HOUSE BILL No. 2126

      An Act concerning limited liability companies; relating to such companies exercising powers
      of a professional association or professional corporation; amending K.S.A. 17-7604, 17-
      7607 and 17-7608 and repealing the existing sections; also repealing K.S.A. 17-7607, as
      amended by section 2 of 1998 Senate Bill No. 472.

Be it enacted by the Legislature of the State of Kansas:

    New Section 1. (a) A limited liability company organized and existing
under the Kansas limited liability company act may have and exercise all
powers which may be exercised by a Kansas professional association or
professional corporation under the professional corporation law of Kan-
sas, including employment of professionals to practice a profession, which
shall be limited to the practice of one profession, except as provided in
K.S.A. 17-2710, and amendments thereto.

    (b) Only a qualified person may be a member of a limited liability
company organized to exercise powers of a professional association or
professional corporation. No membership may be transferred to another
person until there is presented to such limited liability company a certif-
icate by the licensing body, as defined in K.S.A. 1997 Supp. 74-146, and
amendments thereto, stating that the person to whom the transfer is made
or the membership issued is duly licensed to render the same type of
professional services as that for which the limited liability company was
organized.

    (c) As used in the section, ``qualified person'' means:

    (1) Any natural person licensed to practice the same type of profes-
sion which any professional corporation is authorized to practice;

    (2) the trustee of a trust which is a qualified trust under subsection
(a) of section 401 of the federal internal revenue code of 1986, as in effect,
on July 1, 1998, or of a contribution plan which is a qualified employee
stock ownership plan under subsection (a) of section 409A of the federal
internal revenue code of 1986, as in effect, on July 1, 1998;

    (3) the trustee of a revocable living trust established by a natural
person who is licensed to practice the type of profession which any pro-
fessional corporation is authorized to practice, if the terms of such trust
provide that such natural person is the principal beneficiary and sole
trustee of such trust and such trust does not continue to hold title to
membership in the limited liability company following such natural per-
son's death for more than a reasonable period of time necessary to dispose
of such membership;

    (4) a Kansas professional corporation or foreign professional corpo-
ration in which at least one member or shareholder is authorized by a
licensing body, as defined in K.S.A. 1997 Supp. 74-146, and amendments
thereto, to render in this state a professional service permitted by the
articles of organization; or

    (5) a general partnership or limited liability company, if all partners
or members thereof are authorized to render the professional services
permitted by the articles of organization of the issuing limited liability
company formed pursuant to this section and in which at least one partner
or member is authorized by a licensing authority of this state to render
in this state the professional services permitted by the articles of organ-
ization of the limited liability company.

    New Sec. 2.  Nothing in this act shall restrict or limit in any manner
the authority and duty of any licensing body, as defined in K.S.A. 1997
Supp. 74-146, and amendments thereto, for the licensing of individual
persons rendering a professional service or the practice of the profession
which is within the jurisdiction of the licensing body, notwithstanding
that the person is an officer, manager, member or employee of a limited
liability company organized to exercise powers of a professional associa-
tion or corporation. Each licensing body may adopt rules and regulations
governing the practice of each profession as are necessary to enforce and
comply with this act and the law applicable to each profession.

    New Sec. 3. A licensing body, as defined in K.S.A. 1997 Supp. 74-
146, and amendments thereto, the attorney general or district or county
attorney may bring an action in the name of the state of Kansas in quo
warranto or injunction against a limited liability company engaging in the
practice of a profession with complying with the provisions of this act.

    New Sec. 4. A limited liability company organized to exercise powers
of a professional association or professional corporation under the Kansas
limited liability company act prior to July 1, 1998, shall file with the sec-
retary of state at the time of making an annual report for the calendar
year 1998 a certificate by the licensing body, as defined in K.S.A. 1997
Supp. 74-146, and amendments thereto, of the profession involved that
each of the members is duly licensed to practice that profession, and that
the proposed company name has been approved.

    New Sec. 5. Sections 1 through 5 shall be part of and supplemental
to the Kansas limited liability company act.

    Sec. 6. K.S.A. 17-7604 is hereby amended to read as follows: 17-
7604. Each limited liability company organized and existing under the
Kansas limited liability company act may:

    (a) Sue or be sued, or complain or defend, in its name;

    (b) purchase, take, receive, lease, or otherwise acquire, own, hold,
improve or use, or otherwise deal in or with, real or personal property,
or an interest in real or personal property, whenever situated;

    (c) sell, convey, mortgage, pledge, create a security interest in, lease,
exchange or transfer, or otherwise dispose of, all of any part of its property
or assets;

    (d) purchase, take, receive, subscribe for, or otherwise acquire, own,
hold, vote, use, employ, sell, mortgage, lend or pledge, or otherwise dis-
pose of, or otherwise use or deal in or with:

    (1) Shares or other interests in or obligations of other foreign or do-
mestic limited liability companies, domestic or foreign corporations, as-
sociations, general or limited partnerships, or individuals; or

    (2) direct or indirect obligations of the United States or any other
government, state, territory, governmental district, or municipality or of
any instrumentality thereof;

    (e) make contracts or guarantees or incur liabilities; borrow money
at such rates of interest as the limited liability company may determine;
issue its notes, bonds, or other obligations; or secure any of its obligations
by mortgage or pledge of all or any part of its property, franchises, and
income;

    (f) lend money for any lawful purpose, invest or reinvest its funds, or
take and hold real or personal property as security for the payment of
funds so loaned or invested;

    (g) conduct its business, carry on its operations and have offices, and
exercise the powers granted by the Kansas limited liability company act
within or without this state;

