Kansas Attorney General Opinion 1992-023

ROBERT T. STEPHAN
ATTORNEY GENERAL February 14, 1992
ATTORNEY GENERAL OPINION NO. 92- 23
Adley E. Johnson, C.P.A.
Chairman, Kansas Board of Accountancy
Landon State Office Building, Suite 556
Topeka, Kansas 66612-1239
Re: Corporations--Limited Liability Companies--
Formation; Certified Public Accountants
Corporations--Professional Corporations--
Professional Corporation Law; General and Business
Corporation Law Applicable; Exceptions
Accountants, Certified Public--Licensure,
Examination and Registration--Registration of
Partnerships; Professional Corporations
Synopsis: A certified public accountant may organize and
practice as a limited liability company pursuant to
K.S.A. 1991 Supp. 17-2708. Cited herein: K.S.A.
17-2709; 17-2717; 17-6001 et seq.; 17-7601
et seq.; K.S.A. 1991 Supp. 17-2707;
17-2708; 17-2712.
Dear Mr. Johnson:
As chairman of the Kansas board of accountancy you inquire
whether a Kansas certified public accountant (hereinafter
C.P.A.) may organize and practice as a limited liability
company pursuant to K.S.A. 1991 Supp. 17-2708.

You indicate the C.P.A. licensing statutes specifically allow
C.P.A.'s to practice as professional corporations provided
they meet certain specific requirements such as licensing and
organization under the professional corporation law.
The professional corporation law, K.S.A. 17-2706 et
seq., authorizes persons licensed in certain professions
to form corporations for the practice of their profession.
Among the professionals listed are certified public
accountants, K.S.A. 1991 Supp. 17-2707. At issue is whether
K.S.A. 1991 Supp. 17-2708 authorizes C.P.A.'s to organize
and practice as a limited liability company. The statute
provides:
"Except as otherwise provided, the Kansas
general corporation code contained in
K.S.A. 17-6001 et seq., and
amendments thereto, shall apply to a
professional corporation organized
pursuant to this chapter. Any provisions
of the professional corporation law of
Kansas shall take precedence over any
provision of the Kansas general
corporation code which conflicts with it.
The provisions of the professional
corporation law of Kansas shall take
precedence over any law which prohibits a
corporation from rendering any type of
professional service. Any person or
organization as defined in K.S.A. 17-2707,
and amendments thereto, which is
authorized to form a professional
corporation also may incorporate under the
Kansas general corporation code contained
in K.S.A. 17-6001 et seq., and
amendments thereto, or organize under the
Kansas limited liability company act
contained in K.S.A. 17-7601 et seq.,
and amendments thereto."
Accordingly the general corporation code applies to
professional corporations, except to the extent that a
conflict exists. When there is a conflict, the professional
corporation law takes precedence. In other words a
professional corporation must meet all the requirements of the
general corporation code and must also abide by restrictions
to its corporate form imposed by the professional corporation
law, K.S.A. 17-2709. Additionally the 1989 and 1991

