Michigan Business Lawyer Blog

The Michigan Supreme Court recently heard oral arguments in the case of Miller v. Allstate. The major issue in this case is whether those providing a service requiring a license must incorporate under the Michigan Professional Services Corporation Act (PSCA) instead of under the Michigan Business Corporation Act (BCA). Before the Miller case reached the Michigan Supreme Court, the Michigan Court of Appeals ruled that under the language of the PSCA, any licensed professional who incorporates must do so under the PSCA and not the 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 Miller, the patient was referred for physical therapy treatments. The treatments were administered by licensed physical therapists according to prescriptions that were properly issued by the patient's doctors. The company providing the physical therapy services was incorporated under the BCA. When the physical therapy company billed Allstate, Allstate refused to pay, on the basis that it believed the physical therapy company had been improperly incorporated under the BCA instead of the PSCA.

Allstate asserted that the physical therapy company had to incorporate under the PSCA because it provided a personal service requiring a license. Allstate claimed that because the physical therapy company was incorporated under the BCA, its incorporation was defective, thus allowing Allstate the legal right to refuse to pay the physical therapy company's charges. 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 involved in the Miller case, the question of defective incorporations is the most wide-reaching and has the greatest potential to disturb the status and operations of many Michigan corporations. An adverse ruling by the Michigan Supreme Court on this point could mean that any Michigan business corporation that incorporated under the BCA and 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.