10-31 Professional Organizations Act - North Dakota Statutes

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CHAPTER 10-31PROFESSIONAL ORGANIZATIONS ACT10-31-01. Definitions. As used in this chapter, unless the context otherwise requires:1."Create" means to form an organization by:a.Incorporating a professional corporation;b.Organizing a professional limited liability company; orc.Registering a professional limited liability partnership.2."Executive" means an officer or a director of a professional corporation, a manager
or a governor of a professional limited liability company, or a partner of a
professional limited liability partnership.3."Foreign limited liability partnership" has the meaning set forth in section 45-22-01.4."Foreign professional organization" means a professional organization that is
created under laws other than the laws of this state for purposes for which a
professional organization may be created under this chapter.5."Owner" means a shareholder of a professional corporation, a member of a
professional limited liability company, or a partner of a limited liability partnership.6."Professional corporation" or "corporation" means a corporation that is incorporated
under this chapter for the purpose of rendering professional service and which has
as its shareholders only individuals who themselves are licensed or otherwise legally
authorized within this state to render the same professional service as the
corporation or nonlicensed employees as provided in section 10-31-07.1.7."Professional limited liability company" or "limited liability company" means a limited
liability company that is organized under this chapter for the purpose of rendering
professional service and which has as its members only individuals who themselves
are licensed or otherwise legally authorized within this state to render the same
professional service as the limited liability company or nonlicensed employees as
provided in section 10-31-07.2.8."Professional limited liability partnership" or "limited liability partnership" means a
limited liability partnership that is registered under this chapter for the purpose of
rendering professional service, is not a foreign limited liability partnership, and has
as its partners only individuals who are licensed or otherwise legally authorized
within this state to render the same professional service as the limited liability
partnership or nonlicensed employees as provided in section 10-31-07.1.9."Professional organization" or "organization" means:a.A professional corporation that is incorporated under this chapter;b.A professional limited liability company that is organized under this chapter; orc.A professional limited liability partnership that is registered under this chapter.10."Professional service" means the personal service to the public which requires a
license as a condition precedent to the rendering of such service and which requires
as a condition of licensure an undergraduate or advanced college degree in the
specific field.Page No. 110-31-02. Articles of incorporation.1.One or more individuals may incorporate a professional organization in the form of a
corporation for the practice of a profession by filing articles of incorporation with the
secretary of state.The articles of incorporation must meet the requirements ofchapter 10-19.1 and contain the following:a.The profession to be practiced through the professional corporation; andb.The names and residence addresses of all of the original shareholders of the
professional corporation who will practice the profession in this state.2.At the time the articles of incorporation are filed with the secretary of state, the
professional corporation also shall file a certificate from the regulating board of the
profession involved that each of the directors and shareholders of voting shares who
will practice the profession in this state, if any, is licensed to practice the profession
in this state.10-31-02.1. Articles of organization.1.One or more individuals may organize a professional organization in the form of a
limited liability company for the practice of a profession by filing articles of
organization with the secretary of state. The articles of organization must meet the
requirements of chapter 10-32 and must contain the following:a.The profession to be practiced through the professional limited liability
company; andb.The name and residence address of each original member of the professional
limited liability company who will practice the profession in this state.2.At the time the articles of organization are filed with the secretary of state, the
professional limited liability company also shall file a certificate from the regulating
board of the profession involved that each of the governors and members who will
practice the profession in this state, if any, is licensed to practice the profession in
this state.10-31-02.2. Registration.1.Two or more individuals may register a professional organization in the form of a
limited liability partnership or a foreign professional organization in the form of a
foreign limited liability partnership for the practice of a profession by filing the
registration required under section 45-22-03 with the secretary of state.Theregistration must meet the requirements of chapter 45-22 and contain the following:a.The profession to be practiced through the professional limited liability
partnership or foreign limited liability partnership; andb.The names and residence addresses of all of the partners of the professional
limited liability partnership or foreign limited liability partnership who will practice
the profession in this state.2.At the time the registration is filed with the secretary of state, the professional limited
liability partnership or foreign limited liability partnership also shall file a certificate
from the regulating board of the profession involved that each of the partners who
