Bill Text: NY A01938 | 2021-2022 | General Assembly | Introduced


Bill Title: Relates to certified public accountants; requires that a majority of the ownership of a professional service corporation formed to lawfully engage in the practice of public accountancy are individuals licensed to practice public accountancy in some state; enacts similar provisions for partnerships and LLCs.

Spectrum: Strong Partisan Bill (Democrat 73-4)

Status: (Introduced) 2021-01-13 - referred to higher education [A01938 Detail]

Download: New_York-2021-A01938-Introduced.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                          1938

                               2021-2022 Regular Sessions

                   IN ASSEMBLY

                                    January 13, 2021
                                       ___________

        Introduced  by  M.  of A. PEOPLES-STOKES, TAYLOR, MAGNARELLI, BENEDETTO,
          DICKENS, ENGLEBRIGHT, J. RIVERA, JEAN-PIERRE,  DE LA ROSA,  SEAWRIGHT,
          MORINELLO,  COOK,  L. ROSENTHAL,  PERRY,  LUPARDO, GOTTFRIED, BRONSON,
          ABBATE, DILAN, RICHARDSON, PHEFFER AMATO, DINOWITZ,  RODRIGUEZ,  PRET-
          LOW,  NIOU,  ROZIC,  D. ROSENTHAL,  JOYNER, HUNTER, PICHARDO, SOLAGES,
          HEVESI, HYNDMAN, GALEF, GUNTHER, STIRPE, WOERNER, QUART, CUSICK, FAHY,
          SANTABARBARA, BICHOTTE HERMELYN, WEPRIN, LAVINE, CYMBROWITZ,  WALCZYK,
          VANEL,  ZEBROWSKI, WALLACE, PAULIN, EICHENSTEIN, CARROLL, FALL, REYES,
          WALKER, FERNANDEZ, SAYEGH, McMAHON,  BARNWELL,  BARRETT,  BUTTENSCHON,
          COLTON,  BARRON,  BRAUNSTEIN,  DARLING, STERN, CAHILL, GRIFFIN, RAMOS,
          JONES -- Multi-Sponsored by -- M. of A. DAVILA, J. M. GIGLIO, GOODELL,
          M. MILLER, THIELE -- read once and referred to the Committee on Higher
          Education

        AN ACT to amend the business corporation law, the  partnership  law  and
          the  limited  liability  company  law, in relation to certified public
          accountants

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:

     1    Section  1. Section 1503 of the business corporation law is amended by
     2  adding a new paragraph (h) to read as follows:
     3    (h) Any firm established for the business purpose of incorporating  as
     4  a  professional  service  corporation  formed  to lawfully engage in the
     5  practice of public accountancy, as such practice is respectively defined
     6  under article one hundred forty-nine  of  the  education  law  shall  be
     7  required  to  show  (1)  that  a simple majority of the ownership of the
     8  firm, in terms of financial interests, and voting  rights  held  by  the
     9  firm's  owners,  belongs  to  individuals  licensed  to  practice public
    10  accountancy in some state, and (2) that all shareholders  of  a  profes-
    11  sional  service corporation whose principal place of business is in this
    12  state, and who are engaged in the practice of public accountancy in this
    13  state, hold a valid license issued under  section  seventy-four  hundred

