BILL ANALYSIS �
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THIRD READING
Bill No: AB 560
Author: Gorell (R), et al.
Amended: 7/12/11 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 7/5/11
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 70-0, 5/12/11 (Consent) - See last page
for vote
SUBJECT : Professional limited liability partnerships
SOURCE : American Institute of Architects, California
Council
DIGEST : This bill extends the sunset date of January 1,
2012, to
January 1, 2019, authorizing limited liability partnerships
for the practice of architecture.
ANALYSIS : Existing law provides that a partner in a
registered limited liability partnership (LLP) is not
liable or accountable, directly or indirectly, including by
way of indemnification, contribution, assessment, or
otherwise, for debts, obligations, or liabilities of or
chargeable to the partnership or another partner in the
partnership, whether arising in tort, contract, or
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otherwise, that are incurred, created, or assumed by the
partnership while the partnership is a registered limited
liability partnership, by reason of being a partner or
acting in the conduct of the business or activities of the
partnership. (Corporations Code (CORP) Section 16306(c))
Existing law defines "foreign LLP" to include partnerships
licensed to engage in the practice of architecture,
engineering, land surveying, public accountancy, or the
practice of law. (CORP Section 16101(6)(A))
Existing law defines "registered LLP" to include persons
licensed to engage in the practice of architecture,
engineering, land surveying, public accountancy, or law.
(CORP Section 16101(8)(A))
Existing law defines "professional LLP services" to include
the practice of architecture, engineering, land surveying,
public accountancy, or law. (CORP Section 16101(14))
Existing law provides that general partners of LLPs are
jointly and severally liable for all obligations of the
limited partnership. (CORP Section 15904.04)
Existing law requires that every registered LLP and foreign
LLP provide security for claims, as specified. (CORP
Section 16956)
Existing law requires all LLPs, at the time of registration
and continuously while transacting intrastate business to
provide security for claims, as specified. For claims
based upon acts, errors, or omissions arising out of the
practice of architecture, a registered limited liability
partnership or foreign limited liability partnership
providing architectural services shall comply with one, or
some combination as specified, of the following:
1. Maintaining a policy or policies of insurance against
liability imposed on or against it by law for damages
arising out of claims as follows:
A. The total aggregate limit of liability under the
policy or policies of insurance for partnerships with
five or fewer licensees rendering professional
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services on behalf of the partnership shall not be
less than $1 million.
B. For partnerships with more than five licensees
rendering professional services on behalf of the
partnership, an additional $100,000 of liability
coverage shall be obtained for each additional
licensee.
C. However, the total aggregate limit of liability
under the policy or policies of insurance is not
required to exceed $5 million.
2. In lieu of insurance coverage as specified above,
maintaining in trust or bank escrow, cash, bank
certificates of deposit, United States Treasury
obligations, bank letters of credit, or bonds of
insurance or surety companies as security for payment of
liabilities imposed by law for damages arising out of
all claims as follows:
A. The maximum amount of security for partnerships
with five or fewer licensees rendering professional
services on behalf of the partnership shall not be
less than $1 million.
B. For partnerships with more than five licensees
rendering professional services on behalf of the
partnership, an additional $100,000 of security shall
be obtained for each additional licensee.
C. However, the maximum amount of security is not
required to exceed $5 million. (CORP Section
16956(a)(3)(A)-(B))
Existing law provides that the impairment or exhaustion of
the aggregate limit of liability by amounts paid under the
policy in connection with the settlement, discharge, or
defense of claims applicable to a designated period shall
not require the partnership to acquire additional insurance
for that designated period. (CORP Section 16956(a)(3)(A))
Existing law sunsets the ability of architects to organize
as LLPs on
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January 1, 2012. (CORP Section 16101(19))
This bill extends the above January 1, 2012 sunset date to
January 1, 2019.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/15/11)
American Institute of Architects, California Council
(source)
ARGUMENTS IN SUPPORT : According to the author:
"Existing law allows attorneys, accountants, architects,
engineers, and land surveyors to organize as Limited
Liability Partnerships. Unlike attorneys and
accountants, the architect LLP law (and the engineer and
land surveyor law, enacted last year) contains a sunset
date. AB 560 proposes to eliminate the sunset date on
the architect LLP, giving it the same status as the law
for accountants and attorneys.
"Without AB 560, the architect LLP law would expire,
forcing the nearly 200 architect LLPs to reorganize their
businesses to another business structure, and most likely
require them to rewrite their existing contracts to
reflect that change. Also, the sunset date serves as a
disincentive for architecture firms to organize as an
LLP. Many architectural firm principals dismiss the LLP
structure as a viable option because of the sunset date;
they do not want to risk having to reorganize their firm
and rewrite existing contracts.
"The sponsor of this bill, the AIACC, adds that by
extending the sunset date, this bill "�brings] this law
into parity with the law that authorizes attorneys and
licensed accountants to form LLPs. . . . While the 1995
legislation that authorized attorneys and licensed
accountants to form LLPs did not include a sunset date,
the 1998 legislation to add licensed architects to the
LLP statutory framework did include a sunset date �later
extended twice]."
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ASSEMBLY FLOOR : 70-0, 5/12/11 (Consent)
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel P�rez, Silva, Skinner, Smyth, Solorio,
Swanson, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. P�rez
NO VOTE RECORDED: Alejo, Cedillo, Conway, Garrick, Gorell,
Roger Hern�ndez, Bonnie Lowenthal, Mitchell, Portantino,
Torres
RJG:mw 8/16/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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