will practice the profession in this state is licensed to practice the profession in this
state.Page No. 210-31-03. Applicability of chapter 10-19.1. Chapter 10-19.1 applies to a professionalorganization that is created in the form of a corporation and which enjoys the powers and
privileges and is subject to the duties, restrictions, and liabilities of other corporations except
when inconsistent with the letter and purpose of this chapter. This chapter takes precedence in
the event of any conflict with chapter 10-19.1.10-31-03.1. Applicability of chapter 10-32. Chapter 10-32 applies to a professionalorganization that is created in the form of a limited liability company and which enjoys the powers
and privileges and is subject to the duties, restrictions, and liabilities of other limited liability
companies except when inconsistent with the letter and purpose of this chapter. This chapter
takes precedence in the event of any conflict with chapter 10-32.10-31-03.2. Applicability of chapter 45-22. Chapter 45-22 applies to a professionalorganization that is created in the form of a limited liability partnership and enjoys the powers and
privileges and is subject to the duties, restrictions, and liabilities of other limited liability
partnerships except when inconsistent with the letter and purpose of this chapter. This chapter
takes precedence in the event of any conflict with chapter 45-22.10-31-04. Purpose for which created.1.A professional organization may be created pursuant to this chapter only for the
purpose of rendering one specific type of professional service and services ancillary
thereto or for the purpose of rendering two or more kinds of professional services
that are specifically authorized to be practiced in combination under the licensing
laws of each of the professional services to be practiced by a licensed individual or
partnership of licensed individuals and ancillary services. This subsection does not
preclude an organization created pursuant to this chapter from rendering more than
one specific type of professional service if the services rendered are set forth in
chapters 43-03 and 43-19.1 or if the services rendered are set forth in chapters
43-26.1 and 43-40.2.A professional organization may not engage in any business other than rendering
the professional service for which it was created to render and services ancillary
thereto. However, a professional organization may own real and personal property
necessary or appropriate for rendering the type of professional services it was
created to render and may invest its funds in real estate mortgages, stocks, bonds,
membership interests, and any other type of investment.10-31-05. Name.1.The name of a professional organization:a.In the form of a corporation incorporated under this chapter must contain:(1)The word "chartered";(2)The word "limited" or the abbreviation "Ltd.";(3)The words "professional corporation" or either the abbreviation "P.C." or
the abbreviation "PC", either of which may be used interchangeably for
all purposes authorized by this chapter, including real estate matters,
contracts, and filings with the secretary of state; or(4)The words "professional association" or either the abbreviation "P.A." or
the abbreviation "PA", either of which may be used interchangeably for
all purposes authorized by this chapter, including real estate matters,
contracts, and filings with the secretary of state.Page No. 3b.In the form of a limited liability company organized under this chapter must
contain:(1)The words "professional limited liability company" or "limited liability
company";(2)The abbreviations:(a)"P.L.C." or "PLC", either of which may be used interchangeably for
all purposes authorized by this chapter, including real estate
matters, contracts, and filings with the secretary of state;(b)"P.L.L.C." or "PLLC", either of which may be used interchangeably
for all purposes authorized by this chapter, including real estate
matters, contracts, and filings with the secretary of state; or(c)"L.L.C." or "LLC", either of which may be used interchangeably for
all purposes authorized by this chapter, including real estate
matters, contracts, and filings with the secretary of state.c.In the form of a limited liability partnership registered under this chapter shall
contain:(1)The words "professional limited liability partnership"; or(2)The abbreviations:(a)"P.L.L.P." or "PLLP", either of which may be used interchangeably
for all purposes authorized by this chapter, including real estate
matters, contracts, and filings with the secretary of state; or(b)"L.L.P." or "LLP", either of which may be used interchangeably for
all purposes authorized by this chapter, including real estate
matters, contracts, and filings with the secretary of state.2.The use of any other word, abbreviation, affix, or prefix indicating that it is a
corporation, limited liability company, or limited liability partnership in the name of an
organization created under this chapter, other than the words and abbreviations set
forth in subsection 1, is prohibited.10-31-06. Executives and owners.1.No individual may be simultaneously an executive or owner of more than one
professional organization.2.A professional organization in the form of a corporation which has only one
shareholder need have only one director, who must be the shareholder.Thatindividual also shall serve as the president and treasurer of the corporation. The
other officers of the corporation need not be licensed or otherwise legally authorized
in the same field of endeavor as the president.3.A retired individual may not continue as an executive or owner of a professional
organization.10-31-07. Issuance and transfer of shares. A professional organization in the form ofa corporation may issue its shares only to persons who are licensed to render the same specific
professional services as those for which the corporation was incorporated or as provided by
section 10-31-07.1. A shareholder may voluntarily transfer shares in a professional corporation
