Can an out-of-state accounting firm that is owned by an Employee Stock Ownership Plan (ESOP) be allowed to do business in Oklahoma and to hold an Oklahoma public accounting permit, given Oklahoma's restrictions on who can own a professional accounting firm?
Plain-English summary
The Oklahoma Accountancy Board's executive director asked the Attorney General about an unusual ownership structure: an out-of-state accounting firm that converted from a limited liability partnership to a professional corporation, with 42% of the new entity's shares now held by an Employee Stock Ownership Plan (ESOP). The firm wanted to renew its Oklahoma permit to provide accounting services. The question: did the ESOP ownership structure disqualify it under either the Oklahoma Professional Entity Act (PEA) or the Oklahoma Accountancy Act (OAA)?
Both statutes require accounting firms to be majority-owned by licensed accountants. The PEA goes further: for a professional corporation, "[n]o person shall be a shareholder . . . who is not duly licensed or otherwise permitted to render the same professional services" (18 O.S. § 809).
The AG's answer: the firm qualifies if the ESOP's trustees are licensed CPAs.
The reasoning: under standard trust law, when company stock is contributed to an ESOP, legal title vests in the ESOP trustees. The participating employees hold only an equitable beneficial interest. The ESOP at issue had five trustees, each of whom was a licensed CPA. Because the trustees (the legal owners) are licensed, the firm satisfies the PEA's "shareholder must be licensed" requirement. The same analysis applies under the OAA's majority-ownership requirement.
The AG canvassed AG opinions from other states. Two states (Arkansas and Georgia) had reached the opposite conclusion, focusing on the trustees' fiduciary duty to non-licensed employee beneficiaries as a potential conflict of interest. Two other states (Iowa and Ohio) reached the same conclusion as Oklahoma, finding that the trustee's legal title satisfies licensing requirements. The AG found the Iowa and Ohio reasoning more persuasive: the ESOP beneficiaries' "equitable interests remain subject to the limitation that [the] trustee may not be required to act in a manner that conflicts with public policy or exceeds the authority permitted under applicable laws."
The opinion also notes a 2024 PEA amendment (SB 620) that expressly permits foreign professional entities to qualify in Oklahoma without requiring all owners to be Oklahoma-licensed (only managers must be licensed). For professional corporations specifically, however, the requirement that all shareholders be licensed in the relevant field still applies.
What this means for you
If you are a CPA firm with ESOP ownership
You can qualify to do business and hold an Oklahoma accounting permit if:
- Your firm is duly organized as a professional corporation (or other professional entity) under your home-state law.
- All ESOP trustees are licensed CPAs (in any jurisdiction, per the OAA's reciprocity provisions).
- You meet other PEA and OAA requirements (firm registration, permits, criminal background checks, peer review, etc.).
If your trustees include non-licensed individuals, the analysis breaks down: the legal owner is then a non-licensed person, which fails the PEA's professional-corporation shareholder requirement. Restructure trustee composition before filing.
If you are an Oklahoma Accountancy Board member or staff
When reviewing permit applications from ESOP-owned firms, focus on trustee composition. The trustees are the legal owners for purposes of the PEA and OAA licensing tests. Confirm:
- All ESOP trustees hold a current accounting license (Oklahoma or another state).
- The firm satisfies all other OAA permit requirements.
- Foreign-entity firms have qualified to do business under the PEA per 18 O.S. § 804.
The opinion does not address whether non-CPA non-trustee participants in the ESOP could trigger Board rules at Okla. Admin. Code § 10:15-23-2.1 about non-CPA owners. Footnote 6 says "Because the 'owners' of the shares held in the ESOP are licensed CPAs, there are no non-CPA owners of the firm and these requirements are therefore inapplicable." So the trustee-as-legal-owner framing is the controlling answer.
If you are an attorney advising a professional firm considering an ESOP
Two key takeaways:
- Trustee composition matters. The ESOP's trustees are the legal owners. Make sure they are licensed in the relevant profession.
- Foreign vs. domestic entity status matters. The 2024 PEA amendment loosened ownership restrictions for foreign professional entities other than corporations. For foreign professional corporations specifically, the all-shareholders-must-be-licensed rule still applies, so the trustee-licensed structure is essential.
The opinion's analysis is specific to accounting firms but the trust-law and PEA reasoning would likely apply to other professional entities (law firms, medical practices, etc.) considering ESOPs, subject to any profession-specific statutes.
If you are an ESOP plan administrator working with a CPA firm
Your trustee selection and ongoing trustee oversight have direct implications for the firm's licensing. Removing a CPA trustee or replacing them with a non-CPA trustee could put the firm out of compliance with Oklahoma law. Build trustee licensing into your governance documents.