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02385-01-1

        A. 1938                             2

     1  four  of  the  education law. For purposes of this paragraph, "financial
     2  interest" means capital stock, capital accounts, capital  contributions,
     3  capital  interest,  or  interest in undistributed earnings of a business
     4  entity.    Although  firms may include non-licensee owners, the firm and
     5  its owners must comply with rules promulgated  by  the  state  board  of
     6  regents.   Notwithstanding the foregoing, a firm incorporated under this
     7  section may not have non-licensee owners if the firm's name includes the
     8  words "certified public accountant," or "certified public  accountants,"
     9  or the abbreviations "CPA" or "CPAs".  Each non-licensee owner of a firm
    10  that  is  incorporated  under this section shall be a natural person who
    11  actively participates in the business of  the  firm  or  its  affiliated
    12  entities. For purposes of this subdivision, "actively participate" means
    13  to provide services to clients or to otherwise individually take part in
    14  the  day-to-day  business  or  management of the firm. Such a firm shall
    15  have attached to its  certificate  of  incorporation  a  certificate  or
    16  certificates demonstrating the firm's compliance with this paragraph, in
    17  lieu of the certificate or certificates required by subparagraph (ii) of
    18  paragraph (b) of this section.
    19    § 2. Section 1507 of the business corporation law is amended by adding
    20  a new paragraph (c) to read as follows:
    21    (c)  Any firm established for the business purpose of incorporating as
    22  a professional service corporation pursuant to paragraph (h) of  section
    23  fifteen  hundred  three  of this article may issue shares to individuals
    24  who are authorized by law to practice in this state the profession which
    25  such corporation is authorized to practice and  who  are  or  have  been
    26  engaged  in  the  practice  of  such profession in such corporation or a
    27  predecessor entity, or who will engage in the practice of  such  profes-
    28  sion  in such corporation within thirty days of the date such shares are
    29  issued and may also issue shares to employees  of  the  corporation  not
    30  licensed as certified public accountants, provided that:
    31    (i)  at  least fifty-one percent of the outstanding shares of stock of
    32  the corporation are owned by certified public accountants,
    33    (ii) at least fifty-one percent of the directors are certified  public
    34  accountants,
    35    (iii)  at least fifty-one percent of the officers are certified public
    36  accountants,
    37    (iv) the president, the chairperson of the board of directors and  the
    38  chief  executive  officer  or officers are certified public accountants.
    39  No shareholder of a firm established for the business purpose of  incor-
    40  porating as a professional service corporation pursuant to paragraph (h)
    41  of  section  fifteen  hundred  three  of this article shall enter into a
    42  voting trust agreement, proxy or any other type of agreement vesting  in
    43  another  person, other than another shareholder of the same corporation,
    44  the authority to exercise voting power of any  or  all  of  his  or  her
    45  shares.  All  shares  issued,  agreements  made  or  proxies  granted in
    46  violation of this section shall be void.
    47    § 3. Section 1508 of the business corporation law is amended by adding
    48  a new paragraph (c) to read as follows:
    49    (c) The directors and officers of any firm established for  the  busi-
    50  ness  purpose  of  incorporating  as  a professional service corporation
    51  pursuant to paragraph (h) of section fifteen hundred three of this arti-
    52  cle may include individuals who are  not  licensed  to  practice  public
    53  accountancy,  provided  however  that  at least fifty-one percent of the
    54  directors, at least fifty-one percent of the officers and the president,
    55  the chairperson of the board of directors and the chief executive  offi-
    56  cer  or  officers  are  authorized  by  law to practice in any state the

        A. 1938                             3

     1  profession which such corporation is authorized  to  practice,  and  are
     2  either  shareholders  of  such corporation or engaged in the practice of
     3  their professions in such corporation.
     4    § 4. Section 1509 of the business corporation law, as amended by chap-
     5  ter 550 of the laws of 2011, is amended to read as follows:
     6  § 1509. Disqualification   of   shareholders,  directors,  officers  and
     7            employees.
     8    If any shareholder, director, officer or employee  of  a  professional
     9  service  corporation,  including  a  design  professional service corpo-
    10  ration, who has  been  rendering  professional  service  to  the  public
    11  becomes  legally  disqualified  to practice his or her profession within
    12  this state, he or she shall sever all  employment  with,  and  financial
    13  interests  (other  than  interests  as  a creditor) in, such corporation
    14  forthwith or as otherwise provided in section 1510 of this article.  All
    15  provisions of law regulating the rendering of professional services by a
    16  person  elected or appointed to a public office shall be applicable to a
    17  shareholder, director, officer and employee of such corporation  in  the
    18  same  manner  and  to the same extent as if fully set forth herein. Such
    19  legal disqualification to practice his or  her  profession  within  this
    20  state shall be deemed to constitute an irrevocable offer by the disqual-
    21  ified shareholder to sell his or her shares to the corporation, pursuant
    22  to  the provisions of section 1510 of this article or of the certificate
    23  of incorporation, by-laws or agreement among  the  corporation  and  all
    24  shareholders, whichever is applicable. Compliance with the terms of such
    25  offer  shall  be specifically enforceable in the courts of this state. A
    26  professional service corporation's failure to  enforce  compliance  with
    27  this  provision  shall constitute a ground for forfeiture of its certif-
    28  icate of incorporation and its dissolution.
    29    § 5. Paragraph (a) of section 1511 of the business corporation law, as
    30  amended by chapter 550 of the laws of 2011, is amended and a  new  para-
    31  graph (c) is added to read as follows:
    32    (a) No shareholder of a professional service corporation [or], includ-
    33  ing  a design professional service corporation, may sell or transfer his
    34  or her shares in such corporation except to another  individual  who  is
    35  eligible  to  have  shares  issued  to him or her by such corporation or
    36  except in trust to another individual who would be eligible  to  receive
    37  shares  if  he  or  she were employed by the corporation. Nothing herein
    38  contained shall be construed to prohibit the transfer of shares by oper-
    39  ation of law or by court decree.  No transferee of shares  by  operation
    40  of  law  or  court decree may vote the shares for any purpose whatsoever
    41  except with respect to corporate action under sections 909 and  1001  of
    42  this chapter. The restriction in the preceding sentence shall not apply,
    43  however,  where  such transferee would be eligible to have shares issued
    44  to him or her if he or she were an employee of the corporation  and,  if
    45  there  are  other  shareholders,  a  majority of such other shareholders
    46  shall fail to redeem the shares so transferred, pursuant to section 1510
    47  of this article, within sixty days of receiving written notice  of  such
    48  transfer.  Any  sale  or  transfer,  except by operation of law or court
    49  decree or except for a corporation having only one shareholder,  may  be
    50  made only after the same shall have been approved by the board of direc-
    51  tors, or at a shareholders' meeting specially called for such purpose by
    52  such  proportion, not less than a majority, of the outstanding shares as
    53  may be provided in the certificate of incorporation or in the by-laws of
    54  such professional service corporation. At such shareholders' meeting the
    55  shares held by the shareholder proposing to sell or transfer his or  her
    56  shares  may  not  be voted or counted for any purpose, unless all share-

