Legal Restrictions on Professionals

Many states permit practitioners of licensed professions (such as law, accountancy, medicine, chiropractic, psychology, dentistry, architecture, and engineering) to elect to practice under any one of three forms of liability-limiting entity: corporations, limited liability companies, and limited liability partnerships.

In states where it is permitted, the professional's interest in practicing through a liability-limiting entity is legislatively balanced against the client's right to redress for professional malpractice. The legislation generally does not affect the professional's liability for malpractice but permits the professional to have limited liability for other debts or obligations of the business. Professional entities incorporated under such laws are governed by the law under which the entity was formed as well as the requirements of the applicable licensing board.

Professionals who wish to practice through a liability-limiting entity should consult a business law attorney who will ensure that they obtain limited liability to the extent possible while meeting the stringent requirements of the professional licensing board.

Special Licensing and Permit Considerations

A new or expanded existing business may be required to obtain business, occupational or environmental licenses or permits. Such licenses and permits are required by federal, state, and/or local laws to serve the following purposes:

• Ensuring the competency of practitioners of a profession or trade.
• Ensuring the safety or effectiveness of a product or service.
• Preventing fraud or ensuring the financial capabilities of the parties to a transaction.
• Controlling the development and implementation of new technologies.
• Ensuring the conservation of natural resources and preventing pollution.
• Controlling access to certain markets or promoting or restricting competition in certain industries.
• Authorizing a business to serve as the state's agent for collection of sales and excise taxes