    (h) elect or appoint managers and agents of the limited liability com-
pany, define their duties, and fix their compensation to the extent pro-
vided in the operating agreement;

    (i) make donations to the public welfare or for charitable, scientific
or educational purposes;

    (j) indemnify a member or manager or any other person to the same
extent as a corporation may indemnify any of the directors, officers, em-
ployees or agents of the corporation against expenses actually and rea-
sonably incurred by the member or manager in connection with the de-
fense of an action, suit or proceeding, whether civil or criminal, in which
the member or manager is made a party;

    (k) cease its activities and surrender its certificate of organization;

    (l) have and exercise all powers necessary or convenient to effect any
or all of the purposes for which the company is organized;

    (m) transact any lawful business which the members or the managers
find to be in aid of governmental policy;

    (n) pay pensions and establish pension plans, profit-sharing plans and
other incentive plans for any or all of its members, managers and em-
ployees;

    (o) be a promoter, incorporator, general partner, limited partner,
member, associate or manager of any corporation, partnership, limited
partnership, limited liability company, joint venture, trust or other enter-
prise; and

    (p) have and exercise all powers necessary or convenient to effect its
purposes; and

    (q) have and exercise all powers which may be exercised by a Kansas
professional association or professional corporation, including employ-
ment of professionals to practice a profession, which shall be limited to
the practice of one profession, except as provided in K.S.A. 17-2710 and
amendments thereto.

    Sec. 7. K.S.A. 17-7607 is hereby amended to read as follows: 17-
7607. (a) The articles of organization of a limited liability company shall
set forth:

    (1) The name of the limited liability company;

    (2) the period of its duration or, the latest date upon which the limited
liability company is to dissolve;

    (3) the purpose for which the limited liability company is organized,
and if the limited liability company is organized to exercise the powers of
a professional association or corporation, each such profession shall be
stated;

    (4) the address of its registered office in the state and the name and
address of its initial resident agent in the state;

    (5) the right, if given, of the members to admit additional members
and the terms and conditions of the admissions;

    (6) the right, if given, of the remaining members of the limited lia-
bility company to continue the business on the death, retirement, resig-
nation, expulsion, bankruptcy, or dissolution of a member or the occur-
rence of any other event which terminates the continued membership of
a member in the limited liability company;

    (7) (6) (A) if the limited liability company is to be managed by a
manager or managers, a statement that the company is to be managed by
a manager or managers and the names and addresses of such managers
who are to serve as managers until their successors are elected and qual-
ify; and

    (B) if the management of a limited liability company is reserved to
the members, the names and addresses of the members; and

    (8) (7) any other provisions, not inconsistent with law, which the
members elect to set out in the articles of organization for the regulation
of the internal affairs of the limited liability company, including any pro-
visions which under the Kansas limited liability company act are required
or permitted to be set out in the operating agreement of the limited
liability company.

    (b) It is not necessary to set out in the articles of organization any of
the powers enumerated in the Kansas limited liability company act.

    Sec. 8. K.S.A. 17-7608 is hereby amended to read as follows: 17-
7608. (a) The original signed copy, together with a duplicate copy which
may be either a signed or conformed copy, of the articles of organization,
any certificate of amendment, statement of intent to dissolve or articles
of dissolution shall be filed with the secretary of state. A person who
executes a certificate, statement or articles as an agent or fiduciary shall
not be required to exhibit evidence of the person's authority as a prereq-
uisite to filing. Unless the secretary of state finds that any filing does not
conform to law, upon receipt of all filing fees required by law, the sec-
retary of state shall:

    (1) Certify that the articles of organization, certificate of amendment,
statement of intent to dissolve, or articles of dissolution have been filed
in the secretary of state's office by endorsing upon the original filing the
word ``filed'' and the date and hour of the filing; in the absence of actual
fraud, this endorsement is conclusive of the date and time of its filing;

    (2) file and index the endorsed document; and

    (3) return the duplicate copy, similarly certified, to the person who
filed it or such person's representative.

    (b) The articles of organization shall be amended as provided in a
certificate of amendment upon the filing of the certificate of amendment
in the office of the secretary of state or upon the future effective date
specified in the certificate of amendment. The articles of organization are
canceled upon the issuance of a certificate of dissolution by the office of
the secretary of state.

    (c) The fee required by this act shall be paid at the time of the filing
of any articles of organization, certificate of amendment, statement of
intent to dissolve or articles of dissolution.

    (d) The fee required by this act shall be paid for a certified copy of
any paper on file pursuant to this act and the fee fixed pursuant to this
act shall be paid for each page copied.

    (e) Upon filing the articles of organization of a limited liability com-
pany organized to exercise powers of a professional association or profes-
sional corporation, the limited liability company shall file with the sec-
retary of state a certificate by the licensing body, as defined in K.S.A.
1997 Supp. 74-146, and amendments thereto, of the profession involved
that each of the members is duly licensed to practice that profession, and
that the proposed company name has been approved.

    Sec. 9. K.S.A. 17-7604, 17-7607, 17-7607, as amended by section 2
of 1998 Senate Bill No. 472, and 17-7608 are hereby repealed.

    Sec. 10. This act shall take effect and be in force from and after its
publication in the statute book.

I hereby certify that the above Bill originated in the
House, and passed that body

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House adopted
Conference Committee Report __________________________

__________________________________

Speaker of the House.

__________________________________

Chief Clerk of the House.

Passed the Senate
as amended __________________________

Senate adopted
Conference Committe Report __________________________

__________________________________

President of the Senate

__________________________________

Secretary of the Senate.

Approved__________________________

__________________________________

Governor.