only to a person owning or eligible to own the same type of shares as the person making thePage No. 4transfer. The issuance of any shares in violation of this section is void. The voluntary transfer of
any shares in violation of this section is void. No share may be transferred upon the books of the
professional corporation or issued by the professional corporation until there is presented to and
filed with the corporation a certificate from the regulating board stating that the person to whom
the transfer is to be made or the share issued is licensed to render the same specific professional
services as those for which the corporation was incorporated.10-31-07.1. Retirement plan trust - Voting and nonvoting shares. A professionalcorporation may establish a retirement plan trust which allows the corporation to contribute
nonvoting shares for nonlicensed employees and voting shares for licensed employees.10-31-07.2.Issuance and transfer of membership interests.A professionalorganization in the form of a limited liability company may issue membership interests only to
persons who are licensed to render the same specific professional services as those for which
the company was organized.A member may voluntarily transfer membership interests in aprofessional limited liability company only to a person owning or eligible to own a membership
interest. The reflection of any membership interests in the required records of the professional
limited liability company in violation of this section is void.The voluntary transfer of anymembership interests in violation of this section is void.No membership interest may bereflected in the required records of the professional limited liability company until there is
presented to and filed with the limited liability company a certificate from the regulating board
stating that the person to whom the transfer is to be made or the membership interest issued is
licensed to render the same specific professional services as those for which the limited liability
company was organized.10-31-07.3.Issuance and transfer of partnership interests.A professionalorganization in the form of a limited liability partnership may issue partnership interests only to
individuals who are licensed to render the same specific professional services as those for which
the partnership was registered.A partner may voluntarily transfer partnership interests in aprofessional limited liability partnership only to a person owning or eligible to own a partnership
interest. The issuance of any partnership interests issued in violation of this section is void. The
voluntary transfer of any partnership interests in violation of this section is void. No partnership
interest may be transferred upon the books of the professional limited liability partnership or
issued by the professional limited liability partnership until there is presented to and filed with the
limited liability partnership a certificate from the regulating board stating that the person to whom
the transfer is to be made or the partnership interest issued is licensed to render the same
specific professional services as those for which the limited liability partnership was registered.10-31-08. Professional services through officers, managers, employees, agents.No organization created under this chapter may render professional services except through its
executives, employees, and agents who are licensed to render professional services in this state.
In this section, the term "employee" does not include a clerk, secretary, bookkeeper, nurse,
technician, or assistant, who is not usually and ordinarily considered by custom and practice to
be rendering professional services to the public for which a license or other legal authorization is
required in connection with the profession practiced by a particular professional organization.10-31-09. Professional relationship preserved - Liability of owners - Professionalregulation.1.This chapter does not modify any law applicable to the relationship between a
person furnishing professional service and a person receiving professional service,
including liability arising out of the professional service, and including the confidential
relationship between the person rendering the professional service and the person
receiving the professional service, if any, and all confidential relationships previously
enjoyed under the laws of this state or hereinafter enacted must remain inviolate.2.Subject to subsection 1, nothing contained in this section renders an executive,
owner, or employee of a professional organization personally liable in tort for any act
in which that individual has not personally participated or in contract for any contractPage No. 5which that individual executes on behalf of a professional organization within the
limits of that individual's authority.3.Nothing in this chapter restricts or limits in any manner the authority and duty of the
regulating boards for the licensing of an individual rendering professional services.4.No professional organization may do any act that is prohibited to be done by any
individual licensed to practice the profession which the professional organization is
created to render.10-31-10.Legal disqualification.If any executive or owner of a professionalorganization becomes legally disqualified to render a professional service within this state or
accepts employment or is elected to a public office that, pursuant to existing law, is a restriction
or limitation upon rendering of professional service, that individual shall sever all employment
with or financial interest in the professional organization. A professional organization's failure to
comply or require compliance with this section is a ground for the forfeiture of its right to render
