Michigan’s New Position on The Professional Corporation Act - "The Fix" - Part II

What does the Miller decision mean to your clients and what can be done to “fix” the problem? 

The case raises practical concerns.  Who must now incorporate under the Michigan Professional Corporation Act?  What existing corporations may be deemed to be improperly incorporated?

The Bureau’s current policy is that if the entity does not involve a traditional “learned profession,” and was incorporated prior to the court ruling in May of 2007, they will not require the entity to take any corrective action.

New entities are less clear.  Entities listed under the Professional Service Corporation Act, under the Michigan Public Health Code and those services referenced as "professional" under the Michigan Occupational Code, must now incorporate under the Professional Service Corporation Act.  Occupations which are and which are currently not included, can be found at www.michigan.gov/documents/cis/Website_update_re_Miller111_203547_7.pdf.

Occupations which may surprise, include Funeral Director, Mortician, Real Estate Appraiser, Real Estate Brokers and Salespersons.  Notably (and perplexing to me) is the list of not included occupations including Insurance Agents, Insurance Counselors, Investment Advisors and Mortgage Brokers.  It is unclear to me how these services are less professional and personal in nature than those included!

It should be noted that there is pending “corrective” legislation in the Michigan Legislature.  It appears, however, that the legislature will wait until the case, currently on appeal in the Michigan Supreme Court, is finally decided, before acting.

Some advisors are concerned that third party litigants may attempt to use the Miller decision as a basis to “pierce the corporate veil” and find personal liability.  One possible “fix” that has been suggested is for the corporate entity to form a subsidiary Limited Liability Company (LLC) and move its operations into the LLC.  At this time, there has not been a court ruling regarding the improper organization of an LLC.  Currently, an LLC is not subject to the Miller ruling (note that in “companion” litigation--Allstate v A & A Medical Transportation Services, Inc., in an unpublished opinion the court “sidestepped” the LLC issue when raised by the insurer).  Again, the bureau’s official policy is that the Miller decision does not apply to LLC formation.

Obviously, “do not try this at home” is applicable here.

This Newsletter is intended to be informational, only and does not constitute legal advice.  If you have questions, concerns or comments, please contact me at: arichards@smithbovill.com, or by Telephone at 989-652-9923.

Andy Richards