CORPORATE TRANSACTIONS & COMPLIANCE BLOG

New York State Consent Process for Professional Corporations and LLCs

By: Teri Mayor, COGENCY GLOBAL INC. on Thu, Dec 13, 2018

Permission Required for Professional Corporations and LLCs in New YorkNew York is somewhat unusual in that it requires registered entities, such as corporations and limited liability companies (LLCs), to get approval or consent from other New York state agencies prior to filing in many different situations. This commonly comes up when the company uses a restricted word in its name or does business in particular industries like insurance or education.

Even if the name is not one that will cause New York to reject the document without consent attached from the appropriate agency, it’s important to be aware of the activities that trigger the need for consent to avoid future difficulties. The New York State Department of Education’s (NYSED) Office of the Professions and Office of Counsel, the Department of Financial Services and the Department of Taxation and Finance are agencies whose approval is often required for corporate filings.

Today we’re going to explore the process of obtaining consent from the NYSED Office of Professions to form professional corporations, LLCs or limited liability partnerships (LLPs).

Professional Limited Liability Entities

NYSED’s Office of the Professions, in conjunction with the State Boards for the Professions, administers regulations for more than 50 professions in New York. Unless practicing as individuals or general partnerships, entities practicing these professions must register as a professional corporation (PC) or a professional LLC (PLLC).

General partnerships practicing a profession can register as an LLP, if limited liability status is desired but unlike professional corporations and PLLCs, LLPs do not need to obtain consent. While they need to abide by the same entity naming rules (discussed below), LLPs only need to file a certified copy of their registration certificate, as filed with the Secretary of State, with NYSED. However, CPA partnerships — both general and limited liability — must register with the NYS Board for Public Accountancy.

Excluded from the NYSED Office of Professions regulatory purview is the legal profession. For professional entities practicing law, a Certificate of Good Standing for the attorneys who make up the entity must be obtained from the New York State Bar Association and submitted with a Certificate of Incorporation or Articles of Organization.

For PCs and PLLCs practicing other professions, the process for obtaining approval gives these entities authorization (by way of a NYS Education Department Certificate of Authority) to practice their profession in New York and enables them to file formation or qualification documents with the Secretary of State.

Entity Name Rules

The following rules apply to both true and assumed names of professional entities seeking consent to do business in New York:

  • The name of the entity must appropriately describe the profession to be practiced. The preferred format is to list the names of the owning professionals followed by the profession to be practiced and the appropriate corporate indicator (P.C., PLLC, etc.)
  • If the name desired contains words, initials or abbreviations not commonly used in reference to the profession, a letter of explanation for those words must be provided.
  • If a specialty is mentioned, proof of the entity’s authority to practice the specialty is required, such as Board Certification.
  • A physician is only permitted to use the ‘M.D.’ designation if that is their specific academic degree.
  • If the name of the entity references a group, there must be more than one professional shareholder or member.
  • The entity is not allowed to use the following misleading words*.
    Cure
    Healing
    International
    Management Co.
    National
    Network

    Partners
    Spa
    Center 
    Clinic
    Hospital

  • The entity name cannot include “claims of superiority” by using the following words*:
    Advanced
    Best
    Exceptional
    Expert
    Outstanding

    Premier
    Special
    Super
    Ultimate

*Please note that neither word list is comprehensive. The NYSED Office of the Professions may determine that other words are misleading or a claim of superiority.

Foreign entities (those not initially formed in New York) are required to follow similar rules regarding naming of domestic entities as discussed earlier. If the true name of the foreign entity does not reference the name of the profession to be practiced or does not otherwise meet the requirements, the entity will need to register an assumed name that does comply with New York’s naming rules.

Rules for Ownership and Management of the Entity

Domestic

  • All shareholders, officers and directors or members and managers must be licensed to practice the profession in New York.