professional service as a professional organization pursuant to this chapter.10-31-11. Disposition of shares, membership interests, or partnership interests ondeath or disqualification.1.With respect to a professional organization in the form of a corporation:a.The articles of incorporation may provide for the purchase or redemption of the
shares of any shareholder upon the death or disqualification of the shareholder,
or the same may be provided for in the bylaws or by private agreement. In the
absence of a provision for the same in the articles of incorporation or the
bylaws or by private agreement, the corporation has an option to purchase the
shares of a deceased shareholder or a shareholder no longer qualified to own
shares in such corporation within six months after the death or disqualification
of the shareholder.b.The option price for the shares must be the book value as of the end of the
month immediately preceding the death or disqualification of the shareholder
unless otherwise specified in the articles of incorporation, bylaws, or by private
agreement. Book value must be determined from the books and records of the
professional corporation in accordance with the regular method of accounting
used by the corporation.c.If the corporation fails to exercise the option, the shares of the deceased or
disqualified shareholder may be sold to any individual licensed or otherwise
legally authorized to render the same professional service as that for which the
corporation was incorporated.d.A disqualified shareholder, or the estate of a deceased shareholder, may
continue to hold shares of the corporation during said option period and for a
reasonable period thereafter, pending transfer to another licensed or otherwise
legally authorized individual, but may not participate in any decisions
concerning the performance of professional service.2.With respect to a professional organization in the form of a limited liability company:a.The articles of organization may provide for the purchase or redemption of the
membership interest of any member upon the death or disqualification of the
member, or the same may be provided for in the bylaws, in the member-control
agreement, or by private agreement.In the absence of a provision for thesame in the articles of organization, in the bylaws, in the member-control
agreement, or by private agreement, the limited liability company has an option
to purchase the membership interest of a deceased member or a member noPage No. 6longer qualified to own a membership interest in the limited liability company
within six months after the death or disqualification of the member.b.The option price for such membership interest must be the book value as of the
end of the month immediately preceding the death or disqualification of the
member unless otherwise specified in the articles of organization, in the bylaws,
in the member-control agreement, or by private agreement. Book value must
be determined from the books and records of the limited liability company in
accordance with the regular method of accounting used by the limited liability
company.c.If the limited liability company fails to exercise the option, the membership
interest of the deceased or disqualified member may be sold to any individual
licensed or otherwise legally authorized to render the same professional service
as that for which the limited liability company was organized.d.A disqualified member, or the estate of a deceased member, may continue to
hold a membership interest in the limited liability company during the option
period and for a reasonable period thereafter, pending transfer to another
licensed or otherwise legally authorized individual, but may not participate in
any decisions concerning the performance of professional service.3.With respect to a professional organization in the form of a limited liability
partnership:a.The partnership agreement may provide for the purchase or redemption of the
partnership interest of any partner upon the death or disqualification of the
partner, or the same may be provided for by private agreement. In the absence
of a provision for the same in the partnership agreement or by private
agreement, the limited liability partnership has an option to purchase the
partnership interest of a deceased partner or a partner no longer qualified to
own a partnership interest in the limited liability partnership within six months
after the death or disqualification of the partner.b.The option price for the partnership interest must be the book value as of the
end of the month immediately preceding the death or disqualification of the
partner unless otherwise specified in the partnership agreement or by private
agreement. Book value must be determined from the books and records of the
limited liability partnership in accordance with the regular method of accounting
used by the limited liability partnership.c.If the limited liability partnership fails to exercise the option, the partnership
interest of the deceased or disqualified partner may be sold to any individual
licensed or otherwise legally authorized to render the same professional service
as that for which the limited liability partnership was registered.d.The disqualified partner, or the estate of a deceased partner, may continue to
hold a partnership interest in the limited liability partnership during the option
period and for a reasonable period thereafter, pending transfer to another
licensed or otherwise legally authorized individual, but may not participate in
any decisions concerning the performance of professional service.10-31-12.Death of last or only shareholder - Amendment of articles ofincorporation - Involuntary dissolution.1.In the event of the death of the last or only shareholder of a professional corporation
whose shares pass to heirs by intestate succession, to devisees under a last will and
testament, or otherwise pass by operation of law to an individual not legally qualified
to render the professional services which the professional corporation wasPage No. 7incorporated to perform, the heirs, devisees, or personal representative of the
