CHAPTER 277

2 Act to authorize the organization in Virginia of professional associa-
tions for the purpose of rendering certain professional services; to
provide for the execution, acknowledgment and filing for record of
articles of association and amendments thereto; to prescribe the
powers of such associations, their government and management by
directors and officers in pursuance of by-laws duly adopted; to pre-
scribe the relationship existing between members of the association
who are rendering professional services on its behalf and persons
receiving such services, and the liabilities of the association and the
members under certain circumstances; to provide for the ownership
of such associations, the evidences of ownership, their transferability,
and redemption by the associations; to provide for suits by and
against such associations, the serving of process upon them, and the
effect of gudgments and executions against them; to provide for the
continuity of life of such associations, the method of their dissolu-
tion, and the application of assets to liquidation; to prescribe the
manner in which deeds of such associations are to be executed, the
state and local taxes to which the associations are liable and the
manner in which such taxes are to be assessed.

[H 395]

Approved March 15, 1962

Be it enacted by the General Assembly of Virginia:

§ 1. This act may be cited as “The Professional Association Act’’.

§ 2. As used in this act, unless a different meaning is plainly re
ired by the context:

(1) “Associate” means a member of a professional association.

(2) “Profession” means and includes the following occupations,
enses for the practice of which are required by provisions of Title 54

the Code of Virginia; architecture, professional engineering, land sur-
ying, certified public accounting, dentistry, optometry, practice of the
aling arts, and veterinary medicine, surgery and law.

(3) “Professional Association” means an unincorporated association,
distinguished from a partnership or a corporation, organized under the
ovisions of this act for the sole purpose of carrying on a profession as
fined in (2) above.

(4) “Professional Service’ means any type of professional service
nich may be legally performed only pursuant to a certificate or license
om a State Examining Board issued under the provisions of Title 54, of
e Code of Virginia.

§ 3. Any three or more individuals, each of whom holds a valid,
irevoked certificate or license to practice the same profession within this
ate, may organize a professional association for the purpose of render-
gy professional services of the kind its associates are authorized to
nder and dividing the gains therefrom; provided, however, that for the
purpose of this act, architects, professional engineers and land surveyors
shall be deemed to be practicing the same profession.

§ 4. <A professional association may render professional services
only through officers, employees and agents, who are themselves duly
licensed or otherwise legally authorized to render professional services
within this State, and shall not engage in any business other than render-
ing the professional service for which it was organized.

§ 5. The individuals desiring to form a professional association shall
sign, and acknowledge before a person authorized to take acknowledg-
ments in this State, articles of association, which shall state:

(1) The name of the association.

(2) The purpose for which the association is organized.

(3) The address of the principal office of the association.

(4) The names and addresses of the individuals who are to be the
associates of the organization.

(5) The number of directors constituting the initial board of direc-
tors and the names and addresses of the persons who are to serve as
initial directors.

(6) If the duration of the association is not to be perpetual, the
period of its duration.

(7) Such other provisions, not inconsistent with law, which the
associates may elect to set forth for the regulation of the internal affairs
of the association.

The articles of association, so signed and acknowledged, shall
be filed for record in the office in which deeds are recorded in the county
or corporation wherein the business of the association is to be conducted,
and no professional association shall be deemed to be formed until such
articles of association are so filed for record. A copy of the articles of
association shall be delivered promptly to the State Department of Taxa-
tion for filing.

§ 7. Such articles of association may be amended at any time and
from time to time by vote of two-thirds of the associates at any regular
meeting of associates or at a special meeting called for that purpose, pro-
vided the amendment is executed and acknowledged by at least two-thirds
of the associates and filed for record in the same manner as the original
articles are required to be filed for record. A copy of such amendment
shall be delivered promptly to the State Department of Taxation for filing.

§ 8. The clerk in whose office such articles of association, or amend-
ments thereto, are filed for record, shall record the same in the book in
which certificates of incorporation are recorded and shall receive for such
recordation a fee in like amount as that required to be paid for the recor-
dation of certificates of incorporation and amendments thereto, provided,
however, that in the City of Richmond and County of Henrico the clerks
shall record the same in the books in which certificates of incorporation
were required to be recorded prior to January 1, 1957.

§ 9. Each professional association organized under the provisions
of this act shall have power:

(a) To have perpetual succession by its association name.

(b) To sue and be sued, complain and defend, in its association name.

(c) To have an association seal, which may be altered at pleasure,
and to use the same by causing it, or a facsimile thereof, to be impressed
or affixed or in any manner reproduced.

