Operating a business as a corporation, including an LLC (limited liability corporation) or PLLC, or as a partnership, has many advantages in North Carolina, including limiting the liability of the owners of the business. There are, however, some disadvantages to operating a business as a corporation (as opposed to a sole proprietorship). One of those is that in North Carolina a corporation cannot represent itself, through its non-attorney employees and owners, in a court proceeding, such as a proceeding in the District or Superior Court; a corporation must appear through a licensed attorney in a lawsuit or other court proceeding.
The practice of law in North Carolina is governed by statute. The practice of law includes performing any legal service for another person, firm or corporation, with or without compensation, preparing court documents, assisting in legal work, and advising another person, firm or corporation about their legal rights. (N.C. Gen. Stat. § 84-2.1) A statute specifically states that a non-lawyer cannot “appear as attorney or counselor at law in any action or proceeding before any judicial body, including the North Carolina Industrial Commission, or the Utilities Commission.” One case held that a corporation cannot even request a continuance of a court date, because this constitutes the practice of law.
Federal courts have generally applied the same rule, requiring a corporation to appear through a licensed attorney. The rule also applies to partnerships, and non-profit corporations. Some federal proceedings are exempt from this rule, such as proceedings before the Social Security Administration, Internal Revenue Service, and U.S. Citizenship and Immigration Services (USCIS).
The leading case on this issue in North Carolina is found at 155 N.C. App. 205, 573 S.E.2d 547 (2002). In this case, the plaintiff sued the defendant, which was a corporation. The corporation had one shareholder, who was also the president, CEO and Chairman of the Board. This owner filed an answer and counterclaim, and apparently appeared in court to argue one or more motions. The plaintiff sought to strike the answer on the basis that the owner could not file the answer for her corporation. The presiding judge contacted the North Carolina State Bar (which regulates licensed attorneys in North Carolina, and which also investigates the unauthorized practice of law), who informed the judge that the owner could represent her corporation in court. The case later reached the North Carolina Court of Appeals, which held that this was error. The court wrote, “in North Carolina a corporation must be represented by a duly admitted and licensed attorney-at-law and cannot proceed pro se unless doing so in accordance with [limited] exceptions.”
One such exception is that a corporation’s employee can represent the corporation in small claims court. 86 N.C. App. 469 (1987). The reasoning of this case is suspect, but this exception is still recognized.
Whether a corporation can represent itself in an administrative proceeding before the Office of Administrative Hearings (OAH), or before a Board or licensing agency, is not entirely clear. N.C. General Statute 84-2.1 states that the following constitutes the practice of law: “the preparation and filing of petitions for use in any court, including administrative tribunals and other judicial or quasi-judicial bodies, or assisting by advice, counsel, or otherwise in any legal work.” The State Bar has said, apparently in reliance on this statute, that “appearing in court or before any judicial or quasi-judicial body on behalf of another” constitutes the practice of law.
It would therefore appear that a corporation must appear through a lawyer in administrative proceedings. The term “quasi-judicial” generally means, “denoting or relating to powers and functions similar to those of a judge, such as those exercised by an arbitrator, administrative tribunal.” Further, North Carolina case law states, “A ‘contested case’ is a quasi-judicial administrative proceeding to resolve the rights, duties, or privileges of a person involved in a dispute with an administrative agency.” 358 N.C. 649, 657 (2004).
On the other hand, one case held that a corporation can represent itself in an administrative hearings unless a specific rule or statute says otherwise. 187 N.C. App. 227, 653 S.E.2d. 11 (2007). It is therefore difficult to summarize this precise issue and to predict how courts will rule in specific administrative contexts.
A corporation appearing in Superior or District Court in North Carolina, or appearing before a Board or the Office of Administrative Hearings, should therefore retain counsel to represent it, or at a minimum retain counsel to advise as to whether legal counsel is required. Where counsel is required, the absence of counsel will mean that the corporation cannot assert its rights, and cannot defend itself.