deceased shareholder, within six months after the date of death of the last or only
shareholder, may amend the articles of incorporation to provide that the corporation
must continue as a corporation under chapter 10-19.1.2.The death of the last or only shareholder of a professional corporation and the failure
of the heirs, devisees, or personal representative to make an amendment within six
months after the death is a ground for the involuntary dissolution of the professional
corporation.3.When notified of the facts, the secretary of state shall certify immediately the facts to
the attorney general who shall take immediate appropriate action to dissolve the
professional corporation.10-31-13. Professional organizations - Annual reports - Renewal.1.With respect to a professional organization in the form of a corporation:a.Each corporation incorporated under this chapter shall file with the secretary of
state an annual report at the time specified for the filing of the report by chapter
10-19.1 giving the name and residence address of each officer, director, and
shareholder of the corporation at the time of filing of the report. With respect to
shares, the report must include:(1)A statement of the aggregate number of shares the corporation has
authority to issue, itemized by classes, par value of shares, shares
without par value, and series, if any, within a class; and(2)A statement of the aggregate number of issued shares, itemized by
classes, par value of shares, shares without par value, and series, if any,
within a class.b.The report must include a statement that all directors and shareholders of
voting shares who practice in this state are licensed to render the same specific
professional services as those for which the corporation was incorporated. The
report must be:(1)Made on a form as prescribed and furnished by the secretary of state;(2)Signed by the president or vice president of the corporation; and(3)Accompanied by the filing fee prescribed in chapter 10-19.1.c.A copy of the report must be filed at the same time with the regulatory board
that licenses the shareholders described in the report. No filing fee may be
charged by the regulatory board.d.A regulatory board issuing a license under section 10-31-01 shall issue a
certificate required in section 10-31-02.The certificate must be on a formprescribed and furnished by the secretary of state. The regulatory board may
charge and collect a fee not to exceed twenty dollars per individual certified to
be licensed by the regulating board.2.With respect to a professional organization in the form of a limited liability company:a.Each limited liability company organized under this chapter shall file with the
secretary of state an annual report at the time specified for the filing of the
report by chapter 10-32 giving the name and residence address of allPage No. 8managers, governors, and members of the organization at the time of filing of
the annual report.b.The report must include a statement that all governors and members holding
voting membership interests who practice in this state are licensed to render
the same specific professional services as those for which the limited liability
company was organized. This report must be:(1)Made on a form as prescribed and furnished by the secretary of state;(2)Signed by the president or vice president of the limited liability company;
and(3)Accompanied by the filing fee prescribed in section 10-32-180.c.A copy of the report must be filed at the same time with the regulatory board
that licenses the members described in the report.No filing fee may becharged by the regulatory board.d.A regulatory board issuing a license under section 10-31-01 shall issue a
certificate required in section 10-31-02.The certificate must be on a formprescribed and furnished by the secretary of state. The regulatory board may
charge and collect a fee not to exceed twenty dollars per individual certified to
be licensed by the regulatory board.3.With respect to a professional organization in the form of a limited liability
partnership:a.The annual report filed with the secretary of state at the time specified for the
filing of the report by chapter 45-22 must include the name and residence
address of each partner of the organization at the time of filing of the annual
report.b.The annual report must include a statement that each partner holding voting
partnership interests who practices in this state is licensed to render the same
specific professional services as those for which the limited liability partnership
was registered. The annual report must be:(1)Made on a form prescribed and furnished by the secretary of state;(2)Signed by a managing partner of the limited liability partnership; and(3)Accompanied by the filing fee prescribed in section 45-22-22.c.A copy of the annual report must be filed at the same time with the regulatory
board that licenses the partners described in the annual report. A filing fee may
not be charged by the regulatory board.d.A regulatory board issuing a license under section 10-31-01 shall issue a
certificate required in section 10-31-02.The certificate must be on a formprescribed and furnished by the secretary of state. The regulatory board may
charge and collect a fee not exceeding twenty dollars per individual certified to
be licensed by the regulating board.10-31-13.1. Foreign professional organizations - Practice in the state.1.A foreign professional organization may practice a profession in this state only
through executives, owners, employees, and agents who are licensed to practice the
profession in this state.The practice of a profession in this state by a foreignPage No. 9professional organization is subject to the laws and regulations of this state
governing the practice of such professional service.2.The certificate of authority of a foreign professional organization may be revoked by
the secretary of state as provided in this chapter, if the foreign professional