        A. 1938                             4

     1  holders consent that such shares be voted or counted. The certificate of
     2  incorporation or the by-laws of the professional service corporation, or
     3  the professional service corporation and  the  shareholders  by  private
     4  agreement,  may  provide,  in  lieu  of  or in addition to the foregoing
     5  provisions, for the alienation of shares and may require the  redemption
     6  or purchase of such shares by such corporation at prices and in a manner
     7  specifically set forth therein. The existence of the restrictions on the
     8  sale  or transfer of shares, as contained in this article and, if appli-
     9  cable, in the certificate of incorporation, by-laws, stock  purchase  or
    10  stock  redemption agreement, shall be noted conspicuously on the face or
    11  back of every certificate for shares issued by  a  professional  service
    12  corporation.  Any  sale  or  transfer  in violation of such restrictions
    13  shall be void.
    14    (c) A firm established for the business purpose of incorporating as  a
    15  professional  service  corporation  pursuant to paragraph (h) of section
    16  fifteen hundred three of this article,  shall  purchase  or  redeem  the
    17  shares  of a non-licensed professional shareholder in the case of his or
    18  her termination of employment within thirty days after such termination.
    19  A firm established for  the  business  purpose  of  incorporating  as  a
    20  professional  service  corporation  pursuant to paragraph (h) of section
    21  fifteen hundred three of this article, shall not be required to purchase
    22  or redeem the shares of a terminated  non-licensed  professional  share-
    23  holder  if  such  shares, within thirty days after such termination, are
    24  sold or transferred to another employee of the corporation  pursuant  to
    25  this article.
    26    § 6. Section 1514 of the business corporation law is amended by adding
    27  a new paragraph (c) to read as follows:
    28    (c) Each firm established for the business purpose of incorporating as
    29  a  professional service corporation pursuant to paragraph (h) of section
    30  fifteen hundred three of this article shall, at least once  every  three
    31  years  on  or  before  the  date  prescribed by the licensing authority,
    32  furnish a statement to the licensing authority  listing  the  names  and
    33  residence  addresses  of  each shareholder, director and officer of such
    34  corporation and certify as the date of certification and  at  all  times
    35  over the entire three year period that:
    36    (i)  at  least fifty-one percent of the outstanding shares of stock of
    37  the corporation are and were owned by certified public accountants,
    38    (ii) at least fifty-one percent of the directors are and  were  certi-
    39  fied public accountants,
    40    (iii)  at  least fifty-one percent of the officers are and were certi-
    41  fied public accountants,
    42    (iv) the president, the chairperson of the board of directors and  the
    43  chief  executive  officer  or  officers  are  and  were certified public
    44  accountants.
    45  The statement shall be signed by the president or any  certified  public
    46  accountant  vice-president  and  attested  to  by  the  secretary or any
    47  assistant secretary of the corporation.
    48    § 7. Paragraph (d) of section 1525 of the business corporation law, as
    49  added by chapter 505 of the laws of 1983, is amended to read as follows:
    50    (d) "Foreign professional service corporation"  means  a  professional
    51  service corporation, whether or not denominated as such, organized under
    52  the  laws of a jurisdiction other than this state, all of the sharehold-
    53  ers, directors and officers of which  are  authorized  and  licensed  to
    54  practice  the  profession  for  which such corporation is licensed to do
    55  business; except that all shareholders,  directors  and  officers  of  a
    56  foreign  professional service corporation which provides health services

