Articles

Michigan Supreme Court Decision Could Change the Way Professionals Set up Shop

By Maria L. Meldrum

The long-awaited Michigan Supreme Court decision on Miller v Allstate Insurance Co. could have big implications for businesses providing professional services.

The issue in Miller is whether a provider of professional services must be incorporated as a Professional Corporation (PC), under the Professional Services Corporation Act (PSCA) in order to lawfully render services and collect on those services.

Miller, Allstate's insured, was injured in an automobile accident and received physical therapy services from PT Works by qualified and licensed employees. PT Works, is incorporated under the Michigan Business Corporations Act (MBCA). Allstate contends PT Works is unlawfully incorporated because it is not a Professional Corporation, and doesn't have to provide $29,150 for services rendered.

This isn't just a case of adding "insult to injury," but one that could lead to potentially complex and expensive business re-organization (in all fields employing licensed professionals). Should the Michigan Supreme Court rule in favor of Allstate, Michigan will have its own unique, mandatory requirement of professional businesses to organize either as a PC or as a Professional Limited Liability Company (PLC), entirely owned by licensed professionals.

Should corporations or LLC's that provide professional services change their existing structures in Michigan now? At this time, no. It would make sense to wait for the decision of the Michigan Supreme Court before incurring accounting, printing, and other business expenses.

Remember too that each state legislature adopts its own business statutes. When practicing across state lines, make sure you compare and distinguish each state statute to learn what may or may not be allowed.