Michigan

Miller v. Allstate: The Controversy of Properly Incorporating the Businesses of Licensed Professionals

The Michigan Supreme Court recently heard oral arguments in the case of Miller v. Allstate. One of the issues in this case is whether a licensed medical professional, other than a physician, must incorporate under the Michigan Professional Services Corporation Act (PSCA) instead of under the Michigan Business Corporation Act (BCA).

Traditionally, only members of the ?learned professions? (i.e., doctors, lawyers, and the clergy) have been required to incorporate under the PSCA. All other businesses that provide personal or professional services have had the option to incorporate under the BCA or the PSCA, even if a license was required to provide those services.

In the Miller case, Mr. Miller was referred to PT Works, Inc. for physical therapy treatments, which he received from licensed physical therapists according to prescriptions properly issued by his physicians. PT Works was also incorporated under the BCA. When PT Works billed Allstate, Allstate refused to pay, contending that PT Works was improperly incorporated.

Allstate asserted that PT Works was required to incorporate under the PSCA because PT Works provides a personal service to the public that requires a license. Allstate claimed that because PT Works was incorporated under the BCA, its incorporation was defective and Allstate did not have to pay for services rendered by PT Works. Importantly, Allstate has asserted that if any corporation provides services that require a license and is not incorporated under the PSCA, the corporation?s incorporation is defective. If incorporation is deemed to be improper there can be negative repercussions with respect to a number of issues, including whether the corporation can collect its outstanding accounts receivable and whether shareholders may be personally liable for company obligations.

The Miller case has caused a major uproar in the business and legal communities. It appears to have caught many, including the State of Michigan, off guard. Numerous business interests as well as the State of Michigan have taken formal positions opposing Allstate?s arguments as being illogical and inconsistent with the plain language and purposes of the business incorporation acts in Michigan.

While there are several other issues before the Michigan Supreme Court in the Miller case, the question of defective incorporations is the most wide-reaching and the most potentially disturbing to Michigan corporations. An adverse ruling on this point could mean that any Michigan business corporation that has provided services requiring a license could experience some difficulties.

An experienced Michigan business lawyer should be consulted if a business or professional has any questions about the issues raised in the Miller case, or any other issues concerning the proper incorporation of a business.

Full post as published by Michigan Business Lawyer Blog on May 14, 2008 (boomark / email).