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PROBATE 42: Dissolution of professional corporation.

This case involves the estate of a doctor whose professional corporation also had to be dissolved upon his death. The personal representative of the estate sold the company’s assets but did not pay off the company’s debts before transferring the proceeds to the estate and distributing them to the heirs. The personal representative could not avoid the company’s liabilities in this manner.

Sole Member PLC

Dr. L was the sole member of a PLC organized for his medical practice; the PLC entered into two six-year commercial lease agreements for three office suites. Dr. L personally guaranteed the lease payments. Dr. L died in March 2016.

The lease holder filed a notice of claim with the personal representative (PR) for unpaid rents under the lease agreements. The PR denied the request for payment, responding that the medical practice had vacated the property and had been dissolved. The lease holder then filed a proof of claim for $79,000 in the probate court based on Dr. L’s personal guaranty. The PR did not file a disallowance of the claim in the probate action.

Personal Representative

Under MCL 450.4908(1), only Dr. L’s membership interest in the PLC was transferred to the PR as personal representative of his estate. The PR insists that she was barred from receiving Dr. L’s membership interest in the PLC because MCL 450.4904 requires that members of a PLLC that provide medical services have professional licenses. However, the statutes only restrict the PR from making decisions regarding the rendering of professional services; the statutes do not prevent her from winding up and properly dissolving the PLC. The PLC continued to exist as a separate entity until its business affairs were properly wound up; its assets did not simply devolve to the estate.

The PR took Dr. L’s interest in the PLC. Although she could not make decisions about rendering medical services, she certainly could wind up the business of the PLC and vote for its dissolution.

Probate Court

The probate court granted leaseholders’ motion for summary disposition in part because it ruled that the PR transferred business funds to the Estate to avoid paying the creditors of the PLC by rendering the PLC insolvent. This ruling was based in part on PR’s testimony that she collected money that was owed to the PLC before transferring that money to the estate.

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