Foreign

  • All shareholders, officers and directors or members and managers must be licensed to practice the profession in the domestic jurisdiction.
  • Each individual who will be practicing the profession in New York State must be licensed in New York.  However: 
    • For corporations or limited liability companies in health services, each shareholder, officer and director or manager and member must be licensed to practice said profession in New York State and the domestic jurisdiction.
    • For limited liability companies in the design professions (such as architecture, engineering, or land surveying) each manager or member must be licensed to practice both in New York and the domestic jurisdiction.

A Note on Timing

Before diving into the details of obtaining consent, please know that one of first things you’ll need is patience! Approval for both domestic and foreign entities seeking consent from NYSED is approximately 16 weeks, as of December 2018. There have been shorter time frames in the past (and may be shorter again in the future), but at this point it is important to plan ahead and anticipate about four months to complete the process.

Domestic Entity Consent Requirements

To obtain consent for a domestic entity name, the following items must be submitted to the NYS Office of the Professions:

Professional
Corporation (PC)

Professional Limited
Liability Corporation (PLLC)

Draft Certificate of Incorporation
(per Section 1503 of the Business Corporation Law).

Draft Articles of Organization (per Section 1203 of the Limited Liability Company Law).

List of the names, license numbers and residence addresses for all shareholders, directors, and officers. All named parties must be licensed in the profession to be practiced by the entity.

List of the names, license numbers and residence addresses for all members and managers. All named parties must be licensed in the profession to be practiced by the entity.

Fee for Consent:
$90

Fee for Consent:
$10 per Member/Manager

 

Foreign Entity Consent Requirements

For foreign professional entities seeking consent to do business in New York, the following items must be submitted to NYSED Office of the Professions:

Professional
Corporation (PC)

Professional Limited
Liability Corporation (PLLC)

Application for Authority
(per Section 1530 of the
Business Corporation Law).

Application for Authority
(per Section 1306 of the
Limited Liability Company Law).

Copy of the Certificate of Incorporation and any amendments from the domestic jurisdiction.

Copy of the Certificate of Incorporation and any amendments from the domestic jurisdiction.

Affidavit, signed by the president, listing all the current shareholders, officers and directors, along with license numbers for the individuals practicing in New York or required to be licensed in New York based on the rules shown above.

Affidavit, signed by the president, listing all the current members/managers, along with license numbers for the individuals practicing in New York or required to be licensed in New York based on the rules shown above.

Evidence of licensure in the original jurisdiction
for each shareholder, officer and director.

Evidence of licensure in the original jurisdiction
for each member and manager.

Fee for Consent:
$50

Fee for Consent:
$50 plus $10 per member/manager

 

Important Tips

Whether seeking consent for a domestic or foreign professional entity, here are a few additional things to keep in mind:
  1. Signature and names of professionals listed in the documents must match the names as they appear on their professional licenses.
  2. The corporate designator must be ‘Professional Corporation’ or P.C.
  3. If the designation MD/M.D. is used anywhere in the documents, proof of that degree must be provided.
  4. The statement of purpose must match the professional title used.

Next Steps After Receiving Consent

Once you receive consent from the State Board of Professions, you are then able to file the Certificate of Incorporation or Articles of Organization with the Secretary of State. When submitting the filing, be sure to request an extra certified copy, as the final step of the process is to file a certified copy of the filed formation document with the Office of Professional Licensing. Professional corporations must submit $20 with the certified copy as a filing fee, while there is no fee for professional LLCs.

Most states license entities practicing professions such as medicine, dentistry or engineering. What makes New York State unusual is that the licensing process must be started by obtaining consent, prior to filing the documents with the Secretary of State. Like the other New York state oversight agencies we will cover in future posts, the Department of Education has many particular rules regarding the name and organizational structure of professional entities. Requiring that consent be provided prior to filing the formation document ensures the entity will not have to make changes later to comply with these requirements.

Before you submit, it’s important to pay close attention to all of the requirements. As approval currently takes a number of months, it is even more important to obtain the consent on the first submission. Carefully reviewing documents to ensure compliance with the rules can help ensure that happens.

Continue reading about obtaining consent in the State of New York...

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations, Business Licensing