Effective October 1, 2019, a new Connecticut law, P.A. 19-177, changed the existing requirements in Connecticut General Statutes Section 20-298b that apply to the ownership of architectural firms doing business as professional corporations incorporated in Connecticut. The new law now permits these architectural firms to have more than 33-1/3% of their voting stock owned by an employee stock ownership plan (ESOP). (The old Connecticut law required an architectural firm, doing business as a professional corporation, to be at least two-thirds owned by licensed architects.) The new law now allows these firms to be owned by ESOPs adopted by the professional corporation, and the shares owned by the ESOP will count as shares owned by the licensed architects for purposes of satisfying the state law requirement that at least two-thirds of the professional corporation be owned by licensed architects, provided that at least two-thirds of the ESOP Trustees are licensed architects. It remains to be seen whether this ESOP-friendly statute for architects will start a trend in the Connecticut legislature for law changes applicable to other licensed professionals in Connecticut with respect to the ownership requirements that apply to such professions under Connecticut law. But given the powerful tax and other benefits that are delivered through ESOP ownership, the ball may start rolling for greater ESOP activity for other types of professional corporations in Connecticut.
New Connecticut Law Permits Architectural Firms to be 100% Owned by ESOPs