(d) To purchase, take by gift, devise or bequest, receive, lease, or
otherwise acquire, own, hold, improve, use and otherwise deal in and with
real or personal property, or any interest therein, wherever situated, in
its own name.

(e) To sell, convey, mortgage, pledge, lease, exchange, transfer and
otherwise dispose of all or any part of its property and assets.
(f) To make contracts and incur liabilities, borrow money at such
rates of interest as its board of directors may determine, issue its notes,
bonds and other obligations, and secure any of its obligations by mort-
gage or pledge of all or any of its property and income. —

(zg) To elect or appoint officers and agents of the association, and
define their duties and fix their compensation.

(h) To make and alter by-laws not inconsistent with its articles of
association or with the laws of this State, for the administration and regu-
lation of the affairs of the association.

(i) To pay pensions and establish pension plans, pension trusts,
profit sharing plans, and other incentive plans for its associates, directors,
officers and employees.

(j) To insure the life of any associate, director, officer, agent or em-
ployee and to continue such insurance after the relationship terminates,
and no such associate, director, officer, agent or employee shall be deemed
disqualified by interest from acting in respect thereof.

(k) To cease its association activities and be dissolved by its asso-

(1) To have and exercise all power necessary or convenient to effect
any or all of the purposes for which the association is organized.

§ 10. A professional association organized pursuant to the provisions
of this act shall be governed by a board of directors, which shall be elected
by the associates from their own number and shall have the full manage-
ment of the business and affairs of the association and continuing exclu-
sive authority to make management decisions on its behalf, and no associate
shall have the power to bind the association within the scope of its busi-
ness or profession merely by virtue of his being an associate. All members
of the board of directors shall be associates of the professional association
and the number of directors shall be three, except that if the total number
of associates is less than four, the number of directors shall be two.

§ 11. The board of directors shall elect a president, a secretary and
a treasurer and such other officers and agents as it may deem desirable in
the conduct of the affairs of the association. The president shall be a direc-
tor and any two or more offices may be held by the same person, except
the offices of president and secretary.

§ 12. The associates may adopt by-laws for the regulation of the
affairs of the association or if such authority is given by the articles of
association, may delegate to the board of directors the power to make and
amend by-laws. The by-laws shall provide for the holding of regular and
special meetings of the association, the method of election of the members
of the board of directors and of the officers of the association, the dates
of the regular meetings of the associates and of the board of directors,
(which regular meetings shall be held at least once in each year), the
method for determining the values of the respective interests of the asso-
ciates, the number of votes each associate may cast at meetings of the
associates, the method for amending the by-laws, and such other provisions
for the regulation and management of the affairs of the association as are
not inconsistent with law and the articles of association.

§ 13. The board of directors may engage whatever employees it
deems necessary for the carrying on of the business of the association. No
employee shall render professional services unless he is duly licensed or
otherwise legally authorized to render such professional services within
the State of Virginia. All of the associates shall be employees of the asso-
ciation. The board of directors shall have the right to fix the amount and
method of payment of compensation for all of the employees and to set up
reserves or distribute excess earnings to each of the associates in propor-
tion to his ownership in the association.

§ The provisions of this act shall not be construed to alter or
affect the professional relationship between a person furnishing profes-
sional services and a person receiving such service, either with respect to
liability arising out of such professional service or the confidential relation-
ship between the person rendering the professional service and the person
receiving such professional service, if any, and all such confidential re-
lationships enjoyed under the laws of this State, whether now in existence
or hereafter enacted, shall remain inviolate.

§ 15. Unless the articles of association expressly provide otherwise,
a professional association shall continue as a separate entity, independent
of its associates, for all purposes and for such period of time as is provided
in the articles of association, or until dissolved by a vote of two-thirds of
the associates, and shall continue notwithstanding the death, insanity, in-
competency, resignation, withdrawal, transfer of membership or of interest,
retirement, or expulsion of any one or more of the associates, the admission
of or transfer of membership or interest to any new member or members,
or the happening of any other event which under the laws of this State
and under like circumstances, would cause a dissolution of a partnership,
it being the purpose and intent of this section that such professional asso-
ciation shall have continuity of life independent of the life or status of its
associates. No associate shall have the power to dissolve the association by
his independent act of any kind.

