BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 560
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          Date of Hearing:   May 4, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 560 (Gorell) - As Amended:  April 6, 2011 

          Policy Committee:                              Business and 
          Professions  Vote:                            9 - 0 

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill deletes the January 1, 2012 sunset date on licensed 
          architects' ability to organize as limited liability 
          partnerships (LLPs) thereby permitting licensed architects to 
          organize as LLPs indefinitely.

           FISCAL EFFECT  

          There are no significant costs associated with this legislation. 


           COMMENTS 

           1)Purpose  . The current authorization for architects to form LLPs 
            is set to sunset January 1, 2012.  This legislation simply 
            removes that sunset date and allows licensed architects to 
            continue to form LLPs indefinitely.

           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.








                                                                  AB 560
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           3)Related Legislation  . 

             a)   AB 2914 (Leno; Chapter 426, Statutes of 2006) extended 
               the sunset date of LLPs for architects until January 1, 
               2012.  

             b)   SB 392 (Florez; Chapter 698, Statutes of 2010) 
               authorized the State Contractors License Board (CSLB) to 
               issue a contractor's license to a limited liability company 
               (LLC) if the LLC meets other requirements such as bonding, 
               solvency, and liability insurance.  

             c)   SB 1008 (Padilla; Chapter 634, Statutes of 2010) 
               authorized licensed engineers and land surveyors to 
               organize and operate as limited liability partnerships, 
               provided that they provide security for claims against the 
               LLP by maintaining specified levels of insurance liability 
               coverage, cash reserves in trust, and minimum net worth.

           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916) 
          319-2081