1.4 Professional Entity Organization, Firm Licensure & Business Rules

1.4 Professional Entity Organization, Firm Licensure & Business Rules

The Board's own reference list for the state-specific exam names the Professional Corporation Act, G.S. 55B as required reading. That is a strong signal: expect items on who may own a surveying firm, who must be licensed inside it, and what the firm must report. This is also the topic where prep material most often repeats a rule that does not exist.

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1. The Ownership Rule That Actually Applies (G.S. 55B-4 and 55B-6)

Start from the default, which is strict:

G.S. 55B-4(2): "All of the shares of stock of the corporation shall be owned and held by a licensee, or licensees, ... except as otherwise permitted in G.S. 55B-6."

So the baseline is 100 percent licensee ownership, not two-thirds. G.S. 55B-6(a) then supplies the exception that matters to a surveying firm:

For professional corporations rendering services defined in Chapters 83A, 89A, 89C, 89E, and 89F, it is lawful "for nonlicensed employees of the corporation to own not more than one-third of the total issued and outstanding shares."

+-----------------------------------------------------------------------------+
|             WHO MAY HOLD SHARES IN AN 89C PROFESSIONAL CORPORATION          |
|                                                                             |
|   DEFAULT (G.S. 55B-4(2)) ........ ALL shares held by licensees             |
|                                                                             |
|   EXCEPTION (G.S. 55B-6(a)) ...... NONLICENSED EMPLOYEES of the corporation |
|                                    may hold NOT MORE THAN ONE-THIRD of the  |
|                                    total issued and outstanding shares      |
|                                                                             |
|   NOT PERMITTED .................. outside investors, silent partners,      |
|                                    family members who are not employees,    |
|                                    or any transferee the licensing board    |
|                                    has not certified as a licensee          |
+-----------------------------------------------------------------------------+

The distinction is not academic. The one-third allowance runs only to employees of the corporation. An outside investor cannot take the one-third. And every ordinary transfer is policed: no share may be transferred on the corporate books unless the corporation has received a certification from the appropriate licensing board that the transferee is a licensee, and any issuance or transfer in violation of the section is void. Shareholders are also barred from entering voting trusts or any agreement vesting the voting power of professional-corporation stock in another person.

Two further wrinkles in G.S. 55B-6(a) are worth knowing:

• Qualified retirement plans. For corporations rendering services under Chapters 83A, 89A, 89C, and 89E, an employee retirement plan qualified under section 401 of the Internal Revenue Code is deemed to be a licensee for this purpose if the trustees of the plan are licensees. This is the accurate version of the loose claim that "an ESOP may hold shares."
• Out-of-state licensed practitioners. Individuals who are not North Carolina licensees but who perform professional services for the corporation in another jurisdiction where the corporation maintains an office, and who are licensed there, may be shareholders — so long as at least one shareholder is a North Carolina licensee and the corporation renders its North Carolina services only through North Carolina licensees.

Governance (G.S. 55B-4)

G.S. 55B-4 imposes three organizational limits, and they are more modest than commonly assumed:

1. At least one incorporator must be a licensee.
2. All shares owned by licensees, subject to the 55B-6 exception above.
3. At least one director and one officer must be a licensee.

The statute does not require that every officer or every voting director be licensed. The articles of incorporation must designate the personal services to be rendered and must be accompanied by a certification from the licensing board that the share ownership complies with G.S. 55B-4(2) and 55B-6.

Under G.S. 55B-7, if any officer, shareholder, agent, or employee who is a licensee becomes legally disqualified from practicing in this State, that person must sever all employment with, and financial interest in, the corporation forthwith — and the corporation's failure to comply is grounds for forfeiture of its certificate of incorporation and dissolution.

