BILL ANALYSIS
SB 1008
Page 1
Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1008 (Padilla) - As Amended: August 2, 2010
Policy Committee: Business and
Professions Vote: 11 - 0
Judiciary 10 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes engineers and land surveyors operating
within their scope of licensure to conduct business as a limited
liability partnership (LLP) similar to that of architects,
certified public accountants and attorneys, and to be designated
as a registered LLP or a foreign LLP.
FISCAL EFFECT
1)The Franchise Tax Board estimates that this legislation will
result in a loss of tax revenue, growing to $2.5 million per
year, because current S corporations and C corporations would
convert to LLPs due to the tax advantages.
2)The licensing board for engineers and land surveyors does not
anticipate that this legislation will have any workload impact
for the board.
COMMENTS
1)Rationale . The intent of this legislation is to allow
engineering and land surveying firms the option of forming
LLPs, which will grant parity with related design
professionals (architects) who can currently form LLPs.
According to the author, the ability to form limited liability
partnerships will allow engineering and land surveying firms
to combine with firms with complimentary expertise in order to
better compete for large infrastructure projects. The author
contends that as the infrastructure projects become more
SB 1008
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complex, the ability of design and construction firms to adapt
will be a key in being able to effectively deliver for their
clients.
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.
3)Related Legislation . SB 392 (Florez) authorizes the State
Contractors License Board (CSLB) to issue a contractors
license to a limited liability company (LLC) if the LLC meets
other requirements such as bonding, solvency, and liability
insurance. That bill is currently pending in this committee.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081