual owners or
members from debts and obligations of the LLC so that the
owner or member's liability is limited to their financial
investment. In addition to limiting liability, the income of
LLCs are only subject to one level of federal tax, a modest
state tax, and distributions of property are generally tax
free. These benefits allow owners to enjoy tax savings and
shield themselves from liability. However, these benefits must
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be balanced with adequate consumer safeguards.
While it is vital that California always balance the concerns
of business with those of California's consumers, there is a
significant risk to any expansion of liability shelters
without the requisite insurance safeguards. [ . . . ] Like
other professions operating as LLCs, real estate brokers
seeking LLC tax and liability shelters must be required to
maintain adequate liability insurance to protect the public
from illicit activity by the licensees. In order to determine
what amount of insurance is adequate, a series of factors
must be considered, including but not limited to real estate
brokers' claims history and data on payments including the
highest and average payouts.
CAOC further argues that real estate brokers should be subject
to liability insurance requirements and other mechanisms,
similar to licensed lawyers and accountants, to protect
consumers, because "[a]n LLP ensures consumers are protected in
the event of negligence or a wrongful act, by allowing
plaintiffs to enforce a judgment against the partnership as an
entity as well as against the personal assets of the negligent
partner."
Lastly, CAOC argues that "[t]he current context of wrongdoing in
the subprime mortgage industry collapse provides a cautionary
background for AB 1253's liability protections. Beginning in
late 2006 and continuing into 2007 and 2008, the real-estate
market collapsed into widespread turmoil. Foreclosures rose
drastically, resulting in chaos in the banking industry as well
as complex securities backed by these subprime mortgages. One
Web site tracking the subprime bust has estimated that as of
September 2009, 360 lenders have gone bankrupt, halted major
lending operations, or been sold at a "fire sale" price since
late 2006. Real estate brokers were involved in these
questionable transactions." (Footnote removed.)
6. Amendments in prior committee
The Senate Business, Professions and Economic Development
Committee analysis indicates proposed amendments whereby the
author committed replace obsolete references to the "Department"
to the "Bureau" prior to/in this Committee.
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Support : California Association of Realtors
Opposition : Consumer Attorneys of California
HISTORY
Source : California Business Properties Association
Related Pending Legislation : None Known
Prior Legislation :
SB 177 (Wieckowski, Ch. 140, Stats. 2015) extended the sunset on
the authorization for LLCs to be issued an alarm company
operator's license to January 1, 2019.
AB 1608 (Olsen, Ch. 669, Stats. 2014), See Background. The bill
included a January 1, 2018, sunset date.
SB 1077 (Price, Ch. 291, Stats. 2012), See Background. The bill
included a January 1, 2016, sunset date.
SB 323 (Vargas, Ch. 419, Stats. 2012) was enacted to repeal the
Beverly-Killea Act LLC Act and, taking into account California's
particular LLC protections, replace it with a modified version
of the RULLCA, which had been adopted by the National Conference
of Commissioners on Uniform State Laws in 2006.
SB 560 (Gorell, Ch. 291, Stats. 2011) extended the sunset for
architecture LLPs to January 1, 2019. The bill, as introduced,
proposed to remove the sunset entirely.
SB 1008 (Padilla, Ch. 634, Stats. 2010) authorized licensed
engineers and land surveyors to organize and operate as LLPs, as
specified, and requires engineers and land surveyors organizing
as LLPs to carry insurance liability coverage, as specified.
This authorization is set to sunset on January 1, 2016.
SB 392 (Florez, Ch. 698, Stats. 2009), See Background.
SB 1337 (Correa, 2008), See Background.
SB 1225 (Harmon, Ch. 114, Stats. 2008) permitted an LLC to
SB 1253 (Moorlach)
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obtain a license as a cemetery authority provided it conformed
to the professional LLP insurance requirements and provided no
licensee becomes an owner-member of the LLC.
SB 414 (Corbett, Ch. 80, Stats. 2007) increased the required
liability coverage for accountancy and law LLPs.
AB 2914 (Leno, Ch. 426, Stats. 2006) extended the sunset date of
architecture LLPs until January 1, 2012, and increased the
amount of insurance that such LLPs must hold.
AB 2235 (Parra, 2006), See Background and Comment 3.
AB 180 (Jerome Horton, 2005) would have allowed engineers and
land surveyors to organize as LLPs, similar to SB 1008 (Padilla,
Ch. 634, Stats. 2010), above. The bill passed this Committee but
was later gutted and amended to deal with a different topic.
AB 2261 (Parra, 2004)), See Background and Comment 3.
AB 1265 (Benoit, 2003) would have permitted professional
engineers and land surveyors to organize as an LLP and would
have required that, depending on the number of partners, the LLP
have between $500,000 and $5 million in insurance. This bill
was held in this Committee.
AB 1596 (Shelley, Ch. 595, Stats. 2001) extended the sunset date
of statutes permitting architects to organize as LLPs, to
January 1, 2007.
AB 469 (Cardoza, Ch. 504, Stats. 1998) authorized architects to
form an LLP provided the partnership had between $500,000 and $5
million in insurance depending on the number of partners in the
LLP. Only partnerships with a net worth of $10 million or more
were allowed to become LLPs. This bill included a January 1,
2002, sunset date.
AB 2401 (Miller, 1996) would have allowed contractors to operate
as LLCs. The bill died in this Committee.
SB 141 (Beverly, Ch. 57, Stats. of 1995) would have added
numerous categories of state regulated professional service
providers to the types of businesses that could operate as LLCs.
However, the bill's sponsor and opponents were unable to agree
as to whether or not professional or licensed LLC service
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providers should carry adequate insurance to ensure their
financial ability to respond to legal judgments for contract or
tort claims. Consequently, those additional classes of
businesses were taken out of the bill.
SB 513 (Calderon, Ch. 679, Stats. 1995) authorized the
establishment of LLPs for licensed attorneys and licensed
accountants, as long as the LLP purchased a liability insurance
policy or maintained bank deposits of least $100,000 per limited
liability partner (or an aggregate of not less than $500,000 for
fewer than five partners and not more than $5 million for all
others). Only partnerships with a net worth of $10 million or
more were allowed to become LLPs.
SB 469 (Beverly and Killea, Ch. 1200, Stats. 1994) See
Background.
Prior Vote : Senate Business, Professions and Economic
Development Committee (Ayes 7, Noes 1)
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