organization fails to comply with this chapter.3.This chapter does not prohibit the practice of a profession in this state by an
individual who is an executive, owner, employee, or agent of a foreign professional
organization, if the individual could lawfully practice the profession in this state in the
absence of any relationship to a foreign professional organization.4.This section applies regardless of whether the foreign professional organization is
authorized to practice a profession in this state.5.A foreign professional organization may render only one specific type of professional
service and services ancillary thereto in this state.A foreign professionalorganization may not engage in any business in this state other than rendering the
professional service it is authorized to render and services ancillary thereto.6.a.The provisions of chapter 10-19.1, applicable to foreign corporations, apply to a
foreign professional organization rendering professional services in this state in
the form of a foreign corporation.Such a foreign professional organizationenjoys the powers and privileges and is subject to the duties, restrictions, and
liabilities of other foreign corporations doing business in this state, except when
inconsistent with the letter and purpose of the provisions of this chapter
applicable to foreign professional organizations.b.A foreign professional organization rendering professional services in this state
in the form of a foreign corporation shall include in its application for a
certificate of authority under section 10-19.1-135 or its annual report under
section 10-19.1-146 the following information:(1)The profession to be practiced by the foreign corporation;(2)The names and residence addresses of all directors and shareholders of
the corporation who practice the profession in this state; and(3)In an application for a certificate of authority, a certificate from the
regulating board of the profession involved that all directors and
shareholders who practice the profession in this state are licensed in this
state to render the same professional service as those for which the
corporation was formed; and in an annual report, a statement that all
directors and shareholders who practice the profession in this state are
licensed in this state to render the same professional service as those for
which the corporation was formed.7.a.The provisions of chapter 10-32 applicable to foreign limited liability companies
apply to a foreign professional organization rendering professional services in
this state in the form of a foreign limited liability company. Such a foreign
professional organization enjoys the powers and privileges and is subject to the
duties, restrictions, and liabilities of other foreign limited liability companies
doing business in this state, except when inconsistent with the letter and
purpose of the provisions of this chapter applicable to foreign professional
organizations.b.A foreign professional organization rendering professional services in this state
in the form of a foreign limited liability company shall include in its applicationPage No. 10for a certificate of authority under section 10-32-138 or its annual report under
section 10-32-149 the following information:(1)The profession to be practiced by the foreign limited liability company;(2)The names and residence addresses of all members or managers of the
limited liability company who practice the profession in this state; and(3)In an application for a certificate of authority, a certificate from the
regulating board of the profession involved that all members or managers
who practice the profession in this state are licensed in this state to
render the same professional service as those for which the limited
liability company was formed; and in an annual report, a statement that
all members or managers who practice the profession in this state are
licensed in this state to render the same professional service as those for
which the limited liability company was formed.8.a.The provisions of chapter 45-22 applicable to foreign limited liability
partnerships apply to a foreign professional organization rendering professional
services in this state in the form of a foreign limited liability partnership. Such a
foreign professional organization enjoys the powers and privileges and is
subject to the duties, restrictions, and liabilities of other foreign limited liability
partnerships doing business in this state, except when inconsistent with the
letter and purpose of the provisions of this chapter applicable to foreign
professional organizations.b.A foreign professional organization rendering professional services in this state
in the form of a foreign limited liability partnership shall include in its registration
under section 45-22-03 the following information:(1)The profession to be practiced by the foreign limited liability partnership;(2)The names and residence addresses of all partners of the limited liability
partnership who practice the profession in this state; and(3)In a registration, a certificate from the regulating board of the profession
involved that all partners who practice the profession in this state are
licensed in this state to render the same professional service as those for
which the limited liability partnership was formed.9.The name of a foreign professional organization rendering professional services in
this state shall contain words or abbreviations required or authorized by the laws of
the jurisdiction in which the foreign professional organization is incorporated,
organized, or originally registered.10-31-14.Construction.This chapter must be construed to effectuate its generalpurpose of making available to professional individuals the benefits of the corporate form, the
benefits of the limited liability company form, and the benefits of the limited liability partnership
form.Page No. 11Document Outlinechapter 10-31 professional organizations act