New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following opinion on April 27, 2001 representing the position of the New York State Insurance Department.

Re: Licensing of Limited Liability Partnerships and Limited Liability Companies as Insurance Brokers in New York State.

Questions Presented:

1. May a licensed insurance brokerage be formed as a limited liability partnership in New York State?

2. May a licensed insurance brokerage be formed as a limited liability company in New York State?

Conclusions:

1. No. An insurance brokerage may not be formed as a limited liability partnership in New York State, since insurance brokers are not considered professionals as defined by the New York Partnership Law.

2. Yes. An insurance brokerage may be formed as a limited liability company in New York State, since the structure of a limited liability company closely resembles that of a partnership.

Facts:

The inquirer spoke with the Albany Customer Service Unit regarding the procedure necessary to amend the name of a brokerage to include the designation LLP. The inquirer received a letter from the Insurance Department dated February 23, 2001 stating that the name of the brokerage was approved for use and would be reserved for a period of six months. Subsequently, the Albany Customer Service Unit informed the inquirer that the Insurance Department can no longer license insurance brokers as limited liability partnerships and that any brokers already licensed as limited liability partnerships were having their licenses cancelled. Consequently, the inquirer requested an opinion regarding whether an insurance brokerage can be formed as a limited liability partnership or as a limited liability company.

Analysis:

The Insurance Law

N.Y. Ins. Law § 2104 (McKinney 2000) provides as follows:

(a) (1) The superintendent may issue an insurance broker’s license to any individual, firm, association or corporation . . . who or which is deemed by him trustworthy and competent to act as a broker in such manner as to safeguard the interests of the insured, and who or which is otherwise qualified as herein required, and who or which has complied with the prerequisites herein prescribed. (emphasis added).

N.Y. Ins. Law §107(20) (McKinney 2000) defines a "firm" as a partnership, limited or unlimited, general or special.

The Partnership Law

N.Y. Partnership Law §121-1500 (a)(McKinney 2000) provides as follows:

(a) Notwithstanding the education law or any other provision of law, (i) a partnership without limited partners each of whose partners is a professional authorized by law to render a professional service within this state and who is or has been engaged in the practice of such profession in such partnership or a predecessor entity, or will engage in the practice of such profession in the registered limited liability partnership within thirty days of the date of the effectiveness of the registration provided for in this subdivision or a partnership without limited partners each of whose partners is a professional, at least one of whom is authorized by law to render a professional service within this state and who is or has been engaged in the practice of such profession in such partnership or a predecessor entity, or will engage in the practice of such profession in the registered limited liability partnership within thirty days of the date of the effectiveness of the registration provided for in this subdivision, (ii) a partnership without limited partners authorized by, or holding a license, certificate, registration or permit issued by the licensing authority pursuant to the education law to render a professional service within this state, which renders or intends to render professional services within this state, or (iii) a related limited liability partnership may register as a registered limited liability partnership by filing with the department of state a registration . . .

Therefore, N.Y. Partnership Law §121-1500(a) (McKinney 2000) restricts the availability of limited liability partnerships to professionals practicing in general partnership form.

N.Y. Partnership Law § 2 (McKinney 2000) defines a profession as including any practice as an attorney and counselor-at-law or as a licensed physician, and those professions designated in title eight of the Education Law. Insurance brokers are not included in the professions enumerated in title eight. Thus, an insurance brokerage can not be formed as a limited liability partnership in New York State since insurance brokers are not considered professionals as defined by the New York Partnership Law.

Limited Liability Company Law

N.Y. Limited Liability Company Law § 203(a) (McKinney 2001) provides as follows:

(a) One or more persons may act as an organizer or organizers to form a limited liability company by (i) preparing the articles of organization of such limited liability company in accordance with subdivision (e) of this section, (ii) executing such articles of organization in accordance with section two hundred seven of this article and (iii) filing such articles, entitled "Articles of organization of . . . (name of limited liability company) under section two hundred three of the Limited Liability Company Law," in accordance with section two hundred nine of this article.

N.Y. Limited Liability Company Law § 203(a) (McKinney 2001) does not restrict the availability of limited liability companies to professionals rendering professional services. Thus, the question becomes whether a limited liability company is a firm, association or corporation within the purview of N.Y. Ins. Law § 2104 (McKinney 2000).

This Department has opined that a limited liability company form of business organization is a hybrid between the partnership and corporate forms, but it may be considered to be closer to the partnership than the corporation form. A recently published treatise notes that "The LLC is most similar to the limited partnership and the general partnership, although it shares some state law concepts with the corporation." H. Leftkowitz & I. Akselrad, New York Limited Liability Company Forms and Practice Manual §1.2 (1994). Accordingly, an insurance brokerage may be formed as a limited liability company because the structure of a limited liability company closely resembles that of a partnership.

For further information, you may contact Attorney Pascale Joasil at the New York City Office.