§ 16. The ownership of a professional association shall be in the
associates and each associate shall be entitled to a certificate of ownership
signed by the president and secretary of the association and evidencing
the proportional part of the association owned by him. Except to the ex-
tent provided in the articles of association or the by-laws, certificates of
ownership shall be freely transferable by any associate to another asso-
ciate, or to other associates, or to any person who is not an associate pro-
vided such person is duly licensed or qualified under the laws of this State
to render the same kind of professional service which the association was
organized to render, and such transferee shall thereupon become an asso-
ciate in the organization and be entitled to participate in its management
and affairs with all the rights of the transferor of such interest. Any re-
striction on the transfer of interest imposed by the articles of association
or the by-laws shall be written or printed on all certificates of ownership
issued to the associates.

§ 17. A professional association shall have the power to redeem the
interest of any associate (including any associate who has been expelled)
or the interest of a deceased associate, upon such terms as may be agreed
upon by the board of directors of the association and such associate or
his personal representative, or at such price and upon such terms as
may be provided in the articles of association or the by-laws.

§ 18. If any associate of a professional association becomes legally
disqualified to render in this State the professional services for which
the association was organized, he shall sever all employment with and
financial interest in such association forthwith.

§ 19. In the event the articles of association or by-laws do not fix
the price at which the association, or its associates may purchase the
interest of a deceased, retired, expelled or disqualified associate, or a
method of arriving at such price, then the price for such interest shall
be the book value of such interest at the end of the month immediately
preceding the death, retirement, expulsion, or disqualification of the
associate, determined under generally accepted accounting methods by an
independent certified public accountant employed by the association for
the purpose.

§ 20. <Any associate of a professional association shall remain per-
sonally and fully liable and accountable for any negligent or wrongful
acts, or misconduct committed by him, or by any person under his direct
supervision and control, while rendering professional services on behalt
of the association to the person for whom such professional services were
being rendered. Such associate shall not, by reason of being an associate,
be personally liable for any debts or claims against, or the acts or
omissions of the association or of another associate or employee of the
association, but the association shall be liable for the acts or omissions
of its associates, officers, agents, employees and servants to the same
extent to which a corporation would be liable for the acts or omissions
of its officers, agents, employees and servants while they are engaged in
carrying on the corporate business.

§ 21. A professional association may sue and be sued under its
association name as shown by its recorded articles of association and
amendments thereto, or the name under which it does business, and
judgments and executions against any such association shall bind its
real and personal property in like manner as if it were incorporated.
Process against such association may be served on any officer or director
of such association, as shown by the said recorded articles and amendments.

§ 22. A professional association may be dissolved at any time by
a vote of two-thirds in number and interest of its associates by resolution
adopted at a meeting called and held in accordance with the provisions
of the by-laws. A copy of the said resolution, certified by the president
and secretary of the association, shall be promptly filed in the clerk’s
office in which the articles of association and amendments thereto are filed
and the dissolution shall be effective from the time of such filing. The
Clerk shall record the said copy in the manner articles of association
are required to be recorded and shall receive a like fee for the recordation
thereof.

§ 23. In the event of a dissolution of a professional association, the
board of directors, as trustees of the property and assets of such asso-
ciation, shall apply the assets first to the payment of debts of the associa-
tion, and second, to or among the associates, as the articles of association
shall provide.

§ 24. All deeds of professional associations shall be executed in the
manner required for the execution of deeds of corporations by § 55-119
of the Code of Virginia and, if such deed is to be recorded, the person
signing the name of the association shall acknowledge the same in the
manner provided by § 55-120.

§ 25. All professional associations organized under the provisions
of this act, shall be taxable as corporations for income tax purposes and
shall be subject to the provisions of Chapter 4 of Title 58 of the Code of
Virginia, entitled “Income Taxes’, insofar as these provisions are appli-
cable to corporations, and property owned by such associations shall be
taxable in the actual form in which it may be and not as capital.

§ 26. § 58-255 of the Code of Virginia, requiring a separate revenue
license for each member of a firm or company of persons practicing any
profession or calling which is regulated by the laws of this State, shall
be applicable to members of professional associations, and no State or
local revenue license shall be required of any professional association as
a prerequisite to the rendering of professional services in this State, or
any county, city or town therein; provided, however, that if any such
county, city or town requires a revenue license for the privilege of prac-
ticing any of the professions to which this act applies and such license is
measured by gross receipts, the gross receipts of an associate of a pro-
fessional association shall consist of (1) his salary and (2) such part of
the gross receipts of the association remaining after the payment of
salaries to all the associates as bears the same ratio to all such remaining
gross receipts as his ownership in the association bears to the ownership
therein of all the associates.