California Attorney General Bill Lockyer has issued opinion No. 04-103:

A limited liability company provides its members with limited liability to the same extent as that enjoyed by corporate shareholders but permits the members to actively participate in the management and control of the company. Corporations Code §§17000-17655. (LLCs are treated like partnerships for income tax purposes.)

An LLC is not authorized to perform "professional services." Corporations Code §17375. "Professional services" means "any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act" and also means ".any type of professional services that may be lawfully rendered only pursuant to a license. authorized by the Yacht and Ship Brokers Act.." Corporations Code §§13401, 13401.3.

While professional services may not be performed by an LLC, they may be performed by a professional corporation formed under the PC Act. Corporations Code §§13402, 13404. Lawyers, doctors, dentists, chiropractors, speech pathologists, audiologists, physical therapists, nurses, psychologists, optometrists, pharmacists, veterinarians, marriage and family counselors, clinical social workers, accountants, architects, and shorthand reporters may form corporations under the PC Act.

More than 60 occupational activities require licensing under the Business and Professions Code, including barbers, locksmiths, private detectives, alarm companies, pest control companies and automotive repair dealers -- as well as contractors, architects and engineers. A "profession" requires specialized knowledge and often long and intensive academic preparation. A "profession" is an occupation requiring a high level of training and proficiency. To determine whether a particular service is "professional" or not requires an examination of the educational, training and testing prerequisites. (Applying the definition of "professional" to each licensed activity specified in the Business and Professions Code is beyond the scope of this opinion.)

CONCLUSION: "We conclude that a business that provides services requiring a license, certification, or registration pursuant to the Business and Professions Code may conduct its activities as an LLC if the services rendered require only a nonprofessional, occupational license."

COMMENT BY AUTHOR: The attorney general's opinion does not attempt to determine whether contractors are "professionals" and whether they may organize as LLCs. But, it is the policy of the Contractors State License Board not to issue contractors licenses to LLCs. Whether that policy will be reviewed as a result of the attorney general's opinion remains to be seen. It seems a good argument can be made that contractors would not qualify as "professionals" under the attorney general's opinion and that contractor licenses could, therefore, be issued to contractors organized as LLCs.

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