How to Convert a Professional Corporation to a Design Professional Corporation
By: Jane M. Myers, Esq.
On January 1, 2012, New YorkState’s Business Corporation Law was amended to create a new business entity: the Design Professional Corporation (also known as the “D.P.C.”).
Soon after the law was enacted, a question we frequently heard from design professionals was: can we convert our existing professional corporation (“P.C.”) to a D.P.C.?
The answer then seemed to be NO. As originally written, the law made no provision for a conversion.
As a result, a P.C. wanting to take advantage of the new D.P.C. law by including non-licensed design professionals as shareholder/owners of the company had to create a D.P.C. and then wind down the business of the old P.C. by transferring the P.C.’s business (client contracts, office and equipment leases, health and retirement plans, etc.) to the new D.P.C. Another possibility might have been to create a new D.P.C. and then do a corporate merger of the old P.C. into the new D.P.C. Not impossible tasks, but time consuming, annoying and costly, to say the least.
Now, when we’re asked if an existing P.C. can be converted to a D.P.C. the answer is: YES!
An amendment to the law now allows an existing P.C. in “good standing” to convert to a D.P.C. The conversion is accomplished by filing a certificate amending the P.C.’s certificate of incorporation. The certificate of amendment must contain certain information as specified by the New York State Education Department (“NYS ED”). In addition, the certificate of amendment must be filed along with moral character attestations for non-licensed shareholders and an affirmation relating to the licensed shareholders. There are a variety of other forms that must be obtained, including a certificate of authority for the proposed D.P.C. and a certificate of good standing for the existing P.C. Of course, there are filing fees payable to NYS which, at the time of this writing, are $110.00.
A P.C. that converts to a D.P.C. must also undergo a name change. The name of the D.P.C. must end with the words “design professional corporation” or the abbreviation “D.P.C.” Just as with the original P.C., the name of the new D.P.C. must continue to include words that describe the professional services that the entity is authorized to provide, (i.e., “architecture”, “engineering”, “land surveying”, or “landscape architecture”).
Take note that the conversion process also requires a P.C. to obtain tax clearance from the NYS Dept. of Taxation and Finance indicating that the P.C. has no outstanding state tax liabilities. The tax clearance document is submitted to the NYS Dept. of State which, after all required filings are completed, will post the amendment information on the Office of the Professions website.
The amendment streamlines the process for licensed design professionals and non-licensed people to combine their talents.
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Please note that this article is intended only as a general discussion of issues pertaining to professional corporations and design professional corporations and that it should not be taken as creating an attorney-client relationship or as legal advice with respect to any particular person, business or situation. Circumstances and the applicable legal principles vary and you should consult with an attorney regarding any questions you may have regarding your specific situation.