        A. 1938                             5

     1  in this state shall be licensed in this state.  A  foreign  professional
     2  service  corporation formed to lawfully engage in the practice of public
     3  accountancy, as such practice  is  defined  under  article  one  hundred
     4  forty-nine  of  the  education  law,  or  equivalent state law, shall be
     5  required to show (1) that a simple majority  of  the  ownership  of  the
     6  firm,  in  terms  of  financial interests, and voting rights held by the
     7  firm's owners,  belongs  to  individuals  licensed  to  practice  public
     8  accountancy  in  some  state, and (2) that all shareholders of a foreign
     9  professional service corporation whose principal place of business is in
    10  this state, and who are engaged in the practice of public accountancy in
    11  this state, hold a  valid  license  issued  under  section  seventy-four
    12  hundred  four  of  the  education  law.  For purposes of this paragraph,
    13  "financial interest" means  capital  stock,  capital  accounts,  capital
    14  contributions,  capital  interest, or interest in undistributed earnings
    15  of a business entity.  Although firms may include  non-licensee  owners,
    16  the  firm and its owners must comply with rules promulgated by the state
    17  board of regents.   Notwithstanding the  foregoing,  a  firm  registered
    18  under  this  section may not have non-licensee owners if the firm's name
    19  includes the words "certified public accountant," or  "certified  public
    20  accountants,"  or  the  abbreviations "CPA" or "CPAs". Each non-licensee
    21  owner of a firm that is operating under this section shall be a  natural
    22  person  who  actively  participates  in  the business of the firm or its
    23  affiliated entities, provided each beneficial owner of an equity  inter-
    24  est  in such entity is a natural person who actively participates in the
    25  business conducted by the firm or its affiliated entities. For  purposes
    26  of  this  paragraph, "actively participate" means to provide services to
    27  clients or to otherwise individually take part in the  day-to-day  busi-
    28  ness or management of the firm.
    29    §  8.  Subdivision  (q) of section 121-1500 of the partnership law, as
    30  amended by chapter 475 of the laws  of  2014,  is  amended  to  read  as
    31  follows:
    32    (q)  Each partner of a registered limited liability partnership formed
    33  to provide medical services in this state must be licensed  pursuant  to
    34  article  131 of the education law to practice medicine in this state and
    35  each partner of a registered limited  liability  partnership  formed  to
    36  provide dental services in this state must be licensed pursuant to arti-
    37  cle  133 of the education law to practice dentistry in this state.  Each
    38  partner of a registered limited liability partnership formed to  provide
    39  veterinary  services  in this state must be licensed pursuant to article
    40  135 of the education law to practice veterinary medicine in this  state.
    41  Each  partner  of  a  registered limited liability partnership formed to
    42  provide public accountancy services, whose principal place  of  business
    43  is  in  this state and who provides public accountancy services, must be
    44  licensed pursuant to article 149 of the education law to practice public
    45  accountancy in this state. Each partner of a registered limited  liabil-
    46  ity partnership formed to provide professional engineering, land survey-
    47  ing,  geological  services, architectural and/or landscape architectural
    48  services in this state must be licensed pursuant to article 145, article
    49  147 and/or article 148 of the education law to practice one or  more  of
    50  such  professions  in  this  state. Each partner of a registered limited
    51  liability partnership formed to provide licensed  clinical  social  work
    52  services  in  this state must be licensed pursuant to article 154 of the
    53  education law to practice clinical social work in this state. Each part-
    54  ner of a registered limited  liability  partnership  formed  to  provide
    55  creative  arts  therapy services in this state must be licensed pursuant
    56  to article 163 of the education law to practice creative arts therapy in

        A. 1938                             6

     1  this state. Each partner of a registered limited  liability  partnership
     2  formed  to  provide  marriage  and family therapy services in this state
     3  must be licensed pursuant to article 163 of the education law  to  prac-
     4  tice marriage and family therapy in this state. Each partner of a regis-
     5  tered  limited  liability  partnership  formed  to provide mental health
     6  counseling services in this state must be licensed pursuant  to  article
     7  163  of  the  education law to practice mental health counseling in this
     8  state. Each partner of a registered limited liability partnership formed
     9  to provide psychoanalysis services in this state must be licensed pursu-
    10  ant to article 163 of the education law to  practice  psychoanalysis  in
    11  this  state.  Each partner of a registered limited liability partnership
    12  formed to provide applied behavior analysis service in this  state  must
    13  be licensed or certified pursuant to article 167 of the education law to
    14  practice  applied  behavior  analysis in this state. A limited liability
    15  partnership formed to lawfully engage in the practice of public  accoun-
    16  tancy, as such practice is respectively defined under article 149 of the
    17  education  law,  shall be required to show (1) that a simple majority of
    18  the ownership of the firm, in terms of financial interests,  and  voting
    19  rights  held  by  the  firm's owners, belongs to individuals licensed to
    20  practice public accountancy in some state, and (2) that all partners  of
    21  a  limited liability partnership whose principal place of business is in
    22  this state, and who are engaged in the practice of public accountancy in
    23  this state, hold a  valid  license  issued  under  section  seventy-four
    24  hundred  four  of  the  education law. For purposes of this subdivision,
    25  "financial interest" means  capital  stock,  capital  accounts,  capital
    26  contributions,  capital  interest, or interest in undistributed earnings
    27  of a business entity.  Although firms may include  non-licensee  owners,
    28  the  firm and its owners must comply with rules promulgated by the state
    29  board of regents. Notwithstanding the foregoing, a firm registered under
    30  this section may  not  have  non-licensee  owners  if  the  firm's  name
    31  includes  the  words "certified public accountant," or "certified public
    32  accounts," or the abbreviations "CPA" or "CPAs". Each non-licensee owner
    33  of a firm that is formed under this  section  shall  be  (1)  a  natural
    34  person  who  actively  participates  in  the business of the firm or its
    35  affiliated entities, or (2) an entity, including, but not limited to,  a
    36  partnership  or professional corporation, provided each beneficial owner
    37  of an equity interest in such entity is a natural  person  who  actively
    38  participates  in  the  business  conducted by the firm or its affiliated
    39  entities. For purposes of this subdivision, "actively participate" means
    40  to provide services to clients or to otherwise individually take part in
    41  the day-to-day business or management of the firm.
    42    § 9. Subdivision (q) of section 121-1502 of the  partnership  law,  as
    43  amended  by  chapter  475  of  the  laws  of 2014, is amended to read as
    44  follows:
    45    (q) Each partner of a  foreign  limited  liability  partnership  which
    46  provides  medical  services  in  this state must be licensed pursuant to
    47  article 131 of the education law to practice medicine in the  state  and
    48  each  partner  of a foreign limited liability partnership which provides
    49  dental services in the state must be licensed pursuant to article 133 of
    50  the education law to practice dentistry in this state. Each partner of a
    51  foreign limited liability partnership which provides veterinary  service
    52  in  the state shall be licensed pursuant to article 135 of the education
    53  law to practice veterinary medicine in this state.  Each  partner  of  a
    54  foreign  limited liability partnership which provides professional engi-
    55  neering, land surveying, geological services, architectural and/or land-
    56  scape architectural services in this state must be licensed pursuant  to