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2. Multidisciplinary Practice (G.S. 55B-14)

The general rule in G.S. 55B-14(a) is one profession per professional corporation. G.S. 55B-14(b) creates the design-professions exception:

In the case of architectural (Ch. 83A), landscape architectural (Ch. 89A), engineering or land surveying (Ch. 89C), geological (Ch. 89E), and soil science (Ch. 89F) services, one corporation may be authorized to provide such of these services where the corporation, and at least one corporate officer who is a stockholder, is duly licensed by the licensing board of each such profession.

Soil science is on the list and is routinely omitted from prep summaries. The operative condition is not an ownership percentage at all — it is that for each discipline offered, the corporation holds that board's license and at least one officer-stockholder holds that board's individual license.

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3. Firm Licensure with NCBELS (G.S. 89C-24; 21 NCAC 56 .0802)

G.S. 89C-24 is short and absolute: a corporation or business firm may not engage in the practice of engineering or land surveying in this State unless it is licensed by the Board and has paid an application fee not exceeding $100. A licensed firm is "subject to the same duties and responsibilities as an individual licensee," and firm licensure does not relieve individual licensees of their design and supervision responsibilities. A corporation not exempt from Chapter 55B by G.S. 55B-15 must be incorporated under Chapter 55B.

The two application tracks in 21 NCAC 56 .0802

[!IMPORTANT] Sole proprietorship exemption. 21 NCAC 56 .0802(b)(1) states plainly that "a sole proprietorship owned and operated by the individual licensee in the licensee's name as reflected in the Board's records is exempt from firm licensure." 21 NCAC 56 .1103(a)(6) and (b)(5) then let that exempt sole proprietor use the individual license number in place of a firm number on plats and reports. Operating under any other name takes you outside the exemption.

Business titles (21 NCAC 56 .0902)

A firm may not practice under a misleading name. A name is misleading if it contains the name of an individual who is not licensed to provide the services offered in North Carolina, is not comity-eligible under G.S. 89C-13, or is not licensed in the state where the business is incorporated or authorized. Deceased or retired former members' names may be retained on written request if the Board finds the use not misleading. A business must apply to the Board for a determination before changing its title or operating under an assumed name.

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4. The Resident Licensee Rule (21 NCAC 56 .0901)

Every firm, partnership, corporation, or LLC that performs or offers to perform land surveying services in North Carolina must have a resident Professional Land Surveyor in responsible charge in each separate office located in North Carolina where those services are performed or offered.

• "Resident" is defined, not left to intuition: a licensee who spends a majority of the licensee's normal working time in that office, and that time "shall not be less than a majority of the operating hours of the business."
• One office at a time — with a real exception. A licensee may be the resident professional at only one place of business at one time unless each business is at least one-third owned by the resident professional. That arrangement must be specifically approved by the Board after it determines that the businesses are integrated in operation, ownership, and office location and that the licensee will be in responsible charge. Proximity alone is not the test.
• Out-of-state offices performing North Carolina work need a licensee in responsible charge of the specific projects, in compliance with 21 NCAC 56 .0701(c)(3).
• No marketing without a resident. No entity may practice, offer to practice, or market land surveying or engineering unless a licensed resident for that service is in responsible charge at that office. Advertisements, signs, letterheads, business cards, and directories must avoid reference to any service that cannot be provided under such a resident.
• Notice and shutdown. The firm must notify the Board of a change of resident professional within 30 days, and shall not practice, offer to practice, or market that professional service during any period without a resident professional.

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5. Renewal and the 30-Day Reporting Duty (21 NCAC 56 .0804)

Separately, the business must give notice to the Board on a change form within 30 days of any change of:

1. business address and branch locations;
2. resident professional or licensee in responsible charge;
3. business name;
4. officers, directors, or owners; or
5. the services being offered.

Criminal convictions must likewise be reported within 30 days of conviction.

[!CAUTION] Note the two different June/December dates. A business license expires the last day of June. An individual PLS license expires the last day of each calendar year, with the renewal window running December 1 through January 31 (21 NCAC 56 .0606(a)). Swapping them is an easy exam trap.