amendments to the above statute permit any person authorized
to form a professional corporation to incorporate as a
general corporation or to organize under the Kansas limited
liability company act.
The interpretation of a statute is a question of law and it is
the court's function to interpret the statute to give it the
intended effect. Unified School District No. 279 v. Sec'y
of the Kansas Department of Human Resources, 247 Kan. 519,
524 (1990). The fundamental rule of statutory construction is
that the purpose and intent of the legislature govern when
that intent can be ascertained from the statute. Id. at
527. While hardly a model of clarity, we think the statute's
intended effect is discernible. It is our opinion that the
statute authorizes professional corporations, such as C.P.A.'s
to incorporate under the Kansas general corporation code or
organize as a limited liability company, provided they remain
subject to the restrictions imposed by the professional
corporation law.
The leading and most current case interpreting this statute is
consistent with our opinion. In Early Detection Center, Inc.
v. Wilson, 248 Kan. 869 (1991) the Supreme Court addressed
the question of whether a general corporation may practice the
healing arts. The case involved an appeal by Early Detection
Center (hereinafter EDC) from the trial court's grant of
summary judgment to Dr. Marvin H. Wilson. EDC filed the
action against Dr. Wilson, an incorporator, officer, director,
30% shareholder and employee of EDC, alleging that he
breached his fiduciary duty to the corporation by forming a
competing business. The Supreme Court concluded that K.S.A.
1989 Supp. 17-2708 does not authorize the practice of
medicine by a general corporation or allow a general
corporation to provide professional services under the
supervision of a licensed practitioner. Because this
conclusion is so broadly stated and appears inconsistent with
our opinion it is necessary to consider the court's
reasoning.
In this case Dr. Wilson and Dr. Powell, both licensed to
practice medicine, formed a partnership that they later
incorporated as a professional corporation known as EDC. In
1985 they amended the articles of incorporation to function as
a general corporation pursuant to K.S.A. 17-2717. This
statute specifically allows the change to a general
corporation but makes clear that the corporation no longer
functions as a professional corporation and is now subject
only to the general corporation code. EDC argued that if

the professional corporation law allowed this change from a
professional corporation to a general corporation, the general
corporation was not precluded from providing medical services
if it employed individuals licensed to provide the services.
248 Kan. 873. The court disagreed because as a professional
corporation both the the incorporators and the professional
corporation are licensed to practice the healing arts. As a
professional corporation, EDC's transfer of stock was
limited by the act to licensed individuals, K.S.A. 17-2712.
EDC's change from a professional corporation to a general
corporation and amendment of its corporate charter made it
subject only to the general corporation code that allowed it
to transfer stock to unqualified (unlicensed) individuals.
EDC sold stock to two unlicensed individuals, W. Hicks and
Harvey Doud.
Had the 1989 amendments to K.S.A. 17-2708 existed (the facts
in Early Detection Center, Inc. v. Wilson arose in 1985)
EDC as a professional corporation could have incorporated
as a general corporation. The 1989 amendments state:
"Any person or organization as defined in
K.S.A. 17-2707, and amendments thereto,
which is authorized to form a professional
corporation also may incorporate under the
Kansas general corporation code contained
in K.S.A. 17-6001 et seq."
However as a general corporation organized pursuant to this
statute EDC would have been subject to the professional
corporation law, (specifically K.S.A. 17-2712 restricting the
transfer of shares to licensed individuals). See Central
State Bank v. Albright, 12 Kan.App.2d 175, 180 (1987)
(the issuance or voluntary transfer of shares to an
unqualified person results in forfeiture of the corporate
charter.) K.S.A. 17-2712 would have applied to EDC because
of incorporation pursuant to K.S.A. 17-2708 that says the
professional corporation law takes precedence in the event of
a conflict. There is a conflict when the general corporation
code freely allows stock transfer and the professional
corporation law restricts transfers to licensed individuals in
the same profession.
Therefore in our opinion the conclusion in Early Detection
Center, Inc. v. Wilson must be tempered by the court's
analysis and narrowed to the facts before the court. The
conclusion in this case thus applies only to a general
corporation that is subject only to the general corporation

code and no longer abides by the restrictions imposed by the
professional corporation law because it incorporated under
K.S.A. 17-2717. Narrowed to the facts it is evident why the
court concluded that K.S.A. 1989 Supp. 17-2708 does not
authorize the practice of medicine (or any other profession
listed in 17-2707) by a general corporation.
In conclusion it is our opinion that K.S.A. 1991 Supp.
17-2708 authorizes C.P.A.'s to organize and practice as a
limited liability company provided the professionals abide by
the restrictions applicable to a professional corporation.
See subsection (q) in K.S.A. 1991 Supp. 17-7604 that
authorizes a limited liability company to exercise all the
powers of a Kansas professional corporation.
Very truly yours,
ROBERT T. STEPHAN
Attorney General of Kansas
Guen Easley
Assistant Attorney General
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