If you are an Oklahoma legislator
The opinion notes that the PEA's distinction between professional corporations (all shareholders must be licensed) and other professional entities (more flexible for foreign entities) is curious: "Candidly, it is unclear why the PEA should impose different ownership requirements for professional corporations than for any other professional entity." If the Legislature wants to align the rules, that would be a 2026-or-later amendment.
Common questions
Q: Why can an ESOP own shares in a professional corporation when individual non-CPAs cannot?
A: Trust law. When stock is contributed to a trust, legal title vests in the trustee. The trustee is the legal owner. The trust beneficiaries (the participating employees) hold only an equitable interest. So as long as the trustees are licensed, the legal owner satisfies the licensing requirement.
Q: What if the firm has 1,000 ESOP-participating employees, most of whom are not CPAs?
A: Their equitable interests do not affect the legal-ownership analysis. The trustees are the legal owners under trust law, regardless of how many beneficiaries the trust has.
Q: What if a trustee resigns or is replaced by a non-CPA?
A: The firm would no longer satisfy the PEA's shareholder-licensing requirement. The firm should immediately replace the non-CPA trustee with a licensed CPA, or face permit issues.
Q: Does this apply to ESOPs in law firms, medical practices, or other professional entities?
A: The PEA covers most professional entities. The trust-law reasoning is the same. But each profession may have additional statutes (Bar Association rules, medical board rules, etc.) that need separate analysis. This opinion is specifically about accounting firms under the PEA and OAA.
Q: What is the 2024 PEA amendment SB 620 about?
A: It expanded the PEA to expressly authorize foreign professional entities (those organized under another state's law) to qualify to do business in Oklahoma. Previously, the PEA was largely silent on foreign entities. SB 620 also loosened ownership requirements for foreign entities (other than corporations): unlicensed individuals can hold ownership interests as long as they are not rendering professional services in Oklahoma.
Q: Does the AG's opinion bind the Oklahoma Accountancy Board?
A: Yes. AG opinions are binding on state agencies under 74 O.S. § 18b.
Q: Other states have ruled the opposite. Why did Oklahoma side with Iowa and Ohio?
A: The AG found the Iowa and Ohio reasoning more persuasive on the trust-law question. The Arkansas and Georgia opinions focused on potential conflicts of interest if the trustee had to choose between professional ethics and ESOP fiduciary duty. The AG noted that the ESOP beneficiaries' equitable interests are limited by the fact that the firm "must be managed according to the professional obligations and ethical standards inherent in that occupation." The hypothetical conflict was not enough to overcome the trust-law analysis.
Background and statutory framework
Oklahoma's Professional Entity Act (PEA), originally enacted in 1961 as the Professional Corporation Act, lets licensed professionals practice through limited-liability business entities. Before the PEA, professionals were generally limited to sole proprietorships or partnerships under the historical view that "human personal qualifications for such professions cannot be possessed by a corporation."
The PEA imposes additional requirements beyond standard corporate formation: managers must be licensed in the relevant profession; services may be rendered only through licensed practitioners; the entity's stated purpose must be limited to one type of professional service or related service. Title 18, section 809 imposes ownership restrictions, with three rules after the 2024 amendment:
- Domestic professional entities: only licensed individuals may hold an ownership interest.
- Qualified foreign professional entities: unlicensed individuals may hold ownership interests if they are not rendering professional services in Oklahoma.
- Any professional corporation, foreign or domestic: only licensed individuals may hold ownership interests.
The Oklahoma Accountancy Act (OAA) regulates accountants and accounting firms. Firms must register with the Oklahoma Accountancy Board and hold a Board-issued permit unless exempt. Section 15.15A(F) and (G) require, with limited exceptions, that "a simple majority of the ownership of the firm, in terms of financial interests and voting rights, belongs to partners or shareholders" engaged in accounting and licensed in one or more jurisdictions.
ESOPs are employee benefit plans designed to give employees an ownership stake. The mechanics: a company forms a trust; the trust holds company stock either contributed by the company or purchased with company-contributed funds; stock value is apportioned among employee accounts based on pay and longevity; on departure, the company repurchases the stock and pays out cash. Trust law principles govern: the trustee holds legal title; the participating employees hold equitable interests; the trustee has fiduciary duties to the beneficiaries.
The opinion's central move is to apply trust law directly to the PEA's "shareholder" concept. A "shareholder" is the legal owner of the share. For shares held in trust, that is the trustee. U.S. Dept. of Labor v. Koresko (3d Cir. 2016) applied this exact framework: "trustees have legal title and a non-beneficial interest in trust assets, [while] beneficiaries have an equitable or beneficial interest."