        A. 1938                             7

     1  article  145,  article  147  and/or  article 148 of the education law to
     2  practice one or more of such professions.   Each partner  of  a  foreign
     3  registered  limited  liability  partnership  formed  to  provide  public
     4  accountancy services, whose principal place of business is in this state
     5  and  who provides public accountancy services, must be licensed pursuant
     6  to article 149 of the education law to practice  public  accountancy  in
     7  this  state.  Each  partner  of  a foreign limited liability partnership
     8  which provides licensed clinical social work services in this state must
     9  be licensed pursuant to article 154 of the  education  law  to  practice
    10  licensed  clinical  social work in this state. Each partner of a foreign
    11  limited liability  partnership  which  provides  creative  arts  therapy
    12  services  in  this state must be licensed pursuant to article 163 of the
    13  education law to practice creative arts  therapy  in  this  state.  Each
    14  partner  of  a  foreign  limited  liability  partnership  which provides
    15  marriage and family therapy services in  this  state  must  be  licensed
    16  pursuant  to  article  163 of the education law to practice marriage and
    17  family therapy in this state. Each partner of a foreign limited  liabil-
    18  ity partnership which provides mental health counseling services in this
    19  state  must  be licensed pursuant to article 163 of the education law to
    20  practice mental health counseling in  this  state.  Each  partner  of  a
    21  foreign  limited  liability  partnership  which  provides psychoanalysis
    22  services in this state must be licensed pursuant to article 163  of  the
    23  education  law to practice psychoanalysis in this state. Each partner of
    24  a foreign limited liability partnership which provides applied  behavior
    25  analysis  services  in this state must be licensed or certified pursuant
    26  to article 167 of the education law to practice applied behavior  analy-
    27  sis  in  this state.   A foreign limited liability partnership formed to
    28  lawfully engage in the practice of public accountancy, as such  practice
    29  is respectively defined under article 149 of the education law, shall be
    30  required  to  show  (1)  that  a simple majority of the ownership of the
    31  firm, in terms of financial interests, and voting  rights  held  by  the
    32  firm's  owners,  belongs  to  individuals  licensed  to  practice public
    33  accountancy in some state, and (2) that all partners of a foreign limit-
    34  ed liability partnership whose principal place of business  is  in  this
    35  state, and who are engaged in the practice of public accountancy in this
    36  state,  hold  a  valid license issued under section seventy-four hundred
    37  four of the education law. For purposes of this subdivision,  "financial
    38  interest"  means capital stock, capital accounts, capital contributions,
    39  capital interest, or interest in undistributed earnings  of  a  business
    40  entity.    Although  firms may include non-licensee owners, the firm and
    41  its owners must comply with rules promulgated  by  the  state  board  of
    42  regents.  Notwithstanding  the  foregoing,  a firm registered under this
    43  section may not have non-licensee owners if the firm's name includes the
    44  words "certified public accountant," or "certified public  accountants,"
    45  or the abbreviations "CPA" or "CPAs".  Each non-licensee owner of a firm
    46  that  is  formed  under  this  section shall be (1) a natural person who
    47  actively participates in the business of  the  firm  or  its  affiliated
    48  entities, or (2) an entity, including, but not limited to, a partnership
    49  or professional corporation, provided each beneficial owner of an equity
    50  interest in such entity is a natural person who actively participates in
    51  the  business  conducted  by  the  firm or its affiliated entities.  For
    52  purposes of this subdivision, "actively participate"  means  to  provide
    53  services  to  clients or to otherwise individually take part in the day-
    54  to-day business or management of the firm.
    55    § 10. Subdivision (h) of section 121-101 of the  partnership  law,  as
    56  added by chapter 950 of the laws of 1990, is amended to read as follows:

        A. 1938                             8

     1    (h)  "Limited  partnership"  and  "domestic limited partnership" mean,
     2  unless the context otherwise requires, a partnership (i) formed  by  two
     3  or more persons pursuant to this article or which complies with subdivi-
     4  sion (a) of section 121-1202 of this article and (ii) having one or more
     5  general  partners and one or more limited partners.  Notwithstanding any
     6  other provisions of law a limited partnership or domestic limited  part-
     7  nership formed to lawfully engage in the practice of public accountancy,
     8  as such practice is respectively defined under article 149 of the educa-
     9  tion  law  shall  be  required to show (1) that a simple majority of the
    10  ownership of the firm, in terms of financial interests, including owner-
    11  ship-based compensation, and voting rights held by  the  firm's  owners,
    12  belongs  to  individuals licensed to practice public accountancy in some
    13  state, and (2) that all partners of a limited  partnership  or  domestic
    14  limited partnership, whose principal place of business is in this state,
    15  and who are engaged in the practice of public accountancy in this state,
    16  hold  a  valid license issued under section seventy-four hundred four of
    17  the education law or  are  public  accountants  licensed  under  section
    18  seventy-four  hundred  five  of  the  education  law. Although firms may
    19  include non-licensee owners, the firm and its owners  must  comply  with
    20  rules  promulgated  by  the state board of regents.  Notwithstanding the
    21  foregoing, a firm registered under this section may not have  non-licen-
    22  see  owners  if  the  firm's  name  includes the words "certified public
    23  accountant," or "certified public  accountants,"  or  the  abbreviations
    24  "CPA"  or  "CPAs".  Each non-licensee owner of a firm that is registered
    25  under this section shall be (1) a natural person  who  actively  partic-
    26  ipates in the business of the firm or its affiliated entities, or (2) an
    27  entity,  including,  but  not  limited to, a partnership or professional
    28  corporation, provided each beneficial owner of  an  equity  interest  in
    29  such  entity  is a natural person who actively participates in the busi-
    30  ness conducted by the firm or its affiliated entities. For  purposes  of
    31  this  subdivision,  "actively  participate" means to provide services to
    32  clients or to otherwise individually take part in the  day-to-day  busi-
    33  ness or management of the firm.
    34    § 11. Subdivision (b) of section 1207 of the limited liability company
    35  law,  as  amended by chapter 475 of the laws of 2014, is amended to read
    36  as follows:
    37    (b) With respect to a professional service limited  liability  company
    38  formed to provide medical services as such services are defined in arti-
    39  cle  131  of  the  education  law, each member of such limited liability
    40  company must be licensed pursuant to article 131 of the education law to
    41  practice medicine in this state.  With respect to a professional service
    42  limited liability company formed to  provide  dental  services  as  such
    43  services are defined in article 133 of the education law, each member of
    44  such  limited liability company must be licensed pursuant to article 133
    45  of the education law to practice dentistry in this state.  With  respect
    46  to  a  professional  service limited liability company formed to provide
    47  veterinary services as such services are defined in article 135  of  the
    48  education  law,  each  member  of such limited liability company must be
    49  licensed pursuant to article 135 of the education law to practice veter-
    50  inary medicine in this state. With respect  to  a  professional  service
    51  limited  liability  company  formed to provide professional engineering,
    52  land surveying, architectural, landscape architectural and/or geological
    53  services as such services are defined in article 145,  article  147  and
    54  article  148 of the education law, each member of such limited liability
    55  company must be licensed pursuant to article  145,  article  147  and/or
    56  article  148  of  the  education  law  to  practice  one or more of such

