BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 560
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 560 (Gorell)
          As Amended  July 12, 2011
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |70-0 |(May 12, 2011)  |SENATE: |34-0 |(August 22,    |
          |           |     |                |        |     |2011)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    B., P. & C.P. 

          SUMMARY  :  Extends the sunset date on licensed architects' 
          ability to organize as limited liability partnerships (LLPs) 
          until January 1, 2019.

           The Senate amendments  add a January 1, 2019 sunset date on 
          licensed architects' ability to organize as LLPs. 

           EXISTING LAW  provides for the formation of various types of 
          legal business entities, including LLPs and foreign LLPs.  Under 
          existing law, registered LLPs and foreign LLPs may only be 
          formed for the practice of accountancy, the practice of law, 
          and, until January 1, 2012, the practice of architecture.  LLPs 
          formed within these professions must meet specified insurance 
          requirements.

           AS PASSED BY THE ASSEMBLY  , this bill deleted the sunset date on 
          licensed architects' ability to organize as LLPs, thereby 
          permitting licensed architects to organize as LLPs indefinitely.

           FISCAL EFFECT  :  According to the Senate Appropriations 
          Committee, pursuant to Senate Rule 28.8, negligible state costs. 


           COMMENTS  :  A LLP is a hybrid of a corporation and a general 
          partnership.  Management of a LLP functions much like that of a 
          general partnership.  Only an informational tax return is 
          required of a LLP - any profit generated by the LLP is passed 
          through to its partners who are then taxed at the individual 
          level.  Possibly the greatest benefit of a LLP, however, is 
          "limited liability" for a LLP partner.  This limited liability 
          protects a LLP partner's personal assets from the errors and 
          omissions of an employee or other partner in the LLP, as well as 
          from financial disaster that may lead to business losses.  Thus, 








                                                                  AB 560
                                                                  Page  2

          a partner in a LLP is not personally liable for the negligent 
          acts of other partners or for debts and obligations of the 
          partnership, although it should be noted that a "protected" 
          partner may still benefit from the profits produced by the 
          negligent partner.  A partner of a LLP still remains personally 
          liable for his or her own actions and errors or omissions.  In 
          contrast to a LLP, all partners of a general partnership are 
          liable for the actions of their business partners.

          This bill, as amended in the Senate, is consistent with Assembly 
          actions. 


           Analysis Prepared by  :    Joanna Gin / B.,P. & C.P. / (916) 
          319-3301 


                                                               FN: 0001837