Citations and references
Statutes:
- 18 O.S. §§ 801 to 819 (Professional Entity Act)
- 18 O.S. § 809 (Ownership restrictions)
- 59 O.S. §§ 15.1 to 15.38 (Oklahoma Accountancy Act)
- 59 O.S. § 15.15A (Firm permits and ownership)
Regulations:
- Okla. Admin. Code § 10:15-23-2.1
Cases:
- Petersen v. Commissioner, 924 F.3d 1111 (10th Cir. 2019) (ESOP trust law)
- U.S. Dept. of Labor v. Koresko, 646 Fed. Appx. 230 (3d Cir. 2016) (trustee/beneficiary distinction)
- Sanders v. Turn Key Health Clinics, 2025 OK 19, 566 P.3d 591
Other state AG opinions cited:
- Ark. A.G. Opinion No. 2000-275 (2000)
- 1995 Ga. Op. Atty. Gen. 138
- 1989 Iowa Op. Atty. Gen. 42
- 1985 Ohio Op. Atty. Gen. 2-241
Source
- Landing page: https://oklahoma.gov/oag/opinions/ag-opinions/2025/16.html
- Original PDF: https://oklahoma.gov/content/dam/ok/en/oag/opinions/ag-opinions/2025/AG%20Opinion%202025-16.pdf
Original opinion text
GENTNER DRUMMOND
ATTORNEY GENERAL
ATTORNEY GENERAL OPINION
2025-16
Ashley Plyushko, Executive Director
Oklahoma Accountancy Board
201 NW 63rd St. Ste. 210
Oklahoma City, OK 73116
December 4, 2025
Dear Executive Director Plyushko:
This office has received your request for an Attorney General Opinion in which you ask, in effect, the following question:
Is an out-of-state accounting firm formed as a professional corporation that is owned by an Employee Stock Ownership Plan eligible to:
(1) qualify to do business in Oklahoma pursuant to the Oklahoma Professional Entity Act, 18 O.S.2021 & Supp.2024, §§ 801 to 819, and
(2) register and receive a permit to practice public accounting from the Oklahoma Accountancy Board pursuant to the Oklahoma Accountancy Act, 59 O.S.2021 & Supp.2024, §§ 15.1 to 15.38?
I. SUMMARY
Generally speaking, the Professional Entity Act requires that all shareholders of a professional corporation doing business in Oklahoma be licensed in the profession for which the corporation was formed. 18 O.S.Supp.2024, § 809. Similarly, the Oklahoma Accountancy Act requires that accounting firms seeking a permit to do business in Oklahoma be majority-owned by licensed accountants. 59 O.S.Supp.2023, § 15.15A(F), (G). Because an Employee Stock Ownership Plan ("ESOP") is a trust, principles of trust law dictate that an ownership interest held by an ESOP is legally owned by the ESOP's trustees, as opposed to the ESOP beneficiaries. Accordingly, if the ESOP trustees are licensed accountants, then the accounting firm described in your question is eligible to qualify to do business in Oklahoma pursuant to the Professional Entity Act, and register and receive a permit to practice public accounting pursuant to the Oklahoma Accountancy Act.
II. BACKGROUND
Your request involves the following scenario: an out-of-state accounting firm that holds a permit to provide services in Oklahoma issued by the Oklahoma Accountancy Board ("Board") converted from a limited liability partnership to a professional corporation organized under the laws of its home state. Forty-two percent (42%) of the shares in the new entity are held by its ESOP.
An ESOP is an employee benefit plan that gives employees an ownership stake in their employer. The mechanics of forming an ESOP can be complex, but at its most basic, a company forms an ESOP through the creation of a trust, which holds company stock that is either contributed directly by the company or purchased with funds contributed by the company. The value of stock is apportioned among dedicated employee accounts, typically in proportion to an employee's pay and longevity at the company. When the employee leaves the company, the company stock that corresponds to that employee's account is re-purchased by the company and the employee receives the equivalent cash payout. As with any other trust, an ESOP trust is overseen by trustees, the legal owners of the trust assets, who have a fiduciary duty to manage its assets in the best interest of the participating employees.
You have advised that the ESOP relevant to your question is overseen by five trustees, each of whom is a certified public accountant ("CPA"). The firm now seeks to renew its permit to provide professional accounting services in Oklahoma. You have asked whether the firm's change of entity type and new ownership structure affect the firm's eligibility to (1) do business in Oklahoma under the Oklahoma Professional Entity Act, and (2) register and receive a renewal permit to provide accounting services in Oklahoma under the Oklahoma Accountancy Act.