        A. 1938                             9

     1  professions in this state.   With  respect  to  a  professional  service
     2  limited  liability company formed to provide public accountancy services
     3  as such services are defined in article 149 of the  education  law  each
     4  member  of such limited liability company whose principal place of busi-
     5  ness is in this state and who provides public accountancy services, must
     6  be licensed pursuant to article 149 of the  education  law  to  practice
     7  public accountancy in this state. With respect to a professional service
     8  limited  liability  company  formed  to provide licensed clinical social
     9  work services as such services are defined in article 154 of the  educa-
    10  tion  law,  each  member  of  such  limited  liability  company shall be
    11  licensed pursuant to article  154  of  the  education  law  to  practice
    12  licensed  clinical  social work in this state. With respect to a profes-
    13  sional service limited liability company formed to provide creative arts
    14  therapy services as such services are defined  in  article  163  of  the
    15  education  law,  each  member  of such limited liability company must be
    16  licensed pursuant to article 163 of the education law to practice  crea-
    17  tive  arts therapy in this state. With respect to a professional service
    18  limited liability company formed to provide marriage and family  therapy
    19  services  as  such  services are defined in article 163 of the education
    20  law, each member of such limited  liability  company  must  be  licensed
    21  pursuant  to  article  163 of the education law to practice marriage and
    22  family therapy in this state. With respect  to  a  professional  service
    23  limited  liability  company  formed  to provide mental health counseling
    24  services as such services are defined in article 163  of  the  education
    25  law,  each  member  of  such  limited liability company must be licensed
    26  pursuant to article 163 of the education law to practice  mental  health
    27  counseling in this state. With respect to a professional service limited
    28  liability  company  formed  to  provide  psychoanalysis services as such
    29  services are defined in article 163 of the education law, each member of
    30  such limited liability company must be licensed pursuant to article  163
    31  of  the  education  law  to  practice psychoanalysis in this state. With
    32  respect to a professional service limited liability  company  formed  to
    33  provide  applied behavior analysis services as such services are defined
    34  in article 167 of the education law, each member of such limited liabil-
    35  ity company must be licensed or certified pursuant to article 167 of the
    36  education law to practice applied behavior analysis  in  this  state.  A
    37  professional service limited liability company formed to lawfully engage
    38  in  the practice of public accountancy, as such practice is respectively
    39  defined under article 149 of the education law shall be required to show
    40  (1) that a simple majority of the ownership of the  firm,  in  terms  of
    41  financial  interests,  and  voting  rights  held  by  the firm's owners,
    42  belongs to individuals licensed to practice public accountancy  in  some
    43  state, and (2) that all members of a limited professional service limit-
    44  ed  liability  company,  whose  principal  place  of business is in this
    45  state, and who are engaged in the practice of public accountancy in this
    46  state, hold a valid license issued under  section  seventy-four  hundred
    47  four  of the education law. For purposes of this subdivision, "financial
    48  interest" means capital stock, capital accounts, capital  contributions,
    49  capital  interest,  or  interest in undistributed earnings of a business
    50  entity.  Although firms may include non-licensee owners,  the  firm  and
    51  its  owners  must  comply  with  rules promulgated by the state board of
    52  regents.  Notwithstanding the foregoing, a firm  registered  under  this
    53  section may not have non-licensee owners if the firm's name includes the
    54  words  "certified public accountant," or "certified public accountants,"
    55  or the abbreviations "CPA" or "CPAs". Each non-licensee owner of a  firm
    56  that  is registered under this section shall be (1) a natural person who

        A. 1938                            10

     1  actively participates in the business of  the  firm  or  its  affiliated
     2  entities, or (2) an entity, including, but not limited to, a partnership
     3  or professional corporation, provided each beneficial owner of an equity
     4  interest in such entity is a natural person who actively participates in
     5  the  business  conducted  by  the  firm  or its affiliated entities. For
     6  purposes of this subdivision, "actively participate"  means  to  provide
     7  services  to  clients or to otherwise individually take part in the day-
     8  to-day business or management of the firm.
     9    § 12. Subdivision (a) of section 1301 of the limited liability company
    10  law, as amended by chapter 475 of the laws of 2014, is amended  to  read
    11  as follows:
    12    (a)  "Foreign  professional service limited liability company" means a
    13  professional service limited liability company, whether or  not  denomi-
    14  nated  as  such,  organized  under the laws of a jurisdiction other than
    15  this state, (i) each of whose members and managers, if any, is a profes-
    16  sional authorized by law to render a professional  service  within  this
    17  state  and who is or has been engaged in the practice of such profession
    18  in such professional service limited liability company or a  predecessor
    19  entity, or will engage in the practice of such profession in the profes-
    20  sional  service limited liability company within thirty days of the date
    21  such professional becomes a member, or each of whose members and  manag-
    22  ers,  if  any, is a professional at least one of such members is author-
    23  ized by law to render a professional service within this state  and  who
    24  is  or  has  been  engaged  in  the  practice of such profession in such
    25  professional service limited liability company or a predecessor  entity,
    26  or  will  engage  in the practice of such profession in the professional
    27  service limited liability company within thirty days of  the  date  such
    28  professional  becomes  a  member,  or  (ii)  authorized by, or holding a
    29  license, certificate, registration or permit  issued  by  the  licensing
    30  authority  pursuant  to,  the  education  law  to  render a professional
    31  service within this state; except that all members and managers, if any,
    32  of  a  foreign  professional  service  limited  liability  company  that
    33  provides  health services in this state shall be licensed in this state.
    34  With respect to a foreign professional service limited liability company
    35  which provides veterinary services as such services are defined in arti-
    36  cle 135 of the education law, each member of such  foreign  professional
    37  service  limited liability company shall be licensed pursuant to article
    38  135 of the education law to practice veterinary medicine.  With  respect
    39  to  a  foreign  professional  service  limited  liability  company which
    40  provides medical services as such services are defined in article 131 of
    41  the education law, each member  of  such  foreign  professional  service
    42  limited  liability  company  must be licensed pursuant to article 131 of
    43  the education law to practice medicine in this state.  With respect to a
    44  foreign professional service limited liability  company  which  provides
    45  dental  services  as  such  services  are  defined in article 133 of the
    46  education law, each member of such foreign professional service  limited
    47  liability company must be licensed pursuant to article 133 of the educa-
    48  tion  law to practice dentistry in this state. With respect to a foreign
    49  professional service limited liability company  which  provides  profes-
    50  sional engineering, land surveying, geologic, architectural and/or land-
    51  scape  architectural  services  as  such services are defined in article
    52  145, article 147 and article 148 of the education law,  each  member  of
    53  such  foreign  professional  service  limited  liability company must be
    54  licensed pursuant to article 145, article 147 and/or article 148 of  the
    55  education law to practice one or more of such professions in this state.
    56  With respect to a foreign professional service limited liability company

