New York State Amends Business Corporation Law to Permit New Design Professional Service Corporations

Effective January 1, 2012, Section 1503 of the Business Corporation Law was amended to permit the incorporation of design professional service corporations (engineering, architecture, landscape architecture, land surveying, or any combination thereof) first organized on or after January 1, 2012, in which non-professionals may own less than 25 percent of the shares and may constitute less than 25 percent of director and officer positions. The shareholders of a design professional corporation ("D.P.C.") may include employee stock ownership plans (ESOP) and employees of the corporation who are not licensed as design professionals, provided that:

  • Greater than 75% of the outstanding shares of stock of the corporation are owned by design professionals;
  • An ESOP, either in part or in its entirety, may not constitute part of the greater than 75% owned by design professionals;
  • Greater than 75% of the directors are and were design professionals;
  • Greater than 75% of the of the officers are and were design professionals;
  • The president, the chairperson of the board of directors and the chief executive officer or officers are and were design professionals; and
  • The single largest shareholder is and was either a design professional or an ESOP with greater than 75% of the plan’s voting trustees being design professionals and greater than 75% of the plan’s committee member’s being design professionals.

In addition, Section 1503 of the Business Corporation Law also states that a certificate or certificates issued by the New York State Education Department must be attached to the Certificate of Incorporation of every Design Professional Corporation. The certificate shall certify:

  • That each of the proposed shareholders, directors, and officers who is listed as a design professional is authorized by law to practice a profession which the corporation is being organized to practice, and if applicable, that one or more of such individuals is authorized to practice each profession which the corporation will be authorized to practice; and
  • That the president, the chairperson of the board of directors, and the chief executive officer or officers are authorized by law to practice a profession which the corporation is being organized to practice. That each of the shareholders, directors, officers, and owners have been deemed to have been of good moral character, as may be established by the regulations of the Commissioner of Education.

If you have any questions on how this new law impacts you or your firm, please do not hesitate to contact us.

About Dannible/McKee and Associates, Ltd.

Dannible/McKee and Associates, Ltd. provides business valuation, ownership transition, expert witness testimony and litigation support, strategic planning, financial management and employee benefit consulting to professional service firms across the country. In addition, the company teaches national seminars on business valuation and ownership transition to members of professional service firms.  Visit our website for more information.

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