III. DISCUSSION
A. The Professional Entity Act.
Enacted in 1961 as the Professional Corporation Act, the Professional Entity Act ("PEA") enables licensed professionals, for example, physicians, attorneys, or accountants, to engage in their practice through a limited liability business entity. Before the PEA, these professions were generally limited to practicing as sole proprietorships or partnerships. The PEA, like equivalent statutes in other states, places limitations on who may hold ownership interests in a professional entity.
These ownership restrictions are set forth in title 18, section 809. Before the 2024 amendment, the PEA prohibited unlicensed individuals from holding any ownership interest in a professional entity. After the amendment, this prohibition remains in place for domestic professional entities, but not for foreign professional entities: "An owner of a qualified foreign professional entity need not be duly licensed if he or she is not rendering professional services in this state." 18 O.S.Supp.2024, § 809.
The 2024 amendment also added a separate clause specific to professional corporations, without differentiating between foreign or domestic: "No person shall be a shareholder of a professional corporation who is not duly licensed or otherwise permitted to render the same professional services or related professional services as the services for which the corporation is organized."
Distilled to its simplest terms, this leaves us with three separate rules for ownership of professional entities in Oklahoma:
(1) For domestic professional entities, only individuals who are licensed or otherwise permitted to practice the relevant profession in Oklahoma may hold an ownership interest;
(2) For qualified foreign professional entities, unlicensed individuals may hold ownership interests only if such persons are not rendering professional services in Oklahoma; and
(3) For any professional corporation, domestic or qualified foreign, only individuals who are licensed or otherwise permitted to practice the relevant profession may hold an ownership interest.
With these provisions in mind, the question is whether the PEA permits shares in a professional corporation to be held by an ESOP, and specifically an ESOP that is managed by licensed professionals as trustees. As described above, when company stock is contributed to an ESOP, it is held in trust with legal title vested in the ESOP trustee and participating employees retaining an equitable interest.
While this question has not been addressed by this office or answered by courts in Oklahoma, it is not novel. Two Attorneys General concluded that shares in a professional corporation cannot be held by an ESOP whose participants include non-licensed employees, even if the ESOP trustee is a licensed professional. On the other hand, Attorneys General in Iowa and Ohio reached the opposite conclusion. They reasoned that a statutory requirement that ownership interests be held only by licensed professionals is satisfied if the trustee holding legal title to the stock is a licensed professional, even if beneficiaries holding an equitable interest in the stock were non-licensed employees.
Turning back to your question, the reasoning in these latter two opinions is persuasive. The PEA prohibits individuals from owning stock in a professional corporation if they are not licensed or otherwise permitted to render the professional services for which the corporation is organized. In the scenario you describe, the persons having legal title to the accounting firm's stock held by the ESOP are the ESOP's trustees, each of whom is a licensed CPA. Accordingly, the firm complies with the PEA's stock ownership restriction.
B. The Oklahoma Accountancy Act.
The next question is whether the foreign professional corporation described in your request, having qualified to do business under the PEA, is eligible to register and obtain a permit to provide accounting services in Oklahoma. As with the PEA, the OAA also includes restrictions on who may hold ownership interests in an accounting firm. Specifically, a firm applying for a permit to practice in Oklahoma must document, subject to exceptions not relevant here, that "a simple majority of the ownership of the firm, in terms of financial interests and voting rights, belongs to partners or shareholders" engaged in accounting work and certified or licensed in one or more jurisdictions.
For the same reasons set forth above, the firm described in your request satisfies this requirement. The shares of the firm held by the ESOP are legally owned by the ESOP trustees, each of whom is a licensed CPA. Thus, the ownership interest held by the ESOP "belongs to . . . shareholders engaged in" the practice of accounting, as does the non-ESOP ownership interest held by the firm's licensed employees. This results in a firm that is wholly owned by licensed professionals, satisfying the OAA's majority ownership requirement.
It is, therefore, the official Opinion of the Attorney General that:
An out-of-state accounting firm formed as a professional corporation that is owned by an Employee Stock Ownership Plan ("ESOP") is eligible to (1) qualify to do business in Oklahoma pursuant to the Oklahoma Professional Entity Act, 18 O.S.2021 & Supp.2024, §§ 801 to 819, and (2) register and receive a permit to practice public accounting from the Oklahoma Accountancy Board pursuant to the Oklahoma Accountancy Act, 59 O.S.2021 & Supp.2024, §§ 15.1 to 15.38, so long as the ESOP's trustees are licensed accountants.
GENTNER DRUMMOND
ATTORNEY GENERAL OF OKLAHOMA
ETHAN SHANER
DEPUTY GENERAL COUNSEL