        A. 1938                            11

     1  which  provides public accountancy services as such services are defined
     2  in article 149 of the education law, each member of such foreign profes-
     3  sional service limited liability company whose principal place of  busi-
     4  ness  is  in  this  state  and who provides public accountancy services,
     5  shall be licensed pursuant to article 149 of the education law to  prac-
     6  tice public accountancy in this state. With respect to a foreign profes-
     7  sional  service  limited liability company which provides licensed clin-
     8  ical social work services as such services are defined in article 154 of
     9  the education law, each member  of  such  foreign  professional  service
    10  limited  liability  company shall be licensed pursuant to article 154 of
    11  the education law to practice clinical social work in this  state.  With
    12  respect  to  a  foreign  professional  service limited liability company
    13  which provides creative arts  therapy  services  as  such  services  are
    14  defined in article 163 of the education law, each member of such foreign
    15  professional service limited liability company must be licensed pursuant
    16  to article 163 of the education law to practice creative arts therapy in
    17  this  state.  With  respect  to  a  foreign professional service limited
    18  liability company which provides marriage and family therapy services as
    19  such services are defined in article 163  of  the  education  law,  each
    20  member  of  such  foreign professional service limited liability company
    21  must be licensed pursuant to article 163 of the education law  to  prac-
    22  tice  marriage  and  family  therapy  in  this  state. With respect to a
    23  foreign professional service limited liability  company  which  provides
    24  mental  health counseling services as such services are defined in arti-
    25  cle 163 of the education law, each member of such  foreign  professional
    26  service  limited  liability company must be licensed pursuant to article
    27  163 of the education law to practice mental health  counseling  in  this
    28  state.  With respect to a foreign professional service limited liability
    29  company which provides psychoanalysis  services  as  such  services  are
    30  defined in article 163 of the education law, each member of such foreign
    31  professional service limited liability company must be licensed pursuant
    32  to  article  163 of the education law to practice psychoanalysis in this
    33  state. With respect to a foreign professional service limited  liability
    34  company  which  provides  applied  behavior  analysis  services  as such
    35  services are defined in article 167 of the education law, each member of
    36  such foreign professional service  limited  liability  company  must  be
    37  licensed  or  certified  pursuant to article 167 of the education law to
    38  practice applied behavior analysis in this state. A foreign professional
    39  service limited liability company formed to lawfully engage in the prac-
    40  tice of public accountancy, as such  practice  is  respectively  defined
    41  under  article  149  of  the education law shall be required to show (1)
    42  that a simple majority of the ownership of the firm, in terms of  finan-
    43  cial  interests, and voting rights held by the firm's owners, belongs to
    44  individuals licensed to practice public accountancy in some  state,  and
    45  (2)  that  all members of a foreign limited professional service limited
    46  liability company, whose principal place of business is in  this  state,
    47  and who are engaged in the practice of public accountancy in this state,
    48  hold  a  valid license issued under section seventy-four hundred four of
    49  the education law. For purposes of this subdivision,  "financial  inter-
    50  est" means capital stock, capital accounts, capital contributions, capi-
    51  tal  interest, or interest in undistributed earnings of a business enti-
    52  ty.  Although firms may include non-licensee owners, the  firm  and  its
    53  owners must comply with rules promulgated by the state board of regents.
    54  Notwithstanding  the foregoing, a firm registered under this section may
    55  not have non-licensee owners if  the  firm's  name  includes  the  words
    56  "certified public accountant," or "certified public accountants," or the

        A. 1938                            12

     1  abbreviations "CPA" or "CPAs". Each non-licensee owner of a firm that is
     2  registered under this section shall be (1) a natural person who actively
     3  participates  in the business of the firm or its affiliated entities, or
     4  (2)  an  entity, including, but not limited to, a partnership or profes-
     5  sional corporation, provided each beneficial owner of an equity interest
     6  in such entity is a natural person  who  actively  participates  in  the
     7  business  conducted by the firm or its affiliated entities. For purposes
     8  of this subdivision, "actively participate" means to provide services to
     9  clients or to otherwise individually take part in the  day-to-day  busi-
    10  ness or management of the firm.
    11    §  13.  Notwithstanding  any  other  provision of law to the contrary,
    12  there is hereby established a fee for each non-licensee owner of a  firm
    13  that  is  registered in this state to lawfully engage in the practice of
    14  public accountancy. Such non-licensee owner shall  pay  a  fee  of  nine
    15  hundred dollars to the department of education on a triennial basis.
    16    § 14. This act shall take effect immediately.
feedback